Exemption of Retirement Accounts in Bankruptcy

The Supreme Court ruled recently that inherited IRA accounts may have limited protection in bankruptcy proceedings using federal exemptions.  This ruling may have limited effects on Kansas filers using liberal Kansas retirement account exemptions.  A chapter 7 or chapter 13 bankruptcy is often filed seeking to exempt some retirement monies in the process.  Careful planning and review is warranted in these cases.  Since most retirement accounts may still be protected under Kansas exemptions in bankruptcy, it is rarely a good idea to liquidate a retirement account unless it will 1) not exhaust the retirement account to any real degree, and 2) it will resolve all debt issues.  Otherwise, way too often, the bankruptcy still occurs later, and the client no longer has what would otherwise have been a protected asset in the bankruptcy.


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