{"id":179,"date":"2012-08-09T16:59:38","date_gmt":"2012-08-09T16:59:38","guid":{"rendered":"http:\/\/bankruptcyattorneystl.com\/?p=179"},"modified":"2012-08-09T17:26:36","modified_gmt":"2012-08-09T17:26:36","slug":"is-my-ira-protected-in-bankruptcy","status":"publish","type":"post","link":"http:\/\/bankruptcyattorneystl.com\/?p=179","title":{"rendered":"Is my IRA Protected in Bankruptcy?"},"content":{"rendered":"<p><span style=\"font-family: Times New Roman; color: #000000; font-size: small;\">\u00a0<\/span><span style=\"font-size: small;\"><span style=\"color: #000000;\"><span style=\"font-family: Times New Roman;\">When considering filing for bankruptcy, many individuals are concerned that their individual retirement account, or IRA, will not be protected.\u00a0 Typically, IRAs are protected through bankruptcy; however, there are certain instances when an IRA could be considered unprotected.\u00a0 <\/span><\/span><\/span><\/p>\n<p><span style=\"font-size: small;\"><span style=\"color: #000000;\"><span style=\"font-family: Times New Roman;\">\u00a0<\/span><\/span><\/span><span style=\"font-size: small;\"><span style=\"color: #000000;\"><span style=\"font-family: Times New Roman;\">The bankruptcy code states that <a title=\"Qualified Retirement Plans and Bankruptcy\" href=\"http:\/\/www.lickerlawfirm.com\/blog\/qualified-retirement-plans-and-bankruptcy.cfm\" target=\"_blank\">IRAs are protected through bankruptcy<\/a>, but only if the funds are in an account that is exempt from taxation. Generally, your IRA will remain exempt from taxation, unless you have used the money in your account in a way that is prohibited by the IRS. \u00a0The Internal Revenue Code has rules that restrict what can be done with your IRA, and these rules list &#8220;prohibited transactions&#8221;; Committing one of the prohibited transactions could make your account taxable, meaning it would NOT be exempt from taxation.\u00a0\u00a0 <\/span><\/span><\/span><\/p>\n<p><span style=\"font-size: small;\"><span style=\"color: #000000;\"><span style=\"font-family: Times New Roman;\">\u00a0<\/span><\/span><\/span><span style=\"font-family: Times New Roman; color: #000000; font-size: small;\">Examples of prohibited transactions include: <\/span><\/p>\n<p><span style=\"font-family: Times New Roman; color: #000000; font-size: small;\">\u00a0<\/span><\/p>\n<ul>\n<li><span style=\"font-family: Times New Roman; color: #000000; font-size: small;\">using the money in the account to benefit a disqualified person (meaning yourself, your family, or your business\/employees)<\/span><\/li>\n<\/ul>\n<p><span style=\"font-family: Times New Roman; color: #000000; font-size: small;\">\u00a0<\/span><\/p>\n<ul>\n<li><span style=\"font-family: Times New Roman; color: #000000; font-size: small;\">selling, leasing, or exchanging the property in the account with a disqualified person<\/span><\/li>\n<\/ul>\n<p><span style=\"font-family: Times New Roman; color: #000000; font-size: small;\">\u00a0<\/span><\/p>\n<ul>\n<li><span style=\"font-family: Times New Roman; color: #000000; font-size: small;\">lending the money or extending credit from the IRA to a disqualified person<\/span><\/li>\n<\/ul>\n<p><span style=\"font-family: Times New Roman; color: #000000; font-size: small;\">\u00a0<\/span><\/p>\n<p><span style=\"font-size: small;\"><span style=\"color: #000000;\"><span style=\"font-family: Times New Roman;\">The basic rule with an IRA is that you cannot receive any benefit from the money in your IRA unless it is authorized by the plan and by the law.\u00a0 If your account is managed by an independent custodian (someone other than you who is impartial), engaging in prohibited transactions do not typically occur because this person will not allow them to.\u00a0 However, if there is not an independent custodian of the account, you can run into trouble.\u00a0 Many times, people will run into this when dealing with real estate and with attempting to roll over their account into a new account. \u00a0<\/span><\/span><\/span><\/p>\n<p><span style=\"font-family: Times New Roman; color: #000000; font-size: small;\">\u00a0<\/span><\/p>\n<p><span style=\"font-size: small;\"><span style=\"color: #000000;\"><span style=\"font-family: Times New Roman;\">As an example, you cannot use your IRA as collateral for a loan to purchase real estate.\u00a0 This is prohibited by the IRS, and will lead to your account losing its tax exempt status.\u00a0 <\/span><\/span><\/span><\/p>\n<p><span style=\"font-family: Times New Roman; color: #000000; font-size: small;\">\u00a0<\/span><\/p>\n<p><span style=\"font-size: small;\"><span style=\"color: #000000;\"><span style=\"font-family: Times New Roman;\">Another example of a prohibited act would be when you are rolling over your IRA from one company to another.\u00a0 Many companies have a simple form that will transfer your account without you needing to do anything personally.\u00a0 However, you also have the option to withdraw all of the funds from the account and transfer them yourself into the new account.\u00a0 When doing this, you have 60 days to complete the roll over to the new account.\u00a0 Many people are tempted, however, to take or borrow money out of the IRA during this 60 day window.\u00a0 Doing this is prohibited by the IRS, and will lead to your account losing its tax exempt status.