590 B.R. 895
8th Cir. BAP2018Background
- Debtor Brian Lerbakken retained counsel in 2014 for divorce; the marital settlement awarded him one-half of his ex-wife’s Wells Fargo 401(k) and an entire IRA, and directed entry of a Qualified Domestic Relations Order (QDRO) that was never obtained.
- Lerbakken never acquired title or possession of the accounts after the divorce; Sieloff & Associates (his former counsel) remained listed as a creditor for unpaid fees.
- Lerbakken filed a Chapter 7 petition on January 23, 2018 and claimed exemptions in the disputed 401(k) and IRA on Schedule C as retirement funds.
- Sieloff objected to the exemptions, arguing the Accounts were not exempt retirement funds under federal law.
- The bankruptcy court disallowed the exemptions under the Clark v. Rameker framework, concluding the Accounts were not "retirement funds" for § 522(d)(12)/(b)(3)(C).
- Lerbakken appealed; the district court reviewed the legal question de novo and affirmed the bankruptcy court’s order.
Issues
| Issue | Lerbakken's Argument | Sieloff's Argument | Held |
|---|---|---|---|
| Whether Lerbakken may exempt his interest in the 401(k) and IRA under federal retirement-fund exemption | The Accounts are marital retirement savings (ex-wife’s pre-/during-marriage contributions) and are effectively retirement funds he will use at retirement; tax treatment inures to him | The Accounts are not "retirement funds" as defined by Clark; Lerbakken’s interest arose by property settlement and he did not contribute to or hold the accounts as retirement savings | The accounts do not qualify as "retirement funds" under Clark; exemption disallowed |
Key Cases Cited
- Clark v. Rameker, 573 U.S. 122 (Sup. Ct. 2014) (ordinary meaning of "retirement funds" limits exemption to sums set aside for one’s own retirement)
- Rice v. Allard (In re Rice), 478 B.R. 275 (E.D. Mich. 2012) (both retirement-character and tax-exempt-account elements required for § 522(d)(12) exemption)
- Rucker v. Belew (In re Belew), 588 B.R. 875 (B.A.P. 8th Cir. 2018) (de novo review of legal entitlement to exemption)