In an important personal bankruptcy decision, the U.S. Court of Appeals for the Fifth Circuit has ruled that once a Chapter 7 debtor claims an exemption for their individual retirement account, a trustee is not allowed to claim that money — even if the debtor cashes out their IRA during the bankruptcy.
The Fifth Circuit's recent decision in Hawk v. Engelhart is the appellate court's second try at an issue of first impression: whether a debtor who withdraws funds from their IRA and doesn't deposit the funds into another retirement account within 60 days loses the exemption pursuant to Texas law.
The case involves Gregory and Marcie Hawk, who filed a voluntary Chapter 7 bankruptcy in 2013. The Hawks claimed that their IRA funds were exempt under the Texas Property Code and were excluded from the estate. No party objected to the Hawks' IRA exemption.
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