Helping With Your Financial Future

Are my retirement accounts protected from bankruptcy seizures?

On Behalf of | Feb 20, 2023 | Bankruptcy Exemptions

When you overextend yourself financially and cannot pay your bills, creditors may start filing lawsuits to seize your assets. Under normal conditions, your retirement money may be vulnerable to these claims. However, once you file for bankruptcy in California, federal laws shield certain types of retirement accounts from creditors.

Chapter 7 vs. Chapter 13 bankruptcies

Different guidelines apply to Chapter 7 and Chapter 13 filings. Chapter 7 bankruptcies are applicable for individuals below a California median-level household income. If the household income is higher than that, then a Chapter 13 filing is a viable option.

The court considers the income generated by retirement plans when you file for a Chapter 7 bankruptcy. This additional money may be enough to push you over the allowable median income level in Chapter 7 and force you into Chapter 13.

Account protections

The degree of protection from creditors during bankruptcy for your retirement accounts varies from unlimited to none. Here’s an overview of what you can expect if you find yourself in this situation.

Fully protected

Qualified retirement accounts adhere to the standards set by the Employment Retirement Income Security Act. These plans include the deferred income tax employer-sponsored 401(k) and 403(b) compensation plans. These accounts are fully protected and untouchable during bankruptcy.

The Bankruptcy Abuse Prevention and Consumer Protection Act provides similarly complete protection for SEP-IRA, Simple IRA and most rollover IRAs.

Limited protection

Traditional and Roth IRAs receive limited protection from BAPCPA. Assets not exceeding $1,512,350 per person across all accounts are safe from creditors. However, creditors may seize any funds above the stated maximum.


Although you may have a bank account that you call your retirement money, laws don’t protect it from creditors. The same thing is true for personal brokerage accounts.

Social Security

If you don’t want creditors to have access to your Social Security savings, you need to deposit the checks in a separate bank account. Ensure that you keep this money segregated and don’t comingle it with funds from other sources.

You may have contributed to your retirement accounts for years. Safeguard them before declaring bankruptcy.