Can I keep my retirement if I file for bankruptcy?

By Gregory Nassar

Generally, yes. Exemptions to apply depend on the type of retirement account. Most of such exemptions are codified in the following statutes:

Calif. CCP § 704.115(b) states that benefits derived from private retirement plans are exempt whether payable or already paid. Further, except for self-employed private retirement plans, the exemption amount for private retirement plans under Calif. CCP § 704.115(b) is unlimited. However, a single-premium annuity purchased by the debtor as an individual, not by an employer, does not qualify as a private retirement plan under Calif. CCP § 704.115(b).

Amounts held in "self-employed retirement plans" (IRAs and Keoghs) are exempt to the extent "necessary" for the support of the debtor, spouse and other dependents when the debtor retires. [Calif. CCP § 704.115(a)(3),(e),(f); In re Vigghiany (BC SD CA 1987) 74 BR 61, 62–63; In re Crosby (BC CD CA 1993) 162 BR 276, 285]

The Bankruptcy Code limits the exemption amount for IRAs to $1,171,650. But the cap may be increased "if the interests of justice so require." [11 USC § 522(n)]. There is no limit on the number of accounts included in the set. [In re Elster (BC CD CA 1988) 86 BR 631, 633]

As with pension and profit-sharing plans, an IRA is exempt under Calif. CCP § 704.115(a)(3) if it is principally used for retirement purposes. [In re Dudley (9th Cir. 2001) 249 F3d 1170, 1176].

Filing for bankruptcy is a complex process and once a petition is filed, your assets are placed in the hands of the assigned trustee. Thus, it is crucial the proper exemptions are applied and planning is performed in order to protect such valuable assets as your retirement plan. It is crucial that you select a highly skilled bankruptcy attorney. I make it my goal to provide each client the dedicated time and experience to assist the client with his/her bankruptcy.

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