When filing for Chapter 7 bankruptcy - also referred to as personal bankruptcy, a debtor's property is classified as exempt or non-exempt. Exempt property is considered protected in bankruptcy because the debtor can keep these assets. Non-exempt property is property that can be used to pay creditors.
Under federal law, funds in your 401(k) are exempt from Chapter 7 bankruptcy, however, Traditional IRA and Roth IRA accounts are only partially exempt. As of April 1, 2010, funds in Traditional IRAs and Roth IRAs are protected up to $1,171,650. This exemption amount does not apply to certain funds that were rolled over into your Traditional IRA or Roth IRA accounts. Other retirement plans that are exempt for federal purposes include 403(b) accounts and Section 457 plan accounts.
In addition to the exemptions provided under federal law, many states have bankruptcy laws that also provide protection for a debtor's property. Some states will allow you to choose between the federal exemptions and the state exemptions. Other exemptions include certain amounts for your homestead and educational savings accounts.
Contact Steven Peck's Premier legal toll free at 1.866.999.9085 to talk to an experienced California Bankruptcy Attorney.
