A debtor's interest in an ERISA qualified pension plan is not property of the bankruptcy estate, and, thus, is not subject to be turned over to the trustee in bankruptcy according to the 6th Circuit case of Forbes v. Lucas and the U.S. Supreme Court case Forbes v. Holiday Corporation Savings and Retirement Plan.
In Patterson v. Patterson the U.S. Supreme Court rejected the trustee's contention that the anti-alienation requirement in the plan did not effectively apply to the debtor who controlled the company and thus controlled the plan. Therefore, the debtor's interest was not property of the bankruptcy estate, and the creditors could not reach the plan.
In the Eastern District of Virginia case of In Re Wyles, the Chapter 7 trustee objected to the debtor's claim of exemption in ERISA Qualified Pensions Plans. The Court held, however, that the debtor's ERISA qualified pension plans were exempt, even though the debtor was a fifty percent shareholder of the corporation that set up the plans, and, as such, had authority to amend or terminate the plans as he sought fit. The Court ruled that there was no showing that the plans were established or maintained to defraud creditors, and that any premature plan distributions would constitute grounds for reopening the case so that such funds could be made available to creditors of the estate. The Court did enjoin withdraws and modifications without court order until the debtor reached the age fifty-nine and one-half.
In the Eastern District of Virginia case of In Re Johnson, the Chapter 7 trustee objected to the debtor's claim of exemption for federal Thrift Savings Plan funds. The Court ruled in favor of the Trustee that funds withdrawn from the account prior to the bankruptcy and placed in bank accounts which could be used by the debtors free from retirement plan rules restrictions.
The 4th Circuit Court case of In Re Moore holds that all ERISA qualified pension plans, which by definition have a non-alienation provision, are not property of the bankruptcy estate, and thus not reachable by creditors.
Litigation has occurred regarding debtor contributions to ERISA qualified plans in Chapter 13 cases. In the case of In Re: Allen Scott and In Re: Annette Renaye Fountain, both decided by the United State Bankruptcy Court for the Eastern District Virginia at Richmond, debtor's plans were denied confirmation because not all of the debtor's disposable income was applied pursuant to Bankruptcy Code §1325 (b).
In Scott the debtor had made two loans from his ERISA pension plan, and provided for a repayment of $790.36 per month, while paying the general unsecured creditors only seventeen percent. Since the ERISA plan had no secured interest against the debtor, the proposed Chapter 13 plan was denied confirmation.
In Fountain the debtor proposed paying her ERISA plan fifty-five percent more that she would pay to unsecured creditors. The end result of her Chapter 13 plan would have been an approximately $16,000.00 exemption and additional equity in her residential real estate. The Bankruptcy Court ruled that since this contribution was not necessary for support, it must be included in the plan; since it has not, the Chapter 13 plan was denied confirmation.
In Patterson v. Patterson the U.S. Supreme Court rejected the trustee's contention that the anti-alienation requirement in the plan did not effectively apply to the debtor who controlled the company and thus controlled the plan. Therefore, the debtor's interest was not property of the bankruptcy estate, and the creditors could not reach the plan.
In the Eastern District of Virginia case of In Re Wyles, the Chapter 7 trustee objected to the debtor's claim of exemption in ERISA Qualified Pensions Plans. The Court held, however, that the debtor's ERISA qualified pension plans were exempt, even though the debtor was a fifty percent shareholder of the corporation that set up the plans, and, as such, had authority to amend or terminate the plans as he sought fit. The Court ruled that there was no showing that the plans were established or maintained to defraud creditors, and that any premature plan distributions would constitute grounds for reopening the case so that such funds could be made available to creditors of the estate. The Court did enjoin withdraws and modifications without court order until the debtor reached the age fifty-nine and one-half.
In the Eastern District of Virginia case of In Re Johnson, the Chapter 7 trustee objected to the debtor's claim of exemption for federal Thrift Savings Plan funds. The Court ruled in favor of the Trustee that funds withdrawn from the account prior to the bankruptcy and placed in bank accounts which could be used by the debtors free from retirement plan rules restrictions.
The 4th Circuit Court case of In Re Moore holds that all ERISA qualified pension plans, which by definition have a non-alienation provision, are not property of the bankruptcy estate, and thus not reachable by creditors.
Litigation has occurred regarding debtor contributions to ERISA qualified plans in Chapter 13 cases. In the case of In Re: Allen Scott and In Re: Annette Renaye Fountain, both decided by the United State Bankruptcy Court for the Eastern District Virginia at Richmond, debtor's plans were denied confirmation because not all of the debtor's disposable income was applied pursuant to Bankruptcy Code §1325 (b).
In Scott the debtor had made two loans from his ERISA pension plan, and provided for a repayment of $790.36 per month, while paying the general unsecured creditors only seventeen percent. Since the ERISA plan had no secured interest against the debtor, the proposed Chapter 13 plan was denied confirmation.
In Fountain the debtor proposed paying her ERISA plan fifty-five percent more that she would pay to unsecured creditors. The end result of her Chapter 13 plan would have been an approximately $16,000.00 exemption and additional equity in her residential real estate. The Bankruptcy Court ruled that since this contribution was not necessary for support, it must be included in the plan; since it has not, the Chapter 13 plan was denied confirmation.
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