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Bankruptcy Protection for IRAs

Last Updated November 4, 2015

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) included a provision that protect IRAs from bankruptcy. Under BAPCPA, this protection was capped at $1,000,000 subject to increases every three years based on the Consumer Price Index (CPI).  . Effective April 1, 2013, the limit is $1,245,475 (increased from $1,171,650).

SEP IRA contributions, SIMPLE IRA contributions and amounts rolled over from qualified plans, 403(b) plans and governmental 457(b) plans are not subject to this limit ( no cap for bankruptcy protection).).

Protection in other cases (other than bankruptcy) for IRAs is determined by state law.

Note: Generally, for ERISA  qualified plans, assets are fully protected from bankruptcy and all other claims. Exceptions apply to claims under a qualified domestic relations order (QDRO) and IRS levy (assets can be claimed under these exceptions).

This is a very high level overview.

Individuals should consult with a bankruptcy planning attorney for assistance with determining the protection that applies to their retirement savings .

Tip by Denise Appleby