Supreme Court Protects IRA Accounts From Bankruptcy Proceedings

Dealing a harsh blow to the consumer finance industry, the Supreme Court unanimously voted yesterday to exempt IRA accounts from bankruptcy proceedings.

The Court, which originally heard in the case in December 2004, found that two critical provisions of three elements be met. Those provisions are:

1) the right to receive payment must be from a stock bonus, pension, profitsharing (sic), annuity, or similar plan or contract, and

2) the right to receive payment must be "on account of illness, disability, death, age, or length of service"

Writing for the Court, Justice Clarence Thomas noted that the tax penalty imposed on individuals who withdraw funds from an IRA prior to age 59 1/2 is "substantial".

"We're pleased," said Jean Constantine-Davis, a senior lawyer for AARP, in a statement. "It's really important to encourage people to contribute savings in their working years and to keep those savings sacrosanct."

posted by Consumer Help Web Editorial Team at 10:45 AM |