Retirement Assets Not Separated by QDRO Not Protected in Bankruptcy

Your retirement accounts, such as 401ks, are typically safe in bankruptcy and cannot be used to pay creditors. Traditional IRAs and Roth IRAs are protected up to a limit (currently more than $1 million). However, a U.S. Circuit Bankruptcy Court of Appeals recently ruled that when retirement assets are divided in a property settlement in a divorce, these assets are not protected from creditors. The Court’s opinion stated that the exemption from bankruptcy is limited to the individuals who create and contribute funds to the retirement accounts. This article summarizes the Court’s ruling.

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