Friday, April 26, 2013
Brandon Clark and his wife Heidi Heffron-Clark filed for Chapter 7 bankruptcy in 2010. Almost a decade before they filed for bankruptcy, Mrs. Clark inherited an IRA from her mother in 2001. At the time that the Clarks filed for bankruptcy neither spouse was retired. The Clarks claimed that Mrs. Clark's IRA was exempt under both Wisconsin state law and 11 U.S.C. § 522(b)(3)(C) from their creditors.
In Rameker v. Clark, the Seventh Circuit Court of Appeals held that because the funds within Mrs. Clark's IRA did not represent their retirement funds, it could not sheltered from their creditors. The court reasoned that if it choose to exempt those funds it would basically allow assets that are freely being used for current consumption to be sheltered from potential creditors. The court also further stated that an inherited IRA does not have the same attributes as other retirement tools because the money in the inherited IRA cannot remain in the IRA until the owner's retirement.
See Rameker v. Clark, No. 12-1241 & 12-1255, United States Court of Appeals (7th Cir. 2013).
Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) and Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.