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Summarizing by Amir Shachmurove


Case Type:
Case Status:
Reversed and Remanded
20-12823 (11th Circuit, Jan 24,2022) Published
The U.S. Court of Appeals for the Eleventh Circuit (Circuit) held that Roth Individual Retirement Accounts (Roth IRAs), like customary Individual Retirement Accounts (IRAs) and 401(k) accounts, are excluded from Georgia debtors’ estates under controlling Georgia law, therefore reversing the decision of the U.S. District Court for the Northern District of Georgia (DC), which had affirmed the order granting Appellee-Creditor Signature Bank of Georgia’s (Bank) objection to the estate exemptions for various Roth IRAs claimed by Timothy Hoffman (DR), issued by that district's bankruptcy court (BC).
Procedural context:
The DR filed for Chapter 7 relief. The Bank objected to the DR's claimed exemptions of various retirement accounts, asserting that his retirement accounts either were not qualified retirement plans or did not otherwise qualify as exempt. The BC granted the Bank’s objections as to the DR's two Roth IRAs, concluding that Roth IRAs—unlike traditional IRAs and 401(k) accounts—are not excluded from bankruptcy estates. The DC affirmed the BC's order. The DR timely appealed this affirmance.
The DR is a retired U.S. Air Force Colonel and private pilot. Hoping to help his son-in-law pursue his dream of opening a restaurant, he guaranteed a loan of approximately $432,000 with the Bank. When the restaurant ultimately failed, the DR defaulted on his loan from the Bank and turned to the Code for relief. In his bankruptcy schedules, the DR disclosed an interest in the following retirement accounts: (1) Traditional IRA, (2) Roth Conversion IRA, (3) Roth Contributory IRA, and (4) Fidelity 401(k). The DR claimed all of the accounts as exempt on his Schedule C. The Bank objected; the DR replied by asserting that the Roth IRAs were either were excluded from the estate pursuant to 11 U.S.C. § 541(c)(2), or, if not excluded, were exempt under O.C.G.A. § 44-13-100(a)(2)(E). As to exclusion, the DR argued that Georgia’s revised garnishment statute applies to Roth IRAs and thus urged the BC to revisit precedent analyzing a prior version of this statute, one which had plainly applied only to traditional IRAs. The BC entered a final order overruling the Bank’s objections as to Hoffman’s traditional IRA and 401(k) ac-count but sustaining the objections as to the DR's two Roth IRAs. Though it acknowledged Georgia’s garnishment statute had undergone an expansive overhaul, the BC pointedly noted that there appeared to be no recent authority addressing the contention that Roth IRAs should be excluded under § 541(c)(2).
Charles R. Wilson; Barbara Lagoa; and Edward E. Carnes

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