Retirement plans such as pensions, IRAs and 401ks are designed to provide a worker security in his old age, and they can frequently provide additional benefits to his heirs or spouse. On top of the tax benefits created by the Internal Revenue Code for these plans the worker can also exempt these funds from any creditor claims in a bankruptcy. This double benefit leads me as a bankruptcy lawyer to think they are frequently the best investment an individual can make. Recent court cases however have placed some limitations on creditor protections, when someone other than the worker himself holds the retirement plan.
One such decision that came down in 2014 was In Re Burgeson 504 B.R. 800 (Bankr. W.D. Pa. 2014). This case concerned the pension benefits received by the wife in a divorce. In Burgeson the Debtor filed bankruptcy, while she was in the process of a divorce. She had requested that the divorce court award her an equitable portion of her husband’s pension plan, but the court did not order the transfer of the pension until later. The trustee claimed that in this case the woman’s interest in the pension was not exempt from creditor claims and the bankruptcy court agreed. While the wife would have received the exemption, if she had owned the pension, the judge made the distinction that at the time she filed bankruptcy she did not yet own the pension. This was because she had only asked for a share of the pension and the divorce court had not yet awarded it to her. So according to the bankruptcy judge at the time she filed, she only owned a potential claim against her husband under the divorce law, which was not covered by the exemption against creditor claims that appears in the bankruptcy law.
No comments:
Post a Comment