Retirement Accounts

An important question for many people considering bankruptcy is whether their retirement accounts are protected. You do not want to lose your “nest egg”.

Before 2005 there was a considerable amount of doubt in this area of bankruptcy law. A debtor had to determine if his or her retirement account was set up under ERISA and if not whether the debtor could show that the retirement account was really necessary for his or her retirement.

Fortunately, in 2005 Congress passed a law making tax-deferred retirement accounts exempt in bankruptcy.

As it stands now under 11 USCA § 522(b)(3)(C) a California debtor may claim an exemption for retirement funds in a fund or account so long as it is exempt from taxation under any of the following provisions of the Internal Revenue Code:
__ > 26 USCA § 401 (> § 401(k) accounts);
__ > 26 USCA § 403 (employee annuities);
__ > 26 USCA §§ 408, > 408A (IRA accounts);
__ > 26 USCA § 414 (employee defined benefit/contribution plans);
__ > 26 USCA § 457 (state and local government deferred compensation plans); or
__ > 26 USCA § 501(a) (qualified pension, profit_sharing and stock bonus plans).
So almost all retirement accounts are safe in bankruptcy.