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Supreme Court rules IRAs exempt from bankruptcy estate, creditors' claims

[JURIST] The US Supreme Court Monday unanimously ruled in Rousey v. Jacoway [case backgrounder from Duke Law School] that Individual Retirement Accounts (IRAs) can be exempted from a bankruptcy estate, allowing bankruptcy filers to retain their IRAs rather than forcing them to divide the assets among their creditors. The Rouseys claimed an exemption but their bankruptcy trustee objected, arguing that 11 U.S.C. s. 522(d)(10)(E) grants exemptions for annuities, stock options and other such plans only if the payments are made “on account of illness, disability, death, age or length of service”; this, the trustee argued, excluded IRAs from shelter because such funds can be accessed at any time if holder is willing to pay the associated taxes and penalties. The Supreme Court disagreed in an opinion [PDF] by Justice Thomas, reversing the Eighth Circuit opinion [PDF] and resolving a three-way circuit split.

Also Monday, the Court resolved a circuit split on a timing question under federal habeas law in a 5-4 opinion [PDF] written by Justice Souter in Johnson v. United States [case backgrounder from Duke Law School]. The Court ruled that where a prisoner challenges a federal sentence on the grounds that a state conviction used to enhance it was vacated, the one-year filing deadline for habeas under 28 U.S.C. 2255 begins to run when the prisoner receives notice that the prior conviction has been vacated. In a dissent [PDF] Justice Kennedy, joined by Justices Stevens, Scalia and Ginsburg, disagreed with the Court's parallel finding that the prisoner must use due diligence to obtain the vacatur in the first place or else risk having his enhanced sentence maintained despite the vacatur.

Finally on Monday, the Court granted certiorari in Central Virginia Community College, et al., v. Katz, raising a state imunity issue under the Eleventh Amendment in connection with a bankruptcy court's discharge of an unpaid student loan. Review the Court's full Order List [PDF].

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