A decision was recently released by the Montana Supreme Court that affirmed a United States Bankruptcy Court’s ruling not to allow a bankruptcy debtor to exempt an IRA (individual retirement account) that he had inherited from his mother from his bankruptcy estate. According to the ruling, inherited retirement accounts differ from accounts that are earned by the debtor, and they may not be exempted from the bankruptcy estate in the same way that a debtor’s own retirement funds may be exempted. The ruling, which was determined based on Montana law, is comparable to rulings made under federal jurisdiction in spite of the Montana Constitution’s purposefully broad exemption allowances upon which the debtor based his request.
A Debtor’s Earned Retirement Accounts May Be Exempted From a Bankruptcy and Protected from the Trustee and Creditors
One area of bankruptcy law that often surprises debtors is the number of exemptions that are statutorily available to keep certain property from being seized or sold in a Chapter 7 bankruptcy proceeding. Individual retirement accounts, as defined by federal law in 11 U.S.C. 408(a), are eligible to be kept out of a bankruptcy estate if certain requirements are met and the debtor properly prepares their bankruptcy case.
The recent case held that retirement accounts that are inherited do not fit the definition of exempt property under state or federal law because they are not earned by the debtor and therefore must remain part of the bankruptcy estate. With this ruling, the account in question will not be protected from creditors as part of the bankruptcy.
How Debtors Can Be Sure to Protect Eligible Property from a Bankruptcy Trustee
Debtors must be diligent in planning and executing their case, since bankruptcy trustees will often object to certain accounts being exempted from an estate. In addition to individual retirement accounts, there are several other types of property that can be exempted from a bankruptcy estate and kept by a debtor who follows through with a bankruptcy. With the right legal advice, bankruptcy debtors can successfully discharge their debts while holding onto property that they are legally entitled to maintain.
Are You Considering Bankruptcy?
If you are struggling with debt and considering Chapter 7 or Chapter 13 bankruptcy, this process may allow you to keep more of your property than you think. The Louisville and Southern Indiana bankruptcy attorneys at the Schwartz Bankruptcy Law Center know the most effective ways to use exemptions and other methods to legally keep your property from being accessed by creditors, while discharging the largest amount of your debt possible. Our attorneys will answer your questions about what kinds of debt can be discharged in a bankruptcy, as well as the exemptions that may be used to maintain control of your property throughout the process. Contact an experienced debt relief attorney today. At the Schwartz Bankruptcy Law Center, we help clients across the country get their finances back on the right track. Call 866-366-3328 to schedule a risk-free consultation or contact us through our website.
More Blog Posts:
Ninth Circuit Affirms Dismissal of Pro-Se Debtor’s Bankruptcy Petition for Failure to Meet Deadline, Kentucky Bankruptcy Lawyers Blog, published August 17, 2015.
How Entrepreneurs Build Successful Businesses After Discharging Debts with Personal Bankruptcy, Kentucky Bankruptcy Lawyers Blog, published October 8, 2015.