Bankruptcy in Tennessee has many saving graces. One of the biggest is that it can allow people to get a fresh financial start. Being able to put debt in the rear-view mirror can provide a huge sense of relief to people who have been struggling for some time to keep their heads above water. An experienced Memphis bankruptcy attorney can help you determine what kind of bankruptcy, if any, is a good choice for you.
Under Chapter 7 bankruptcy, there are several exemptions to allow people to maintain some semblance of normal life, while still paying what they can to their creditors — generally by liquidating those assets that are not subject to bankruptcy protection. One potentially major asset for many people, particularly older folks with a long work history, is the value of their Individual Retirement Accounts (IRAs).
After decades of saving for retirement, the balance in an IRA can be quite substantial. People may have been socking away money for years on a regular basis, perhaps just a few dollars a week, with an eye toward being able to draw on those funds when they are no longer employed.
When other financial problems get in the way and bankruptcy becomes a viable option, that IRA money is safe. After all, if someone had to liquidate their retirement funds when they filed for bankruptcy, that “fresh financial start” wouldn’t seem quite so fresh. In fact, people could end up in worse shape than they were before bankruptcy, particularly if they are nearing retirement age.
Fortunately, your own IRA is safe if you file for bankruptcy. What many people may not realize, however, is that an IRA you inherit from someone (other than your spouse) is not considered a retirement account for bankruptcy purposes. States might choose to designate it as such, but Tennessee has not. That means if you are considering bankruptcy but have inherited an IRA from a parent or grandparent, you should consider that the money you might be counting on could be sent to your creditors instead.