The U.S. Supreme Court issued an opinion today in Rousey v. Jacoway, reversing the Eight Circuit Court of Appeals, in a unanimous decision holding that IRAs can be shielded from creditors in bankruptcy proceedings, so long as the requirements of ?522(d)(10)(E) of the Bankruptcy Code are met. The opinion written by Justice Thomas begins as follows:
The Bankruptcy Code permits debtors to exempt certain property from the bankruptcy estate, allowing them to retain those assets rather than divide them among their creditors. 11 U. S. C. §522. The question in this case is whether debtors can exempt assets in their Individual Retirement Accounts (IRAs) from the bankruptcy estate pursuant to §522(d)(10)(E). We hold that IRAs can be so exempted.
Background of the case from the Duke Law website here:
Debtors Richard and Betty Rousey filed for bankruptcy under Chapter 7 of the United States bankruptcy code. Included in the couple’s assets were two individual retirement annuities (“IRAs”) valued at $42,915.32 and $12,118.16. The Rouseys claimed exemptions for a large portion of the IRAs from the bankruptcy estate under 11 U.S.C. § 522(d)(10)(E). The bankruptcy trustee filed an objection to the exemptions.The Bankruptcy Court of the Western District of Arkansas and the Bankruptcy Appellate Panel for the Eight Circuit found that the IRAs were not exempt under 11 U.S.C. § 522(d)(10)(E). The Eight Circuit Court of Appeals affirmed.
More on the history of the case here from USAToday.com.
Recent news articles:
- AP article from the Boston Globe: “Supreme Court: Creditors can’t seize IRAs.”
- Reuters: “Supreme Court: IRAs Are Shielded from Creditors.”
UPDATE: From Law.com, “Justices Rule IRAs Protected in Bankruptcies.” Excerpt:
“It is not unusual in these economic times for people to change jobs — voluntarily or otherwise — several times over the course of their careers. By protecting IRAs from creditors in bankruptcy, this decision allows workers to preserve retirement savings when, after a job change, their circumstances force them into bankruptcy,” said Jean Constantine-Davis, a lawyer for the AARP, which sided with the Rouseys in the case. “Had the decision gone the other way, many thousands of people in circumstances similar to the Rouseys’ would have lost retirement savings simply because they switched jobs.”