Supreme Court Rules IRAs Exempt from Bankruptcy Creditors

Yesterday (April 4, 2005), the Supreme Court of the United States held in Rousey v. Jacoway that IRAs may be protected from the bankrupt owner’s creditors.

The Court stated:

“[T]he Rouseys’ IRAs fulfill both of §522(d)(10)(E)’s requirements at issue here—they confer a right to receive payment on account of age [the 10% penalty for withdrawals before age 59.5] and they are similar plans or contracts to those enumerated in §522(d)(10)(E).”

The protection is not complete, however, because only amounts reasonably necessary for the support of the bankrupt owner and dependents are exempt from creditors.