If we file bankruptcy, can our creditors attach our home, which has a reverse mortgage, to our IRA?

Full question:

If we file bankruptcy, can our creditors attach our home, which has a reverse mortgage, to our IRA?

• Category: Bankruptcy
• Date: 04/07/2025
• State: California

Answer:

After a person files bankruptcy, certain exemptions may apply to prevent a creditor from claiming the debtor's property. In California, a debtor cannot use the federal exemptions, but you can use the federal non-bankruptcy exemptions. California allows you to pick one of two options (pick the one that allows you to keep the most property) --

Option 1:

Real property, mobile home, co-op, or condo to $50,000 if single and not disabled; $75,000 for families if no other member has a homestead; up to $125,000 if 65 or older or disabled or $100,000 if 55 or older, single and earn under $15,000 and creditors trying to force the sale of your home; or 55 or older, married, earning less than $20,000 and creditors trying to force the sale of your home; proceeds from sale of home are exempt for six months. [704.710, 704.720 and 704.730]

Insurance / Annuities: Disability or health benefits, unlimited amount [704.130]; life insurance proceeds if policy prohibits proceeds from being used to pay creditors, unlimited amount [Insurance 1017]; fidelity bonds, unlimited amount [Labor 404]; matured life insurance benefits, amount needed for support [704.100(c); fraternal unemployment benefits, unlimited amount [704.120]; homeowner's insurance proceeds up to six months after receipt and up to real estate exemption amount [704.720(b)]; unmatured life insurance policy loan value up to $8,000 if single, married couples can double [704.100(b)]

Pensions / Retirement Plans: Public and Private retirement benefits, IRAs & Keoghs, unlimited amount [704.110, 704.115]; public employees, public retirement benefits [Government 21201]; county employees, firefighters, police officers, unlimited amount [Government 31452, 31913 and 32210]

Option 2:

Real Estate: Real property, co-op and/or burial plot of debtor or a dependent to $15,000; unused exemption may be applied to any property [703.140(b)(1)]

Insurance / Annuities: Disability benefits, unlimited amount [703.140(b)(10)(C)]; fidelity bonds; life insurance proceeds, amount needed for support [703.140(b)(11)(C); unmatured life insurance policy with dividends or loan value up to $8,000 [703.140(b)(8)]; unmatured life insurance policy [703.140(b)(7)]

Pensions / Retirement Plans: Retirement benefits, amount needed for support [703.140(b)(10)(E)]