What Happens to IRA Accounts in Bankruptcy?

Regular Contributions

• It's important to begin a regular pattern of contributions to your IRA before filing for bankruptcy. If the bankruptcy trustee sees that you suddenly began making huge deposits into your IRA account a few months before filing for bankruptcy, he will suspect you are keeping assets from creditors. Make regular contributions to your IRA starting at least a year before filing for bankruptcy, to establish a regular contribution pattern. Also make sure that your IRA contributions are not excessive, because excessive contributions can be taken to pay creditors.
  
  

Claim your IRA as Exempt

• It's important to report that you have an IRA account when filing for bankruptcy. If you have hired a bankruptcy attorney, make sure your attorney has the IRA paperwork so she can include your IRA in your asset report. When you disclose your IRA in your bankruptcy, claim it as "exempt," Exempt property is kept out of, your bankruptcy estate liquidation. If your IRA qualifies, it will not be touched during your bankruptcy and will remain intact for your retirement.
  
  

Continue Making Contributions

• When in bankruptcy, make sure you continue to make regular contributions to your IRA. This is especially important when you file for a Chapter 13 personal bankruptcy. This type of bankruptcy can last from three to five years and includes making regular payments to a bankruptcy trustee. Make sure your bankruptcy attorney includes any monthly or biweekly contributions to your IRA account in your plan payments to your bankruptcy trustee, and continue to make them throughout the life of your bankruptcy plan.