The Bankruptcy Estate

• When you declare bankruptcy, all of your property goes into a new legal entity called the bankruptcy estate. Property in the bankruptcy estate that is not specifically exempted or excluded by law is liquidated to be distributed to creditors and to pay administrative costs.
  
  

Exemptions

• Exemptions are lists of property that are precluded from being liquidated in a bankruptcy proceeding. Although there are federal exemptions for bankruptcy proceedings, most states have their own list of allowable exceptions. Property under exemption is kept by the debtor.
  
  

Exclusions

• Exclusions are items which are specifically identified as being unavailable for creditors.
  
  

Retirement Plans

• The Supreme Court has ruled that employer-sponsored tax-qualified retirement plans, such as 401k and profit-sharing plans, are specifically excluded from bankruptcy estates. As Individual Retirement Accounts are not employer-sponsored, the law has varied on the status of IRA accounts. Currently, most states exclude IRAs from the bankruptcy estate, but others require the debtor to use an exemption.
  
  

Other Retirement Savings

• Non-qualified retirements savings, such as savings and investment accounts, are generally not excluded or exempted from the bankruptcy estate, and as such may be subject to liquidation in a bankruptcy proceeding.