Arizona Bankruptcy Court- You Can Keep an Inherited IRA- Don’t Listen to the Supremes!

Bankruptcy Lawyer

When people file for bankruptcy protection, they are allowed to protect, or “exempt” certain property.  What can be protected (and what rules are used to protect the assets) depends on which state the debtor lives in.  Back in 2014, the US Supreme Court ruled, in the Clark v. Rameker case, that a debtor (a person in bankruptcy) cannot protect a retirement account the funds were inherited from her mother.  I wrote about it in this blog article then.

As I said then, the Supreme Court case involved a person from Wisconsin, a state that uses the Federal Exemptions.   But, in Arizona, they aren’t listening to the Supremes!  A court in Arizona just issued a new ruling, saying that the Arizona exemption does allow a debtor to protect an inherited IRA.  In the Pacheco case, the Arizona Bankruptcy Court ruled that the Arizona exemption law allows the debtor to protect an inherited IRA.  This means that more courts in more states may say that their state exemption law allows people to keep their inherited IRAs in those states.

This is a highly technical bankruptcy issue, and these kinds of issues don’t come up very often, but when they do, it’s important to have experienced bankruptcy attorneys to represent you.  Does Illinois, or your state, listen to the Supremes?

If you have a retirement account, IRA, or 401(k) account, it is very important to review it with an experienced attorney if you are considering bankruptcy. And, most importantly, don’t move the money around, cash it, or change it in any way, without consulting with a lawyer first.  Call me, or you might be singing the blues!

Daniel J. Winter


Offices in Chicago, Gurnee, Oak Lawn, and Skokie, Illinois

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