The Supreme Court is preparing to hear arguments in Clark v. Rameker a seventh circuit case involving whether an inherited IRA would be exempt under the federal bankruptcy exemptions.
Specifically the statue in question is 11 U.S.C. § 522, which exempts “retirement funds to the extent that those funds are in a fund or account that is exempt from taxation,” under several provisions of the IRS code.
The Debtor is arguing that the funds should be exempt because the funds were set-aside for retirement into the identified account and remains in that account. Further the Debtor points to years of congressional history showing there intention for retirement funds to be exempt.
The Trustee on the other hand is arguing that the funds were not set aside by the Debtor and the Debtor could remove the funds without any additional tax liability.
Both sides have strong arguments and legal scholars are not clear which side the court is likely to come down.
For further reading: Argument preview: Scope of protections for retirement funds in bankruptcy squarely at issue.
If you are considering filing for bankruptcy please contact the experienced attorneys at Fears | Nachawati for a free consultation. Call us at 1-866-705-7584 or send an email to fears@fnlawfirm.com .