Can creditors take some or part of your IRA funds if you file for bankruptcy? Learn more about the federal protections that exist and to what extent they protect your IRAs.
The article from Kiplinger discusses the protection of Individual Retirement Accounts (IRAs) in bankruptcy scenarios. It explains that while federal law provides some protection for IRAs, the extent of this protection can vary significantly depending on state laws. Under federal bankruptcy law, IRAs are generally protected up to a certain amount, currently set at $1,512,350, which is adjusted periodically for inflation. However, this cap does not apply to rollovers from employer-sponsored retirement plans like 401(k)s. States have the option to opt out of federal exemptions, and many have their own rules which might offer more or less protection. For instance, some states might not exempt IRAs at all, or they might only protect contributions made a certain number of years before bankruptcy. The article advises that understanding both federal and state laws is crucial for anyone considering bankruptcy, as these laws determine how much of one's retirement savings can be shielded from creditors. It also highlights the importance of consulting with a bankruptcy attorney to navigate these complex regulations effectively.
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