Can I Keep My Retirement Account If I File Bankruptcy in Florida?
Written by Blake Stewart | Florida Bar No. 84716 | Admitted 2010 | Florida Bankruptcy & Estate Planning Attorney
Yes — in almost every case. Florida provides some of the strongest retirement account protection in the country. Under Fla. Stat. § 222.21, your 401(k), IRA, Roth IRA, and most other qualified retirement accounts are fully exempt from creditors' claims in bankruptcy.
ERISA-Qualified Plans: Unlimited Federal Protection
Employer-sponsored retirement plans that qualify under the Employee Retirement Income Security Act of 1974 (ERISA) — including 401(k) plans, 403(b) plans, traditional pension plans, profit-sharing plans, and most money purchase plans — are protected in bankruptcy without a dollar limit.
This protection has two independent sources. First, ERISA's anti-alienation provision prohibits the assignment or alienation of plan benefits, which the U.S. Supreme Court in Patterson v. Shumate, 504 U.S. 753 (1992), confirmed excludes those plan assets from the bankruptcy estate entirely under 11 U.S.C. § 541(c)(2). They are not even property of the bankruptcy estate — the trustee has no legal claim to them. Second, Florida Statute § 222.21 provides an additional state-law exemption for any account qualifying under the Internal Revenue Code, which adds a layer of protection for plans that ERISA does not directly cover.
ERISA-Qualified Plans — Fully Protected
For the typical employee with a workplace 401(k), 403(b), or pension plan, the protection is essentially absolute. The bankruptcy trustee cannot access those funds regardless of the balance.
IRAs: Unlimited Protection Under Florida Law
Traditional and Roth IRAs are not ERISA-qualified plans — they are individual accounts established directly between the account holder and a financial institution. This distinction matters because it affects which protection applies.
Under Fla. Stat. § 222.21(2)(a), Florida exempts any money held in a retirement or profit-sharing benefit that qualifies under the Internal Revenue Code from creditors' claims. Florida's courts have consistently interpreted this to cover IRAs fully, with no dollar cap.
This is where Florida's opt-out status is particularly valuable. The federal bankruptcy exemption for IRAs under 11 U.S.C. § 522(n) caps protection at $1,711,975 per person (for cases filed April 1, 2025 through March 31, 2028 — adjusted every three years). A Florida debtor with an IRA balance above that threshold who uses Florida's exemptions — which is required under Fla. Stat. § 222.20 — is not limited to that cap. The full balance is protected regardless of size under Florida law.
Rollover IRAs
A 2011 amendment to Fla. Stat. § 222.21 confirmed that rollover IRAs — funds transferred from an ERISA-qualified plan like a 401(k) into an IRA — retain their exempt status under Florida law. The protection follows the funds through the rollover. This means you do not lose creditor protection by rolling a 401(k) into an IRA when you leave an employer.
Inherited IRAs
Florida also protects inherited IRAs under Fla. Stat. § 222.21(2)(c). This is broader than federal bankruptcy law, which does not protect inherited IRAs following the U.S. Supreme Court's ruling in Clark v. Rameker, 573 U.S. 122 (2014). The Clark decision held that inherited IRAs are not "retirement funds" under the federal exemption — but because Florida uses its own exemption statute rather than the federal exemption, Florida bankruptcy filers can still protect an inherited IRA under state law.
What Loses Protection: Distributions and Withdrawals
The exemption protects funds held inside a qualifying retirement account. It does not protect those funds after you withdraw them.
Once you take a distribution from a 401(k) or IRA and the money hits your bank account, it is no longer protected by § 222.21. It becomes regular cash that the bankruptcy trustee can potentially reach as a non-exempt asset. In some circumstances, Florida law may allow tracing of retirement fund distributions as still carrying the exemption character if they are clearly identifiable — but this is not a reliable protection and courts are not uniform on the point.
Do Not Withdraw Retirement Funds to Pay Debts Before Filing
Withdrawing retirement money to pay credit cards or medical bills is almost always the wrong move. You lose the tax-deferred status, typically pay income tax plus a 10% early withdrawal penalty if under age 59½, and convert a protected asset into unprotected cash — often to pay debts that bankruptcy would have eliminated without touching the retirement account at all. I talk to clients regularly who have already drained part of their retirement accounts before contacting me. That money is gone. The best outcome we can achieve is protecting what remains.
What Is Not Protected
Several categories of retirement assets lose their exemption under certain circumstances:
Non-qualified deferred compensation plans
Executive deferred compensation arrangements that do not meet Internal Revenue Code qualification requirements are generally treated as unsecured claims against the employer, not as protected retirement assets. These are sometimes called "top hat" plans or excess benefit plans. They are not covered by ERISA's anti-alienation provision and may not be covered by Fla. Stat. § 222.21 if they do not qualify under the applicable IRC sections.
