We all want our retirement savings to be untouchable, safe. But when life throws curveballs, sometimes we need to ask: What happens to my Individual Retirement Account (IRA) if I file for bankruptcy?

Fortunately, all types of retirement accounts, including IRAs, are protected from creditors in bankruptcy. Protection for IRAs was signed into law by President George W. Bush under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. 

Let’s explore how federal laws protect your IRA when filing for bankruptcy. While your account should be safe, there are always caveats to be aware of. 

Understanding IRA and Bankruptcy

When you’re knee-deep in financial turmoil, filing for bankruptcy might seem like the only way out. But can filing for bankruptcy affect your Individual Retirement Account (IRA)?

You’ll be glad to know that federal laws play a significant role in protecting your retirement accounts during these tough times. Most of them, including traditional IRAs and Roth IRAs, are protected under the BAPCPA. In fact, each person gets protection up to $1,512,350 – quite a relief. Adjustments for inflation are made every three years. 

The Role of Federal Laws in Protecting IRAs

If you think this sounds too good to be true or there’s some catch hidden somewhere—there isn’t. The BAPCPA is designed specifically with consumer protection in mind. This means it shields your precious retirement savings from getting swept away by creditors.

But remember – while most types of IRA get this benefit; not all retirement plans do, so make sure you understand which category yours falls into before making any drastic decisions.

Safety Net For Your Future?

  • Your Traditional IRAs & Roth IRAs can rest easy with coverage up to $1 million-plus per person.
  • The key word being ‘most’ because certain other plans may fall through the cracks such as deferred compensation schemes or stock option plans. You don’t want any nasty surprises down the line now do we?
  • Bear in mind though — no two cases are alike and it’s always best practice checking in with a qualified bankruptcy attorney to get the lowdown on your specific situation.

All in all, when it comes to IRA and bankruptcy, federal laws offer some respite. They provide that much-needed safety net ensuring you don’t lose everything for your golden years.

Key Takeaway: 

Feeling anxious about your IRA in bankruptcy? Take a breath. Federal laws, especially the BAPCPA, are here to help. They safeguard most IRAs up to $1,512,350 per person. But beware—some retirement plans aren’t safe—it’s crucial to understand where yours stands. For peace of mind and advice custom-fit for you, always chat with

Special Protections for Rollover IRAs 

A rollover IRA is a traditional or Roth IRA account that was funded from a previous, qualified retirement plan. Any properly executed rollover IRA is protected in bankruptcy. That’s because once the rollover is complete, the account acts like any other IRA. To ensure full protection, it’s often best to create a separate IRA account for the rollover assets. Even though this is not necessary, it can help avoid potential issues in bankruptcy. It’s always helpful to know where assets are coming from. 

Again, IRAs and other retirement accounts are typically protected in bankruptcy. Therefore, your creditors cannot seize them and your bank cannot freeze your accounts. However, there are some exceptions to the rule. For example, if you commit a crime and go to prison, the government can seize some of your retirement accounts. It’s best to speak with a qualified attorney to discuss specific issues. 

Impact of Bankruptcy on Other Retirement Income

You may ask how does filing bankruptcy affect my other sources of income? Well, Social Security benefits are fully protected during bankruptcy proceedings by federal law. However, pension plans and deferred compensation plans depend on whether they fall under ERISA-qualified accounts or not.

Pension Plans covered by the Employee Retirement Income Security Act (ERISA) get unlimited creditor protection in case of bankruptcy. On the flip side though, non-ERISA plans, such as most deferred compensation plans offer less secure harbor.

If cash exemptions are available in your state’s laws (as they are in New York), they could also be a life-saver – literally. They allow you protect some assets in cash or bank accounts against creditors’ claims.

The sad reality is money saved in regular savings accounts or investment accounts isn’t generally shielded from bankruptcies. Bummer right?

This all might sound complex but remember there’s always help around every corner if needed. 


Untangling the knot of IRA in bankruptcy might seem daunting, but remember, knowledge is power. To schedule a free consultation, contact The Law Office of William Waldner. We can help determine if bankruptcy is right for you, and if your retirement accounts will be protected.