Will I lose my retirement funds if I file Chapter 7 Bankruptcy in Arizona?

Probably not. A.R.S. § 33-1126(B) provides the exemption that applies to “any money or other assets payable … from … a retirement plan which is qualified under §§ 401(a), 403(b), 408 or 409 of the United States Internal Revenue Code of 1986 … from any and all claims of creditors of the beneficiary or participant.” However, In re Flindall, 10,5 B.R. 32 (Bankr.D.Ariz.1989) and In re Hirsch, 9,8 B.R. 1 (Bankr.D.Ariz.1988) held that A.R.S. § 33-1126(B) is preempted by the Employee Retirement Income Security Act (ERISA). These cases stand for the proposition that the preemptive language of ERISA, 29 U.S.C. § 1144(a), preempts all state laws that are within its scope. Further, In re Herrscher, 121 B.R. 29 (Bankr.Ariz., 1989), held that the language of § 33-1126(B) pertaining to IRA’s is not preempted by ERISA and is severable and valid.

Simply put, in Arizona, benefits from an ERISA-qualified retirement or deferred compensation plan and/or an Individual Retirement Account (IRA) are exempt from the reach of creditors except for those amounts contributed within 120 days before a debtor files for bankruptcy. Most employer provided retirement accounts are ERISA qualified; however, you should request verification from your employer prior to filing your bankruptcy petition. Your assigned trustee will likely require such verification prior to your scheduled creditor’s meeting.

As can be the case with some plans, a small portion of your retirement may not be ERISA-qualified. In order to protect your retirement money from seizure, you should address your concerns with an attorney and allow them to review any documentation provided by your plan administrator. If you have any questions, contact us today.

The above assumes you have resided in Arizona for the past two years and you may use Arizona’s exemptions when filing your bankruptcy.