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April 23, 2013

Bankruptcy Protection for IRAs


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

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.


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