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Benefit from the Experience of Attorneys Bill and Valerie Sherman Former Assistant Attorney General, Assistant County Attorneys and Magistrate Judge

What about my retirement accounts if I file bankruptcy?

Question: I was laid-off from work and now I have so much debt that I can't make payments anymore. I thought my job was safe but then my company was acquired by another business and there were a lot of layoffs. And at about the same time I was laid-off, within about a week, my husband lost his job too.

I worked at a tech company in Alpharetta and my husband managed restaurants in Cumming and Roswell. We both thought our jobs were safe but then this happened.

My question is about my IRA. I have an IRA and it has about $75,000 in it. I built it up over the years and I need to know how it will affect my bankruptcy because I'd like to get a chapter 7 if possible. I want to keep my IRA. I want to know if I have to worry about having money in it and if I should maybe take the money out of it.

I need some answers quickly because I think we'll have to file bankruptcy soon. I'm worried about my BMW getting repossessed and my husband doesn't want to give up his Audi and I'm concerned about being late on our bills. We just can't afford things like we could before we lost our jobs.

H.A. in Atlanta, GA

Answer: The money in a retirement account (in your case an IRA) is exempt from the bankruptcy. So you do not have to worry about losing it if you file. It is important to understand that retirement accounts cannot be "taken" from you if you file bankruptcy. You can keep your IRA or any other valid retirement account, including:

  • Traditional IRAs
  • Roth IRAs
  • SEP IRAs
  • Qualified Plans (including profit sharing, and 401(k) plans)
  • 403(b) Accounts
  • 529 Plans
  • Education Savings Account

The retirement account is not considered as income, nor is it considered an asset for "means test" purposes. In fact, we have had clients who have substantial assets in retirement accounts but are still able to file a chapter 7. And we have had clients with large sums in retirement accounts that have not had to account for it under a chapter 13 plan, thus saving them a lot of money

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