Plans that have lost qualified status
If a self-directed IRA or other retirement account has made prohibited transactions or otherwise lost its qualified status under the Internal Revenue Code, the exemption protection under § 222.21 may not apply. This is uncommon in standard commercial IRA accounts but can occur with improperly managed self-directed accounts.
Domestic relations orders
ERISA-qualified plans can be divided pursuant to a Qualified Domestic Relations Order (QDRO) as part of a divorce. The anti-alienation provision explicitly does not prevent a QDRO from directing benefits to an alternate payee. This is an exception the bankruptcy exemption cannot override.
IRS federal tax liens
The IRS can levy a 401(k) or IRA to collect unpaid federal taxes. Federal tax liens override both ERISA's anti-alienation provision and Florida's exemption statute. State and local tax authorities do not have the same power.
Frequently Asked Questions
Is my 401(k) protected in Chapter 7 bankruptcy in Florida?
Yes. ERISA-qualified 401(k) plans are excluded from the bankruptcy estate under 11 U.S.C. § 541(c)(2) following Patterson v. Shumate, 504 U.S. 753 (1992), and are also exempt under Fla. Stat. § 222.21. The protection has no dollar cap. The bankruptcy trustee has no legal claim to your 401(k) balance regardless of its size.
Is my IRA protected in bankruptcy in Florida?
Yes. Florida Statute § 222.21 fully protects IRAs from creditors' claims in bankruptcy with no dollar limit. Florida is an opt-out state that uses its own exemption scheme rather than the federal bankruptcy exemptions, so the federal IRA cap of $1,711,975 per person under 11 U.S.C. § 522(n) does not limit Florida filers who use Florida exemptions. Traditional IRAs, Roth IRAs, SEP-IRAs, SIMPLE IRAs, and rollover IRAs are all covered.
Can I protect an inherited IRA in bankruptcy in Florida?
Yes. Florida Statute § 222.21(2)(c) specifically protects inherited IRAs. This is broader than the federal exemption, which the U.S. Supreme Court held in Clark v. Rameker, 573 U.S. 122 (2014) does not cover inherited IRAs. Florida's independent state exemption — available because Florida is an opt-out state — provides protection that federal bankruptcy law does not.
Should I cash out my retirement account to pay debts before filing bankruptcy?
No. This is one of the most common and costly mistakes people make before filing. Your retirement accounts are almost certainly fully protected in bankruptcy. Withdrawing them to pay debts that would be discharged in bankruptcy converts a protected asset into an unprotected one, creates a taxable event, and typically triggers early withdrawal penalties. The debts get paid, but you lose retirement savings that bankruptcy would have preserved entirely. Do not do this without speaking with a bankruptcy attorney first.
What happens to my 401(k) loan if I file bankruptcy?
A 401(k) loan is treated as a secured obligation backed by your account balance. The loan itself does not disappear in bankruptcy, and the 401(k) account balance remains protected — but the repayment obligation on the loan may continue. If you default on a 401(k) loan in connection with a bankruptcy filing, the defaulted amount is typically treated as a taxable distribution. This is a nuanced area that should be discussed with your attorney as part of bankruptcy planning.
Are government pensions and public employee retirement benefits protected?
Yes. Florida provides specific statutory protection for public employee retirement benefits, including FRS (Florida Retirement System) benefits under Fla. Stat. § 121.131, state and county officer retirement benefits under Fla. Stat. § 122.15, firefighter pensions under Fla. Stat. § 175.241, municipal police pensions under Fla. Stat. § 185.25, and teachers' retirement benefits under Fla. Stat. § 238.15.
Your Retirement Is Almost Certainly Safe
One of the biggest misconceptions about bankruptcy is that you lose everything. For most Florida residents, the opposite is true — particularly when it comes to retirement accounts. Florida's exemptions are designed to give people the tools they need for a financial fresh start without destroying the savings they will need in retirement.
I've filed cases for clients throughout Florida who came in certain they would lose their IRA or 401(k). In nearly every case, those accounts were fully protected. The analysis takes about five minutes once I know what you have and how the accounts are structured.
Call Stewart Law today or schedule a consultation online. We represent clients throughout Florida, with offices in Melbourne on the Space Coast.
Statutes & Cases Referenced: Fla. Stat. § 222.20 · Fla. Stat. § 222.21 · Fla. Stat. § 222.21(2)(a) · Fla. Stat. § 222.21(2)(c) · Fla. Stat. § 121.131 · Fla. Stat. § 122.15 · Fla. Stat. § 175.241 · Fla. Stat. § 185.25 · Fla. Stat. § 238.15 · 11 U.S.C. § 522(n) · 11 U.S.C. § 541(c)(2) · Patterson v. Shumate, 504 U.S. 753 (1992) · Clark v. Rameker, 573 U.S. 122 (2014)
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