William Rameker v. Brandon Clark
714 F.3d 559
7th Cir.2013Background
- Congress exempt retirement funds from creditors in bankruptcy under 11 U.S.C. §522(b)(3)(C) and (d)(12).
- The exemption applies to funds in tax-qualified accounts such as 401, 403, 408, 408A, 414, 457, or 501(a).
- Inherited IRAs differ from ordinary IRAs: distributions must begin within a year of the original owner’s death and are taxed differently, with no new contributions and limited duration.
- In Heidi Heffron-Clark and Brandon Clark’s bankruptcy, the bankruptcy judge held an inherited IRA is not an exempt retirement fund.
- A district judge reversed, adopting the view that any money that was retirement funds at any point should be treated the same in successors’ hands.
- This court agrees with the bankruptcy judge and rejects the Chilton analysis, holding inherited IRAs do not qualify as exempt retirement funds under §522(b)(3)(C) and (d)(12).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether inherited IRAs are exempt as retirement funds | Heidi argues inherited IRAs remain retirement funds. | Chilton/Nessa approach treats inherited funds as retirement funds for exemption purposes. | Inherited IRAs are not exempt retirement funds. |
| Whether exemptions extend to assets that were retirement funds for others but not for the debtor | Exemption applies due to identity with retirement funds historically. | Exemption depends on current status, not historical identity. | Exemption does not apply where assets are no longer retirement funds in the debtor’s hands. |
Key Cases Cited
- In re Chilton, 674 F.3d 486 (5th Cir. 2012) (treats inherited funds as retirement funds for exemption purposes)
- In re Nessa, 426 B.R. 312 (B.A.P. 8th Cir. 2010) (retirement funds notion applied to successors)
- In re Barker, 768 F.2d 191 (7th Cir. 1985) (temporal effect of exemptions; debtor’s interests)
- Rodriguez v. United States, 480 U.S. 522 (1987) (legislative choice and purposive interpretation)