In general, IRAs are protected from bankruptcy, thanks to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCA). As a result of this legislation, IRA investors facing bankruptcy can shield their IRA assets from creditors. While retirement plans that meet the requirements of the Employee Retirement Income Security Act of 1974 (ERISA) — such as employer-sponsored plans like 401(k)s and 403(b)s — have long been excluded from an individual's bankruptcy estate, BAPCA extended these bankruptcy protections to IRAs and certain other investment products.
BAPCA gives IRA investors a degree of protection against creditors that didn't exist before, including additional protections to investors who frequently change jobs and may want to consolidate their multiple retirement plans into IRAs.
Here's a quick overview of how BAPCA affects IRA owners facing bankruptcy. Note: bankruptcy laws can and do change. Always consult a qualified attorney for specific advice regarding your situation.
Taking into account the many factors involved in bankruptcy proceedings, if you have assets in IRAs or other products potentially affected by BAPCA, consult your tax and legal advisors for the appropriate strategies for maximizing protection of your assets. TIAA-CREF and its affiliates do not provide tax or legal advice.
The tax information contained herein is not intended to be used, and cannot be used, by any taxpayer for the purpose of avoiding any tax penalties that may be imposed on the taxpayer. It was written to support the promotion of products and services addressed herein. Taxpayers should seek advice based on their own particular circumstances from an independent tax advisor.
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