In re Bell
Decision Date | 22 December 1988 |
Docket Number | Bankruptcy No. 88-40667. |
Citation | 119 BR 783 |
Parties | In re Marvin Rex BELL and Yvonne Christine Bell, Debtors. |
Court | U.S. Bankruptcy Court — District of Montana |
Barbara E. Bell, Great Falls, Mont., for debtors.
Gary Deschenes, Alexander, Baucus & Linell, P.C., Great Falls, Mont., Trustee.
In this Chapter 13 case, a confirmation hearing was held November 22, 1988, together with the Trustee's objections to the Debtors' Plan and claimed exemptions. The Debtors were present and represented by Barbara E. Bell and the Trustee was present. At the close of trial, the Court took the matters under advisement. Counsel for the Debtors has filed a brief in support of the Debtors' Chapter 13 Plan and claimed exemptions and this matter is deemed submitted.
The Trustee objects to the Debtors' claim of exemption to an Individual Retirement Account (IRA) and to the feasibility of the Debtors' Chapter 13 Plan based on the Debtors' schedules and statements. The Debtors' Plan proposes to pay the Trustee $220.00 per month. However, the Debtors' Amendments to their Petition, filed November 3, 1988, show that the Debtors only have $200.00 available to make Plan payments. The Amendments to the Petition further states that the Debtors have IRA accounts with a balance of $9,677.00. The Debtors assert that the IRA accounts are exempt under § 25-13-609, M.C.A., while the Trustee objects and asserts that the IRA accounts are not exempt and, therefore, must be considered to determine whether the unsecured creditors would receive more upon liquidation than under the Plan. 11 U.S.C. § 1325(a)(4).
Montana has "opted out" of the Federal exemptions which are available to bankruptcy debtors. § 31-1-106, M.C.A. Section 31-2-106, M.C.A., sets forth the exemptions that are available to Montana debtors:
Section 31-2-106, M.C.A., was overhauled by the 1987 Legislature to include, as exempt, numerous public retirement, pension, and annuity funds. However, no private pensions, such as Keoghs or IRAs are specifically listed in the enumerated Montana statutes. The Debtors' claimed exemption under § 25-13-609, M.C.A., is completely misplaced. None of the items contained in § 25-13-609, M.C.A. are even remotely applicable to an IRA. Therefore, the Debtors' claimed exemption under § 25-13-609, M.C.A. is not allowable. However, this Court will determine whether the IRA is exempt under § 522(d)(10) of the Bankruptcy Code, which is a Federal exemption specifically allowed Montana Debtors.
Section 522(d)(10)(E) provides:
An IRA account qualifies under 26 U.S.C. § 408, and, therefore, the three exceptions enumerated in § 522(d)(10)(E) are not applicable. Neither the Ninth Circuit Court of appeals or the Ninth Circuit Bankruptcy Appellate Panel has directly addressed whether an IRA is exempt under § 522(d)(10)(E). In In re Daniel, 771 F.2d 1352 (9th Cir.1985), the Court held that the Debtor had to adhere strictly to the California statute exempting a private profitsharing retirement plan. The Court stressed that the explicit language of the statute relied upon must be used. Id. at 1356. Numerous other courts have held that IRAs or such accounts are not exempt under § 522(d)(10)(E) or applicable state statutes. See, In re Clark, 711 F.2d 21 (3rd Cir.1983), (held that Keogh plan was not exempt because payments were not presently "reasonably necessary" for support of debtor or dependents); Matter of Kochell, 26 B.R. 86 (Bankr.W.D.Wis.1982), (held that only present payment on pension plans are exempt, not the plans themselves); Matter of Parker, 473 F.Supp. 746 (1979), (held that IRAs are under too much control of debtor and are not exempt); In re Mace, 4 B.C.D. 94 (Bankr.Or.1978), (held that IRA's are not exempt unless reasonably necessary upon filing and confirmation and stated that debtor has too much control over the account to justify exemption). Subsequent to Mace, the Oregon Bankruptcy Court's denial of a Debtor's claimed exemption in a Keogh account was appealed to the Ninth Circuit Court of Appeals. In Herbert v. Fliegel, 813 F.2d 999 (9th Cir.1987), the Court stated:
"The majority of courts that have addressed the policy issues have concluded that the benefits to be derived from granting an exemption for self-funded plans are outweighed by the `strong public policy that will prevent any person from placing his property in what amounts to be revocable trust for his own benefit which would be exempt from the claims of his creditors.\'" Id. at...
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