How do I protect my 401(k) or IRA retirement funds from creditors during a California bankruptcy?

In California, your 401(k) and IRA funds are generally fully protected from creditors in a bankruptcy, but you must properly claim this protection in your court filings. Follow these steps to ensure your retirement accounts are safe. Step 1: Gather Your Retirement Account Documents Collect the most recent statements for all of your retirement accounts, including 401(k)s, 403(b)s, traditional IRAs, Roth IRAs, and any other pensions. You will need the account numbers, current balances, and the name of the financial institution for each one. Step 2: Choose California's "System 1" Exemptions When you file for bankruptcy in California, you must choose between two sets of property exemptions. To protect your retirement funds, you must select the exemptions listed in the California Code of Civil Procedure sections 704.010-704.210 (often called "System 1"). This system provides a broad, unlimited exemption for private retirement plans. Step 3: List the Accounts on Your Bankruptcy Forms On your bankruptcy paperwork (specifically, Schedule A/B: Property), you must accurately list every retirement account you own and its current market value. Do not omit any account, as failure to disclose an asset can have severe consequences. Step 4: Claim the Exemption on Schedule C On Schedule C: The Property You Claim as Exempt, you will list your retirement accounts again. In the column asking for the legal basis for your exemption, you must cite the specific law protecting the funds. For 401(k)s and IRAs, you will cite California Code of Civil Procedure § 704.115. Important details and nuances: The protection under CCP § 704.115 covers the amount of funds necessary for your support in retirement. While a trustee could challenge this, courts typically protect the entire balance of legitimate, long-standing retirement accounts. Be aware that contributions made immediately before filing bankruptcy could be viewed as an attempt to hide money and may be challenged. Warnings and limitations: This strong protection generally does not apply to inherited IRAs (from someone other than a spouse). Inherited IRAs have a separate, much lower protection limit. Also, do not withdraw funds from your retirement accounts before or during your bankruptcy, as those withdrawn funds lose their protected status and become cash that creditors can seize. This is general information and does not constitute legal advice. The choice of exemptions can be complex and has significant consequences for your other assets, so you should consult with a qualified California bankruptcy attorney to review your specific situation.