
Advanced IRA Topics
Bankruptcy
IRAs and qualified plans have somewhat different rules regarding bankruptcy and creditor protection.
If an investor faces insolvency, he or she can look to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) for guidance on retirement assets that are shielded from federal bankruptcy. Effective for bankruptcies filed on or after 10/17/2005, all retirement accounts are protected in the event of individual bankruptcy, whether or not the Employee Retirement Income Security Act (ERISA) is applicable. This protection is also extended to IRAs. It is intended to shield retirement assets from creditors and prevents a participant's bankruptcy from causing the investor to lose assets that have been set aside for retirement.