The Short Answer
For most Florida bankruptcy filers, a Roth IRA is well protected. Federal law and Florida exemption law work together to shield retirement savings from creditors in most cases. But the protection is not unlimited, and a few important details are worth understanding before you assume every dollar is safe.
This post walks through the rules in plain language so you can have a more informed conversation with a bankruptcy attorney.
Why Retirement Accounts Get Special Treatment
Congress and the Florida Legislature both recognized that retirement savings serve a different purpose than a checking account or a boat. The goal is to keep people from becoming financially dependent on public programs later in life. Because of that policy choice, retirement accounts like 401(k)s and IRAs receive strong protections under both federal bankruptcy law and Florida state law.
Federal Law: ERISA and the Bankruptcy Code
Many workplace retirement plans, such as 401(k)s and pension plans, are covered by a federal law called ERISA. Courts have long held that ERISA-qualified plans are largely off-limits to bankruptcy trustees because of the way those plans are structured. You can read more about how 401(k) accounts are treated in bankruptcy in our post on 401(k) loans and bankruptcy.
IRAs are different. They are not ERISA-qualified plans. Congress addressed this gap in 2005 when it passed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). Under 11 U.S.C. 522(b)(3)(C) and 522(n), the Bankruptcy Code now provides a federal exemption for traditional IRAs and Roth IRAs up to an inflation-adjusted cap. That cap applies per debtor and is periodically updated by the courts. The cap is high enough that the vast majority of Florida filers with Roth IRAs will find their entire balance protected under federal law alone.
Rollover amounts that came directly from an ERISA-qualified plan, such as a 401(k) rollover into a Roth IRA, receive unlimited protection under a separate provision of the Bankruptcy Code. The theory is that money originally in a fully protected ERISA plan should not lose its protection simply because it moved into an IRA.
Florida State Law Adds Another Layer
Florida also has its own exemption statute protecting retirement accounts. Under Florida Statute 222.21, funds held in an IRA, including a Roth IRA, are exempt from creditor claims. Florida is an "opt-out" state, which means Florida filers must generally use Florida exemptions rather than the federal exemption list. Even so, the Florida retirement account exemption is broad and covers Roth IRAs by name.
The practical result is that most Florida filers are protected under Florida law independently of the federal cap. Both protections point in the same direction: your Roth IRA is shielded.
What Protections Apply in Chapter 7 vs. Chapter 13?
Chapter 7
Chapter 7 is a liquidation process. A trustee reviews your assets and can sell non-exempt property to pay creditors. Exempt property, including a properly protected Roth IRA, stays with you. The means test compares your household income to the Florida median income to determine whether you qualify for Chapter 7.
Because a Roth IRA is generally exempt, the trustee cannot reach it. Many filers go through Chapter 7 and come out the other side with their retirement savings fully intact.
Chapter 13
Chapter 13 is a three-to-five-year repayment plan. You keep your property and pay back some or all of your debts through a court-approved plan. Exempt assets like a Roth IRA are still protected, and there is no liquidation of exempt property in Chapter 13. The protection rules are the same as in Chapter 7.
Are There Any Limits on Roth IRA Protection?
Yes. A few situations can reduce or eliminate the protection:
- Excess contributions. The IRS limits how much you can contribute to a Roth IRA each year. Amounts that exceed the legal contribution limit may not be protected under the federal exemption.
- Inherited Roth IRAs. The U.S. Supreme Court ruled in 2014 (Clark v. Rameker) that inherited IRAs do not qualify for the federal retirement account exemption because they are not funds the debtor set aside for their own retirement. Florida courts have also addressed inherited IRAs. If you inherited a Roth IRA from someone other than a spouse, the protection analysis is more complicated.
- Fraudulent transfers. If someone moves large sums into a Roth IRA shortly before filing bankruptcy specifically to shield money from creditors, a trustee may investigate that transfer under fraudulent transfer rules.
- Domestic support obligations. Debts like child support and alimony generally survive bankruptcy discharge. In some situations, a creditor holding a domestic support obligation may have avenues to reach retirement funds outside of bankruptcy court. These situations are fact-specific.
How the Automatic Stay Affects Creditor Access During Your Case
When you file a bankruptcy petition, the automatic stay goes into effect immediately under 11 U.S.C. 362. Filing the case triggers the stay, which generally pauses most collection actions, garnishments, and lawsuits while the case is open. That means creditors cannot take steps to access your Roth IRA during the bankruptcy proceeding. To learn more about how the automatic stay works, see our post on the automatic stay explained.
The automatic stay has exceptions and can be limited for repeat filers, but for most first-time filers it provides broad protection while the case moves forward.
Steps Required Before You Can Receive a Discharge
Protecting your retirement account is one piece of the picture. To actually receive a bankruptcy discharge, the Bankruptcy Code requires two steps:
- Credit counseling from an approved agency before you file.
- Debtor education from an approved provider after you file but before your case closes.
Both steps are mandatory. Skipping either one can prevent you from receiving your discharge.
The 341 Meeting and Your Retirement Accounts
About a month after filing, you will attend a 341 meeting of creditors. In the Southern District of Florida, which covers Miami, Fort Lauderdale, and West Palm Beach, this meeting is routinely held by video or phone. The trustee will ask you questions under oath about your assets, including any retirement accounts.
You will need to disclose your Roth IRA on your bankruptcy schedules. Claiming the exemption correctly on Schedule C is essential. Listing the account and claiming the exemption is how you protect it. If you do not claim the exemption properly, you risk losing the protection. Our post on the 341 meeting of creditors in Florida explains what to expect at that hearing.
What About Contributions During Bankruptcy?
Some filers wonder whether they can keep contributing to a Roth IRA after filing. In Chapter 7, the case usually closes within a few months, and the question rarely comes up in a meaningful way. In Chapter 13, the plan requires you to commit your disposable income to repaying creditors. Ongoing Roth IRA contributions during a Chapter 13 plan may raise questions from a trustee about whether disposable income is being properly allocated. This is a fact-specific issue that depends on your plan terms and your income.
Key Takeaways
- Roth IRAs are generally exempt in Florida bankruptcy under both Florida Statute 222.21 and the federal Bankruptcy Code.
- Rollover funds from ERISA-qualified plans receive unlimited federal protection.
- Regular Roth IRA balances are protected up to a federal cap that covers the vast majority of filers.
- Inherited Roth IRAs from non-spouse beneficiaries may not be fully protected.
- Excess contributions above IRS limits may fall outside the exemption.
- You must claim the exemption correctly on your bankruptcy schedules.
- Past results do not predict future outcomes.
Attorney fees, court costs and filing fees are explained in writing before any case begins. Every financial situation is different, and the rules described here apply generally. Many filers find that their retirement savings survive bankruptcy intact, but the details of your accounts, how they were funded, and how you claim exemptions all matter.
Wondering if a fresh start fits your situation?
Attorney fees, court costs and filing fees are explained in writing before any case begins. Take the free 2-minute case review or call Recalde Law Firm at (305) 792-9100.