Need a solid YES or NO answer on Roth IRA exemption

[chucko]

I spoke with a lawyer on the phone yesterday and have an appointment to see her tomorrow. I asked her if the Roth IRA is exempt and she didn't know.

I can't find any concrete evidence on the web answering my question either way. Has anyone here gone through a BK with a Roth IRA that was exempt?

My lawyer said there was a Supreme Court ruling that protected IRAs from BK, but that the Roth IRA was not specifically mentioned.

In Pennsylvania, I will be using the federal exemptions as PA has a pretty short list. The only thing the federal exemptions include are ERISA qualified. I don't know where the Roth IRA stands.

Whether or not the Roth is exempt makes or breaks my decision to go ch 7. Thanks for any info or links to articled containing the answer or at least a court precedant.

[mymymy]

As far as I know, Roth IRA's are NOT ERISA qualified and are not exempt. There are other factors but, the main characteristic of ERISA 401k's is that they are employer sponsored and fall under specific IRS and Governmental rules. Roth IRA's are not, as a rule. You can call the IRS and ask for their benefits department. They were very helpful when I spoke to them and that is the source of my statement to you today.

Have you already filed? I don't know if it would be considered fraudulent in any way to roll your IRA over into a 401K.. ask your attorney.

[chucko]

No I haven't filed. I am seeing my attorney for the first time tomorrow. I think she is going to try and find out the answer for me.

Can you simply roll $35,000 of Roth IRA into a 401k?

[chucko]

I found this report dated May 2005 that was a very interesting read regarding the new laws going into affect in Oct and which retirement accounts are exempt and a couple of related cases.

Can someone who can read legalese a little better than me please read this and let me know what they think.

If I read this properly, this almost tells me that my Roth IRA is not necessarily exempt now, but it will be as of Oct. 17. That poses quite an interesting dilemma.

It's only a 2 page report. Please check it out.

http://www.proskauer.com/news_publications/client_alerts/content/2005_05_20_b/_res/id=sa_PDF/8878-052005-Bankruptcy%20Abuse%20Prevention-ca%20v4.pdf

[mymymy]

I found this report dated May 2005 that was a very interesting read regarding the new laws going into affect in Oct and which retirement accounts are exempt and a couple of related cases.

Can someone who can read legalese a little better than me please read this and let me know what they think.

If I read this properly, this almost tells me that my Roth IRA is not necessarily exempt now, but it will be as of Oct. 17. That poses quite an interesting dilemma.

It's only a 2 page report. Please check it out.

http://www.proskauer.com/news_public...on-ca%20v4.pdf

yep.. you read that right! It looks like retirement plans outside of ERISA will be more protected after Oct 17. I can appreciate your dilemma. Now, it's a matter of course for you to determine whether or not and how the other provisions will affect your case. Is the lawyer that you are seeing tomorrow also proficient at asset protection? Some attorneys who specialize in BK are amazing at "planned" BK's. It sounds like the one you're going to see probably isn't one of those. It wouldn't hurt to line up a couple of more consultations in light of the RothIRA situation. You need someone on the ball.

[chucko]

With all the reading and question asking I've been doing, I have come to the conclusion that there is no defined statute that dictates whether or not a Roth IRA is exempt or not. I guess it's a case by case thing.

Here's an excerpt from an article I found at the following site:

http://www.iraplus.com/iraplus/Court/Annuities_Not_Exempt_From_Bankruptcy.sqrl

"The types of plan transfers that are recognized as exempt from the bankruptcy estate under Iowa Code Section 627.6(8)(f) include IRAs and Roth IRAs. However, the Iowa statute does not specifically include individual retirement annuities."

So in Iowa they say that Roth IRAs are exempt, but that doesn't show up when I search for Iowa bankruptcy exemptions. I am so confusd.

I will be calling a few lawyers today to find out who can handle asset protection the best. Thanks for the tip.

[mymymy]

Don't be confused. Stick to the facts, only the facts...LOL. You are in PA and are going to use federal exemptions. Reading about Iowa right now is not something you need.

[davidb81]

I know in utah with 401k the 401k itself is exempt but any contributions you made within a year of filing bk can be recovered by the trustee I dont know if a roth would be the same though

P.S. If the attorney didn't know the answer to that question.... Cancel the appointment! that should be a no brainer for her

[chucko]

This is kind of frustrating. I called almost every BK lawyer in the area. None of them know the answer or have dealt with a BK client who had a Roth IRA. I am in a smaller area, so I think I might go looking into the Harrisburg or Wilked Barre area for better firms who are more familiar with the law.

[davidb81]

are you currently contributing to the roth?

[chucko]

Well it's kind of a strange situation. I get gift money every year at christmas that is deposited directly into my Roth IRA for me. I personally do not contribute to it out of my checking/savings, so there's really no record of the Roth IRA linked to me except a line or two on my income tax return.

[davidb81]

ya but if the roth is in your name it is tied to you i cant imagine that an attorney wouldnt know the answer to your question of course they wont give too much advise until you hire them. the roth is in your name right?

[davidb81]

im thinking if the court ruled that ira's are exempt why wouldnt a roth be ? I think you'll probably be ok except for contributions you have made within 1 year prior to filing bk. those contributions probably wont be exempt how much are we talking as far as the contributions go?

[chucko]

im thinking if the court ruled that ira's are exempt why wouldnt a roth be ? I think you'll probably be ok except for contributions you have made within 1 year prior to filing bk. those contributions probably wont be exempt how much are we talking as far as the contributions go?

I made the maximum contribution of $4000 last year. I didn't actually make it, someone else did, but yes it went into my account and the Roth IRA is in my name. I can't find a lawyer here who has dealt with someone with a Roth IRA. I think it's pretty ridiculous.

Under the new laws a Roth IRA is specifically exempt, and after reading tons of info on the new rules, I may be better off waiting until October and filing then. I passed the means test.

[mymymy]

I made the maximum contribution of $4000 last year. I didn't actually make it, someone else did, but yes it went into my account and the Roth IRA is in my name. I can't find a lawyer here who has dealt with someone with a Roth IRA. I think it's pretty ridiculous.

Under the new laws a Roth IRA is specifically exempt, and after reading tons of info on the new rules, I may be better off waiting until October and filing then. I passed the means test.

How could you have passed the means test? They haven't even established the numbers yet, let alone released them..

Well, in any event, you're probably okay. You may as well start on the 6 months credit counseling thing..let us know if you find a good company- there are so many scheisters out there.

<Did you check to see if you are allowed to do a rollover into your 401K with no penalties yet?>