Is Retirement Money Exempt From Bankruptcy?
In 1992, the United States Supreme Court ruled that qualified retirement plans under ERISA (the Employee Retirement Income Security Act) are not to be made part of the bankruptcy estate and therefore are exempt. The ruling puts retirement funds outside the jurisdiction of the bankruptcy court.
Almost all pensions and 401(k) plans that are qualified plans under ERISA will most likely be kept out of the bankruptcy estate. However, there are certain exceptions with regard to what type of retirement account the debtor holds.
If the money is held in an IRA or Roth IRA, these accounts do not have ERISA protection and their exemption from the bankruptcy estate is based on provisions in state law. If a debtor chooses the Michigan state exemptions, they provide exemptions for most retirement accounts including 401k, 403b as well as individual retirement accounts (IRA).
