Tuesday, December 22, 2009

Debtor's Keogh Plan Exempt In Bankruptcy Under § 222.21(2)(a)(1), Florida Statutes

In In re Baker: Baker v. Tardif (09-13144-HH), the Eleventh Circuit released a published decision and reversed the decision of the Bankruptcy Court and the District Court. The Eleventh Circuit held that the debtor's Keogh plan was exempt under Florida law. Fla. Stat. § 222.21(2)(a)(1).

The bankruptcy court concluded that Baker could not claim the exemption under section 222.21(2)(a)(1) because she was the “sole shareholder and sole ‘participant’ in the Keogh plan.”  The Opinion notes:
After a debtor files for bankruptcy, she is entitled to retain certain assets as exempt from the bankruptcy estate. Although the bankruptcy code provides exemptions, a state may opt out of those exemptions and provide alternative exemptions. 11 U.S.C. § 522(b).
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Florida law shields from the claims of creditors some assets deposited in retirement and profit-sharing plans. Section 222.21 exempts from the bankruptcy estate money, assets, and any interest in a plan in which the debtor is an owner, participant, or beneficiary and that has been preapproved by the Internal Revenue Service as exempt from taxation under section 401(a) of the Internal Revenue Code.
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The district court ruled that Baker’s Keogh plan had to be maintained under the Employee Retirement Income Security Act for Baker to claim an exemption under section 222.21(2)(a)(1), but we disagree.
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In 2005, the Florida Legislature amended section 222.21 to provide that an exempt plan does not have to comply with the Employee Retirement Income Security Act....We reverse the judgment that Baker’s Keogh plan had to comply with the Employee Retirement Income Security Act to qualify for an exemption under section 222.21(2)(a)(1). Section 222.21(2)(a)(1) requires that a profit-sharing plan qualify under section 401(a) of the Internal Revenue Code, not that the plan comply with the Employee Retirement Income Security Act.
The briefs can be found at the following links:

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