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Debtor’s Right to IRA -Bankruptcy estate

Last Updated October 6, 2011

A debtor’s right to receive payment from an IRA may be exempt from the bankruptcy estate under 11 U.S.C. § 522(d)(10)(E), even though the debtor has not yet reached retirement age.

In a recent precedential ruling, the US Court of Appeals for the Third Circuit held that  a debtor’s right to receive payment from an individual retirement account (IRA) may be exempt from the bankruptcy estate under 11 U.S.C. § 522(d)(10)(E), even though the debtor has not yet reached retirement age.

The US Court of Appeals concluded as follows “ It is undisputed that the Debtor’s IRA meets the first two requirements of 11 U.S.C. § 522(d)(10)(E). Further, Rousey impliedly overrules Clark, so Krebs’ right to receive payment from her IRA may be exempt from the bankruptcy estate under § 522(d)(10)(E) even though she has not yet reached 59 ½ years of age. Accordingly, we will vacate the order of the District Court and remand for consideration – without Clark posing any obstacle – of whether the Debtor  establishes the third requirement of § 522(d)(10)(E), that is, whether and to what extent her right to receive payment under the IRA is reasonably necessary to support her and her dependents. Click here for a copy of the ruling