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In 2005 the bankruptcy abuse prevention and consumer protection act was signed into law, stipulating that many types of retirement plans, including IRAs, are exempt assets in bankruptcy. These accounts cannot be used to satisfy creditors' demands for payment on your debt.

Protected Retirement Plans

Company retirement plans such as simplified employee plan or SEP and Simple IRAs can be protected in bankruptcy. Company retirement funds that are rolled over to an IRA can also be protected in bankruptcy. SEP, IRAs, simple IRAs, and most rollover IRAs, are protected from creditors in bankruptcy up to a dollar value limit that is applied based on your circumstances.

Keeping Accounts Separate

Opening a second account for a rollover IRA from a retirement plan is a good idea for record-keeping. While it is not a legal requirement, it will help avoid any issues that may come up during the bankruptcy proceedings. It is easier to document the origin of the assets with separate accounts.

If you have significant assets in your retirement plan and want to be sure that it is safe from creditors, contact an Elk Grove bankruptcy attorney today.