Consumers who are considering debt relief options and possibly filing for bankruptcy should be aware of the various exemptions that are available to protect certain assets from forfeiture to creditors as part of the bankruptcy process. An important point not to be misunderstood is that although personal IRA retirement accounts are protected from being taken as part of a Chapter 7 bankruptcy, an account that has been inherited by the bankruptcy debtor will be treated as any other non-exempt asset and may be seized as part of a Chapter 7 bankruptcy proceeding. Because of this rule, people thinking of bankruptcy should carefully consider all of their options and seek qualified advice before filing a petition.
As noted in a recently posted news report outlining one man’s experience with filing for bankruptcy while trying to protect an inherited IRA account, the U.S. Supreme Court has ruled that an inherited IRA retirement account does not include the same protections as an account that was actually earned by the bankruptcy filer. This means that bankruptcy creditors will have the same access to an inherited IRA as they would to a bank account or other asset in the debtor’s name. The article correctly notes that there are some exceptions to the rule. For example, a surviving spouse who inherits a 401(k) from their deceased husband or wife is able to treat the account as their own for bankruptcy purposes. Additionally, some states have independently passed laws that protect their citizens’ inherited accounts.
Other Ways to Keep Assets Protected
Another way that a consumer considering bankruptcy could protect an inherited IRA retirement account would be to file for Chapter 13 bankruptcy. In a Chapter 13 bankruptcy, the debtor does not surrender all of their assets but instead agrees to a monthly repayment plan that usually allows the debts to be resolved for a fraction of the balance owing before the Chapter 13 plan was filed and implemented. Although a bankruptcy court may consider any inherited IRA accounts in determining the amount of the monthly payments and whether or not to approve a Chapter 13 petition, the accounts will not be taken by the bankruptcy trustee or creditors once the plan goes into effect. Debtors and consumers considering bankruptcy should seek out competent and up-to-date advice on the evolving fields of bankruptcy and consumer law before deciding on a course of action.
Are You Considering Bankruptcy?
If you are feeling like your finances are out of control and you are running out of options, contacting a qualified bankruptcy attorney can give you a plan and peace of mind. The Louisville and Southern Indiana bankruptcy attorneys at the Schwartz Bankruptcy Law Center can help you decide which course of action is the best for you, and we can get you started down the path to financial independence without any regrets. Our attorneys can answer your questions about which kinds of debt can be discharged in a bankruptcy, which type of bankruptcy is best for you, and which exemptions can be used to keep as much of your property as possible throughout the process. Contact an experienced debt relief attorney today. At the Schwartz Bankruptcy Law Center, we help clients across the country get their finances back on the right track. Call 866-366-3328 to schedule a risk-free consultation or contact us through our website.
More Blog Posts:
Ex-NFL Player Clinton Portis Using Chapter 7 Bankruptcy to Address $5 Million in Debt, Kentucky Bankruptcy Lawyers Blog, published January 13, 2016.
Bankruptcy, Medical Bills, and the Effects of a Cancer Diagnosis, Kentucky Bankruptcy Lawyers Blog, published February 10, 2016.