Bankruptcy Concerns: Supreme Court Decides on IRA Exemptions

 Posted on July 26, 2014 in Bankruptcy

Millions of people across the country have been living under the auspices that securing funds in 401(k)’s, IRA’s, and other long term accounts will ensure the financial stability of both themselves and their loved ones. These accounts are structured to prevent the need for a bankruptcy attorney, especially in the case of an inheritance. However, due to a recent Supreme Court ruling regarding inherited IRA accounts, this may no longer be the case.

Traditionally, companies can offer incentives to employees for the purposes of retention as well as stability including benefits such as pension plans, 401(k)’s, and Individual Retirement Accounts (IRA). Often, these accounts are used for retirement purposes, with many employers matching personal contributions into the account to a certain percentage. These accounts generally have beneficiaries in the event of the death of the policyholder.

In the past, these accounts could be transferred into an inherited IRA account, making them completely exempt by federal law in bankruptcy cases. This is no longer the case, however. In a Supreme Court decision handed down this year, any money that is inherited is no longer considered a retirement fund, therefore making it accessible to creditors in case of debt.

It has recently come to light that medical bills are in fact one of the leading causes of bankruptcy in America. As people get older, they become much more susceptible to injuries, illnesses, and subsequently very high medical bills. If your spouse was the primary moneymaker in your marriage and he or she passes away leaving you with these bills, the implications of the decision can be far reaching.

If inherited IRA accounts are no longer considered retirement funds in bankruptcy court, and medical bills pile up from a deceased spouse, you may not have the financial security you once thought you did. If you are facing overwhelming debt from a deceased spouse and are considering bankruptcy as a viable option, consult with a Texas attorney to explore all options possible.

Account exemptions during bankruptcy can seriously affect long term financial stability. The Law Offices of Chance M. McGhee, located in San Antonio, Texas and serving clients across the surrounding counties, can provide you with the legal advice you need to get through hard financial times. Please contact an experienced San Antonio bankruptcy attorney today to discuss your situation.