\u00a0 <\/span><\/span><\/span><\/p>\n<p><span style=\"font-family: Times New Roman; color: #000000; font-size: small;\">\u00a0<\/span><\/p>\n<p><span style=\"font-family: Times New Roman; color: #000000; font-size: small;\">Because the IRS does not have the time or the man power to audit every single person in the United States with an IRA, many people can commit these &#8220;prohibited transactions&#8221; without ever getting caught.\u00a0 Additionally, knowing that the risk of getting caught by the IRS is typically slim, many people are tempted to pull from their IRAs or use them in a way that would make them unexempt from taxation. <\/span><\/p>\n<p><span style=\"font-size: small;\"><span style=\"color: #000000;\"><span style=\"font-family: Times New Roman;\">This is when your IRA would become unprotected when filing for bankruptcy. Despite the IRS not having the time to audit your account, the Bankruptcy Trustee most likely will.\u00a0 This is because the Bankruptcy Trustee has a vested interest in finding funds to disperse to your creditors, since he or she will get a cut of that money as well.\u00a0 If the Bankruptcy Trustee does an investigation of your IRA and finds that there have been prohibited transactions, he or she will object to your claim that it is protected, since the IRA will have lost its tax exempt status.\u00a0 Then, if the Trustee&#8217;s objection is successful, he or she will be able to obtain the account to disperse the funds in it to your creditors.\u00a0 <\/span><\/span><\/span><\/p>\n<p><span style=\"font-size: small;\"><span style=\"color: #000000;\"><span style=\"font-family: Times New Roman;\">As stated before, typically, your IRA will be protected during your bankruptcy; however, there are some exceptions.\u00a0 If you have an IRA, and you are certain that you have not engaged in any prohibited transactions, your IRA will be protected. However, if you have engaged in prohibited transactions, you could face losing your IRA by filing for certain types of bankruptcy.\u00a0 <\/span><\/span><\/span><\/p>\n<p><span style=\"font-size: small;\"><span style=\"color: #000000;\"><span style=\"font-family: Times New Roman;\">If you have questions about your IRA being protected, contact a <a title=\"St. Louis Bankruptcy Attorney\" href=\"http:\/\/www.lickerlawfirm.com\" target=\"_blank\">St. Louis bankruptcy attorney <\/a>today. <\/span><\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>\u00a0When considering filing for bankruptcy, many individuals are concerned that their individual retirement account, or IRA, will not be protected.\u00a0 Typically, IRAs are protected through bankruptcy; however, there are certain instances when an IRA could be considered unprotected.\u00a0 \u00a0The bankruptcy &hellip; <a class=\"more-link\" href=\"http:\/\/bankruptcyattorneystl.com\/?p=179\">Continue reading <span class=\"meta-nav\">&rarr;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3,49],"tags":[52,50,51],"class_list":["post-179","post","type-post","status-publish","format-standard","hentry","category-bankruptcy-general","category-protected-assets","tag-exemptions-2","tag-ira","tag-retirement"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Is my IRA Protected in Bankruptcy? - St. Louis Bankruptcy Attorneys<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"http:\/\/bankruptcyattorneystl.com\/?p=179\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"St. Louis Bankruptcy Attorney\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"http:\\\/\\\/bankruptcyattorneystl.com\\\/?p=179#article\",\"isPartOf\":{\"@id\":\"http:\\\/\\\/bankruptcyattorneystl.com\\\/?p=179\"},\"author\":{\"name\":\"St. Louis Bankruptcy Attorney\",\"@id\":\"http:\\\/\\\/bankruptcyattorneystl.com\\\/#\\\/schema\\\/person\\\/ffac9d6264cfaf62f3228d9b170a410b\"},\"headline\":\"Is my IRA Protected in Bankruptcy?\",\"datePublished\":\"2012-08-09T16:59:38+00:00\",\"dateModified\":\"2012-08-09T17:26:36+00:00\",\"mainEntityOfPage\":{\"@id\":\"http:\\\/\\\/bankruptcyattorneystl.com\\\/?p=179\"},\"wordCount\":706,\"keywords\":[\"exemptions\",\"IRA\",\"retirement\"],\"articleSection\":[\"Bankruptcy General\",\"Protected Assets\"],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"http:\\\/\\\/bankruptcyattorneystl.com\\\/?p=179\",\"url\":\"http:\\\/\\\/bankruptcyattorneystl.com\\\/?p=179\",\"name\":\"Is my IRA Protected in Bankruptcy? - St. Louis Bankruptcy Attorneys\",\"isPartOf\":{\"@id\":\"http:\\\/\\\/bankruptcyattorneystl.com\\\/#website\"},\"datePublished\":\"2012-08-09T16:59:38+00:00\",\"dateModified\":\"2012-08-09T17:26:36+00:00\",\"author\":{\"@id\":\"http:\\\/\\\/bankruptcyattorneystl.com\\\/#\\\/schema\\\/person\\\/ffac9d6264cfaf62f3228d9b170a410b\"},\"breadcrumb\":{\"@id\":\"http:\\\/\\\/bankruptcyattorneystl.com\\\/?p=179#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"http:\\\/\\\/bankruptcyattorneystl.com\\\/?p=179\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"http:\\\/\\\/bankruptcyattorneystl.com\\\/?p=179#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"http:\\\/\\\/bankruptcyattorneystl.com\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Is my IRA Protected in Bankruptcy?\"}]},{\"@type\":\"WebSite\",\"@id\":\"http:\\\/\\\/bankruptcyattorneystl.com\\\/#website\",\"url\":\"http:\\\/\\\/bankruptcyattorneystl.com\\\/\",\"name\":\"St. Louis Bankruptcy Attorneys\",\"description\":\"by A &amp; L, Licker Law Firm with offices in Florissant, St. Louis, Manchester, Granite City, and St. Charles. 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