In the year of 1999, Northrop Grumman was conducting a corporate downsizing and as a part of that they asked Richard Rousey to go for an early retirement. The same thing followed with Richards’s wife Betty Rousey as she was also laid off. At that point of time the couple had both the (401k) and pension funds and had six months to decide the course of action to be taken with those funds. They went ahead and tried to seek advice in order to take an appropriate course of action. They came across a banker at a local bank facility who suggested them to put the funds into individual retirement accounts which is also known as IRAs.
It was tough times for the Rouseys as they develop it difficult to get work. The couple marked to sell there house in Arkansas. There were a sum total of two mortgages on the home and selling it could only salvage one of the mortgages. When the second mortgage lender tried to claim money for the second mortgage the couple filed a joint application under Chapter 7 of the Bankruptcy Code on April 2001. At this point of time the court had appointed Jill Jacoway to help the decisions in this case.
The filing made by the Rouseys was an effort to claim portions of their two single IRA A/Cs as liberate status for the absolute case of bankruptcy. Richard Rousey and Betty Rousey had claimed an amount of $55000 to be excuse under contrary subsections of 11 U.S.C 522(d). But Jacoway had objected exemptions under 522 (d) (10) (E) which amounted to $44000. This decision had come after three months and it was an incisive blow for the Arkansas couple. In February 2002 Jacoway stated that the payments of the IRA does not prepare as “an equivalent plan or contract” and are not collectible on account of “illness, infirmity, death, age or length of service.”
The Rouseys still were not going to give it up. They appealed the bankruptcys court order to the Bankruptcy Appellate Panel for the 8th Circuit. On the month of September in 2002 the U.S, BAP agreed unanimously that regular withdrawal from the IRA A/C makes the account look less like exempted retirement plan and more like a Savings Bank A/C with favorable tax care.
In his request to the U.S. Supreme Court, T.R. Brixey the attorney of the Rouseys, impelled the Court to response the issue that “affects tens or even hundreds of thousands of particular bankruptcy petitions per year and fundamentally alters the lives of the people who file them.”
The court accepted the review of the situation in mid 2004, June to be perfect. By the month of April in 2005, the court unanimously reversed their decision stating that the Rouseys could excuse IRA assets from the bankruptcy holdings. This unanimous decision was delivered by Justice Clarence Thomas. This was possible because the IRAs fulfilled both of the “522(d) (10) (E) requirements at issue. The Arkansas couple was awarded the right to receive payment on account of age and also because IRA fell into the type of plans or contracts cited in the bankruptcy code.