Who files bankruptcy? Though some people in Lawrenceville who apply for bankruptcy can't work and, thus, have no money, many more are gainfully employed or have recently lost their jobs. Just because someone has a job doesn't mean that he or she can't be in serious need of debt solutions.
Nor should people assume that individuals in need of bankruptcy protections are bad with money or have spending problems. There are a host of reasons why people may need to file bankruptcy, some of which are completely outside an individual's control, such as obscenely high medical bills for emergency medical care.
So, with such a diverse background of people applying for bankruptcy, it should not be surprising that there are many applicants in Lawrenceville who also have individual retirement accounts. Whether they have been contributing to their IRAs for years and are quite close to retirement or there is not much in there, it is important to note that traditional IRAs are immune from creditors, both inside and outside of bankruptcy. The purpose behind this important protection is that if their retirement accounts could be drained to pay debtors, they might be insolvent when they hit retirement age.
The Supreme Court of the United States recently issued a decision, however, to make a very important distinction between inherited and traditional IRAs. While traditional IRAs are protected, inherited ones are not. This does not necessarily mean that all of an inherited IRA will need to be used to pay off debtors in bankruptcy, but each situation is different. For those people who are underwater in debt and have recently inherited an IRA, talking to a bankruptcy lawyer may be a good idea.
Source: Courthouse News Service, "Inherited IRAs Aren't Creditor-Safe, Court Says," Barbara Leonard, June 12, 2014