October 11, 2019 By:
The limit on both traditional and Roth IRA contributions that may be exempt from the bankruptcy estate is currently $1,362,800 per person. It’s important to understand, though, that that limit applies to all your retirement plans combined. The ceiling is adjusted every three years to keep pace with cost of living increases. The most recent change to the ceiling was in April, 2019.
There’s no prohibition on rolling over IRA funds while you are in bankruptcy, but you need to be extremely careful. If you use any of the funds to pay personal expenses, the bankruptcy trustee may petition the court for access to those funds, arguing that they were comparable to a savings account. That may happen, even if you replenish the funds before the 60 day rollover period ends. This type of argument has been successfully made by trustees, though there are no court opinions ruling on its validity.
The best course of action—create a separate account exclusively for the rollover funds and don’t touch them—for any reason.
I offer a free initial consultation to all potential bankruptcy clients. Contact my office by e-mail or call me at 972-772-3083 for a private meeting. With offices in Rockwall, Texas, I represent clients in Heath, Greenville, Lavon, Wylie, Mesquite and Rowlett.