A judgment debtor who confessed judgments in favor of a bank in excess of $100,000 failed to make any payment on the acknowledged debt. Following this failure to pay, the bank initiated proceedings to collect. In the course of these proceedings, the debtor confessed that he had made significant additions to his IRA, 401(k), and a 529 plan after the initial judgment. The total contribution to the three plans was approximately $92,000. The bank argued that these conveyances were fraudulent and subject to reversal and execution. When the Court of Appeals heard the case, considering only the transfers to the 401(k) and IRA, it held that the conveyances to the IRA and 401(k) were not subject to reversal after looking at the relevant statutes. The logical question following this holding is how far the opinion may be stretched to the detriment of the judgment creditor. Based on this court’s reasoning, a judgment debtor could feasibly purchase exempt property, like firearms or a home, with non-exempt assets like cash, thereby converting previously non-exempt assets into exempt assets.
See R. Bruce Wallace, IRAs and 401(k)s Are Safe from Judgments – For Now, Lexology, February 6, 2018.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.) for bringing this article to my attention.
