Do You Get To Keep Your Roth IRA Even If You File Bankruptcy? In Georgia, Yes, Says The Eleventh Circuit

• Published date: 28 February 2022
• Law Firm: Arnall Golden Gregory
• Author: Mr Michael J. Bargar

In an issue of first impression, the Eleventh Circuit Court of Appeals has ruled that a Roth IRA is not property of a bankruptcy estate in Georgia. Hoffman v. Signature Bank of Georgia, Case No. 20-12823 (11th Cir. Jan. 24, 2022). This means that a bankruptcy trustee cannot get to the Roth IRA for the benefit of creditors. Although this creates a possible barrier for creditors and bankruptcy trustees attempting to liquidate assets held in retirement accounts, it does not necessarily mean that individual retirement accounts are always excluded from administration in an individual bankruptcy case.

Factual and Procedural Background in Hoffman v. Signature Bank of Georgia

In Hoffman, the debtor was a retired Air Force Colonel who had personally guaranteed a large SBA loan that his son-in-law used to operate a restaurant. In reHoffman, 605 B.R. 560, 563 (Bankr. N.D.Ga. 2019) (Drake, J.). After the business failed, the bank initiated a lawsuit against the debtor, the son-in-law, and the debtor's daughter. Id. Shortly thereafter, the debtor filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code (as did his son-in-law and daughter). Id.

On his bankruptcy disclosure forms, the debtor scheduled interests in over $1.7 million held in various retirement accounts, including a 401(k), a traditional IRA, and two Roth IRAs, and he exempted the entire value of those accounts under various subsections of O.C.G.A. ' 44-13-100(a). Id.

Following an objection to the debtor's claimed exemptions in these accounts, the bankruptcy court addressed, among other things, the following issues: (a) whether the...