Can Bankruptcy Protect Retirement Accounts in Maryland?

 Posted on May 24, 2026 in Consumer Bankruptcy

If you are considering bankruptcy in 2026 and you have a 401(k), IRA, or pension, the good news is that in most cases, bankruptcy can protect your retirement accounts. Retirement savings are among the best-protected assets in any bankruptcy filing. You worked hard to build that money. Both Maryland law and federal law have strong protections to make sure a bankruptcy filing does not take it away from you. A Washington D.C. bankruptcy lawyer can help you understand exactly what is protected in your situation and how to make the most of the exemptions available to you.

Maryland has opted out of the standard federal bankruptcy exemption system. That means when you file for bankruptcy in Maryland, you generally use Maryland's own rules to decide what you can keep. But some federal protections for retirement accounts still apply on top of Maryland's state law, giving most people protection from two directions at once.

What Does Maryland Law Say About Retirement Accounts in Relation to Bankruptcy?

Maryland's main protection for retirement accounts comes from Md. Code, Courts and Judicial Proceedings Section 11-504(h). Under this law, money held in a qualifying retirement account is fully exempt from creditor claims in bankruptcy. Maryland does not put a dollar cap on this protection, meaning the full balance of a qualifying account is shielded no matter how much is in it.

Which Accounts Are Covered?

The accounts protected under Maryland law include:

• 401(k) plans

• 403(b) plans

• Traditional IRAs

• Roth IRAs

• SEP IRAs

• SIMPLE IRAs

• Defined benefit pension plans

If your retirement savings are in one of these types of accounts, Maryland law protects them from your creditors when you file for bankruptcy.

Does Federal Law Add Any Extra Protection for Retirement Accounts During Bankruptcy?

Even though Maryland uses its own exemption rules, federal law still provides a separate layer of protection for retirement accounts under 11 U.S.C. Section 522(b)(3)(C). This federal provision protects retirement funds in most tax-favored accounts from creditors in bankruptcy, even in states that have opted out of the federal exemption list.

What About the IRA Cap?

For traditional and Roth IRAs, there is a federal dollar limit. For cases filed on or after April 1, 2025, the combined balance of your traditional and Roth IRAs is protected up to $1,711,975 per person. This number is adjusted every three years. For most people, this limit covers their entire IRA balance. If your IRA is worth more than this cap, the amount above the limit may not receive the same level of protection, which is one reason talking to an attorney about your specific situation matters.

Workplace retirement plans like 401(k)s and pensions are generally protected without any dollar cap under federal law, in addition to Maryland's protections.

Are Any Retirement Accounts Not Protected During Bankruptcy?

Most retirement accounts are very well protected, but there are a few situations where coverage may not be automatic.

Inherited IRAs

If you inherited an IRA from someone other than a spouse, those funds may not receive the same protection as an account you built yourself. The U.S. Supreme Court ruled in Clark v. Rameker in 2014 that inherited IRAs do not qualify as retirement funds for federal bankruptcy exemption purposes. Maryland's state law may offer some coverage depending on the circumstances, but this is an area where you need legal advice before assuming you are safe.

Retirement Money in a Regular Bank Account

Once you withdraw money from a retirement account and deposit it into a regular checking or savings account, it loses its protected status. Retirement funds mixed with regular money are no longer automatically shielded. If you are thinking about pulling money out of retirement to pay off debt before filing, talk to an attorney first. In most cases, that is the wrong move and could cost you far more than it saves.

Does the Type of Bankruptcy You File Matter When You Want To Protect Your Retirement Accounts?

Both Chapter 7 and Chapter 13 bankruptcy allow you to keep exempt property, and retirement accounts are exempt under both. What differs is how retirement income may be treated in a Chapter 13 case, which involves a three to five-year repayment plan. The court looks at your disposable income to figure out how much you can afford to pay creditors each month. Social Security income is excluded from this calculation, but other retirement income may factor in depending on your situation. This does not mean you lose your accounts. It can, however, affect how your repayment plan is structured.

Contact Our Bowie, MD Bankruptcy Lawyer for a Free 30-Minute Consultation

If you are worried about what bankruptcy means for your retirement savings, you do not have to figure it out alone. The Washington D.C. bankruptcy attorney at Bloc One Services, LLC strives to provide quality legal service at a fair and reasonable price. She can review your accounts and help you make smart decisions about the best path forward. Call 240-200-0076 today to schedule a consultation.