July 1st, 2009

During the bankruptcy process all assets owned by the filer must be disclosed to the Court. Included in this list of assets that must be disclosed are any interest in funds that are held in a retirement account. Many are concerned that if they decide to file bankruptcy, that they will lose their retirement funds that they have accumulated in their 401(k) plan or their I.R.A.

However, most retirement accounts are fully exempt, and thus protected, under both federal and state law. Specifically, the Bankruptcy Code protects funds held by the debtor in 401(k) plans as well as any funds in an I.R.A. See 11 U.S.C. § 522(b)(3)C) and (d)(12) (there is a $1 million dollar cap on funds held in an I.R.A.). Similarly, with almost identical language, Arizona law protects most types of retirement accounts from execution as well. See A.R.S. § 33-1126(B). The only exception under Arizona law, is that any funds contributed to the retirement plan within 120 days prior to filing bankruptcy will not be considered exempt. See A.R.S. § 33-1126(B)(2).

Based on both federal and state exemption statutes, even in bankruptcy you will not lose your retirement funds. Arizona Bankruptcy Attorney John Skiba offers a free bankruptcy consultation where your specific situation can be assessed and a determination can be made if bankruptcy is an appropriate option.