Bankruptcy Exemptions, Retirement, Pensions Allowed, New York State Laws
Civil Practice Law & Rules Section 5205 (c) provides 1) Unless subject to a domestic relation order or
obtained by fraud, all property held in trust for a debtor, where the trust has been created by, or the fund so held in
trust has proceeded from, a person other than the debtor, is exempt from application to the satisfaction of
liability in New York bankruptcy proceedings. 2) For purposes of forfeiture through New York bankruptcy, all trusts, custodial accounts,
annuities, insurance contracts, monies, assets or interests established as part of, and all payments from, either any
trust or plan, which is qualified as an individual retirement account under section four hundred
eight or section four hundred eight A of the United States Internal Revenue Code of 1986, as amended, a Keogh (HR-10),
retirement or other plan established by a corporation, which is qualified under section 401of the United States Code
of 1986, as amended, or created as a result of rollovers from such plans pursuant to sections 402 (a) (5), 403 (a) (4),
408 (d) (3) or 408A of the Code of 1986, as amended, or a plan that satisfies the requirements of section 457 of the
Code of 1986, as amended, shall be considered a trust which has been created by or which has proceeded from
a person other than the debtor, even though such debtor is (i) in the case of an individual retirement account plan, an
individual who is the settlor of and depositor to such account plan, or (ii) a self-employed individual, or (iii) a
partner of the entity sponsoring the Keogh (HR-10) plan, or (iv) a shareholder of the corporation sponsoring the
retirement or other plan or (v) a participant in a section 457 plan.
Operation of New York bankruptcy laws
The provision for retention of trusts and pensions in a New York bankruptcy is uncommonly generous when
compared to other states. The trust exemption also specifically allows self-employed debtors to contribute to a
qualified trust, before filing bankruptcy, subject to the restrictions above.
In recent years, it seems many New York bankruptcy laws
and traditions have been under strict scrutiny. In general, the trend is
to limit individual rights while expanding the rights of corporations
who file Ch. 11. In NY State, approximately 98% of all cases are filed
for individuals under Chapter 7 & 13, while Ch. 11 cases account for
approximately 2% of all cases.
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