IRAs and Bankruptcy
The overbearing burden of debt can affect nearly every aspect of your life. You may be facing endless phone calls from angry creditors with threatening demand letters piling up outside your door. Creditors may even be harassing you at work by calling your office phone repeatedly. The stress is almost unimaginable and may drive you to find other methods to pay back off your debt such as draining a retirement account like an IRA.
Before you make any sudden decisions, it’s important you get in contact with an experienced Cincinnati bankruptcy lawyer. Retirement accounts such as an IRA are exempt from collection actions and pulling funds out of your account may hurt you in the end. That means debt collectors cannot touch any of that money unless it leaves the IRA account. The second the funds are in a checkings or savings account it loses it’s no longer exempt.
If you are struggling with drowning debt, you may want to get in contact with an experienced bankruptcy lawyer. A skilled attorney on your side can negotiate with creditors for you and develop a repayment plan that makes sense. They can also give you valuable legal advice on whether you should touch your IRA account or not.
IRA Protection Attorney in Cincinnati, Ohio
When facing massive amounts of debt, it’s common for borrowers to turn to their retirement accounts such as an IRA as a last-ditch resort. This may seem like a good idea at the time, but the aftereffects of using your IRA to pay off your debt are not worth the temporary relief.
IRAs and other retirement accounts are technically exempt from bankruptcy. So, using that money to pay off debt that could have been discharged is a waste. Not only could you have saved the funds in your IRA account, but the debts you paid off could have been discharged if you had taken the time to hire an attorney. Don’t make that mistake. For experienced and skilled legal representation, get in contact with Steiden Law Offices.
Ohio and Northern Kentucky attorney Eric Steiden has been representing clients in bankruptcy proceedings for decades. He has been practicing for over 25 years with 6,000 case hearings under his belt. Both attorney Steiden and his team pride themselves on helping individuals and businesses escape the burden of unsustainable debt. Their dedication to excellent legal service and efficient representation has helped hundreds of people in the past, and they can use the same tools to help you too.
Contact Steiden Law Offices at to set up your initial consultation. At the appointment Ohio debt collections attorney Eric Steiden will review the details of your case. Steiden Law Offices proudly represents people throughout Hamilton County, Butler County, Clermont County, Warren County, Clinton County, Montgomery County, Greene County, Preble County, Darke County, Highlands County, Miami County, Shelby County, Champaign County, Clark County, Brown County, Adams County, Lawrence County, and Scioto County, Ohio. We also accept clients in Kenton County, Boone County, Campbell County, Gallatin County, Grant County, Pendleton County, Bracken County, Robertson County, Mason County, in Kentucky.
Is an IRA Subject to Creditors?
Having excessive debt can be extremely stressful, but don’t be tempted to turn to your IRA retirement account for help. In 2005, the Consumer Protection Act (BAPCPA) broadened offered protections to retirement plans including IRA accounts. The new changes meant creditors couldn’t access any funds in your IRA account as long as it’s secured. However, there are a few limits to an IRA’s exemption status.
The government exempts traditional and Roth IRAs capped at $1,283,025. If it’s found the borrower has more than that in their IRA account, then creditors will be able to access your IRA funds. It’s important to note that if you have more than one traditional or Roth IRA, the exemption limit applies to all accounts, not individually. So, if you have multiple accounts and their combined amount is over $1,283,025, then it no longer carries an exemption status.
The Employment Retirement Income Security Act (ERISA) does protect some federal exemptions no matter how much they’re worth. These retirement accounts are entirely protected under the law with no maximum limit. Listed below are the protected exemptions under the Employment Retirement Income Security Act.
- IRA (SEP and SIMPLE)
- Profit-Sharing Plan
- Money Purchase Plan; and
- Defined Benefit Plan
How to Protect Your IRA Funds from Creditors
You may be struggling with a large amount of debt and you’re unsure how to handle it. You notice your IRA retirement account, which has been untouched for years, does have some significant funds that could make a dent in your debt. Is it a good idea to pay off that debt with your IRA? The answer is no, it actually could make your whole situation worse.
You should never take a distribution or withdraw money from any of your retirement accounts including your IRA without consulting a bankruptcy lawyer. Once you move the money from your IRA account to a savings or checkings account it’s no longer considered an exemption. That that means the bankruptcy court can reach any portion of the withdrawal.
You won’t be able to fool the court by redepositing the money or converting it into another type of exempt property. In fact, if you do it could be seen as a fraudulent action by the court and result in your bankruptcy case being dismissed. That’s why it’s imperative you don’t touch your retirement accounts unless an experienced debt forgiveness attorney advises you to.
Paying unsecured debt such as credit card or medical bills with IRA funds is an even worse idea. It’s almost always counterproductive and will result in you losing money. It’s possible that the debt you paid with your IRA funds would have been discharged anyway. Therefore, you’re paying off debts that could have been discharged with money you could have kept if you simply hired an attorney. Plus, if you withdraw any IRA funds before you’re the age of 59 ½ years old, then you’ll assess a penalty of 10 % and that money will be considered taxable income.
ERISA | United States Department of Labor — Visit the official website for the Department of Labor to read up more about Employee Retirement Income Security Act (ERISA) written into federal law. Access the site to read the pages of the official act as well as information about the Pension Benefit Guaranty Corporation (PBGC).
United States Bankruptcy Court – Southern Ohio – The primary website for Cincinnati and surrounding area residents. It provides information on judges, locations, phone numbers, FAQ s, means testing, filing and seminars.
U.S. Bankruptcy Court, Southern District of Ohio
Cincinnati Divisional Office
221 E. Fourth Street
Cincinnati Bankruptcy Attorney in Ohio
It’s a hard decision to file for bankruptcy and because of this it’s imperative you thoroughly understand your own financial situation before you make any major decisions. Having a proactive and experienced bankruptcy lawyer on your side can give you the knowledge you need to resolve your debts effectively. You can find that attorney today by getting in contact with Ohio lawyer Eric Steiden at Steiden Law Offices.
Eric Steiden of Steiden Law Offices has decades of bankruptcy practice to fall back on as well as extensive resources and knowledge from his years of practice. He will do everything in his power to help you leave the bankruptcy court with more benefits than losses. Schedule your first consultation by calling Steiden Law Offices at . Steiden Law Offices proudly serves individuals throughout the Ohio and Northern Kentucky, including the Hamilton County cities of Cincinnati, Norwood, Forest Park, Blue Ash, Montgomery and Reading, the Kenton County cities of Covington, Erlanger, Edgewood and Elsmere and the Boone County cities of Florence, Union and Walton, among many others.