The general rule is that IRAs are generally protected if you file bankruptcy. In this case however, the debtor never contributed the money to the various IRAs. Therefore, the chapter 7 trustee claimed that Ms. Kelso was not able to protect this asset from her creditors.
In this particular case, the chapter 7 trustee relied upon several state statutes and court decisions around the United States which held that inherited IRAs are not protected by the retirement funds provisions of the bankruptcy code.
However, in this case the court found the decision of Chilton v. Moser, 444 B.R. 548 (E.D. Tex. 2011) that funds in an inherited IRA are ‘retirement funds’ within the meaning of 11 U.S.C. (d)(12). Whether you can exempt retirement funds in your state depends upon the laws of your state and you should check with a bankruptcy attorney in your area. If you have questions about chapter 7 bankruptcy in Michigan or chapter 13 bankruptcy please visit the particular state pages in this website.