The new Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 expands the creditor protection afforded to IRAs and Roth IRAs. When this law takes effect, in October, up to $1 million worth of assets will be protected in bankruptcy proceedings. This cap can be increased at the discretion of the Bankruptcy Court and it does not apply to certain rollover contributions.
Although this law provides greater creditor protection for retirement plan assets, that only applies to bankruptcy. It does not apply to judgments awarded in other courts where state creditor protection laws will apply. Thus, if you are considering rolling assets from another retirement plan into an IRA, check into your state’s laws, to see how much creditor protection you’ll have.
