Hidden in Plain View: The Pension Shield against Creditors

This Article examines the virtually unquestioned protection of retirement assets from creditors, in both state and federal law, with a view to determining whether tax qualification or even retirement itself is a sufficient rationale for preserving debtor assets in the face of creditors\u27 claims, and if so, what the limits of such protection should be. The problems of current law stem in large part from the use of tax qualified status as a convenient shortcut for determining the appropriate bankruptcy treatment of retirement accounts. The result is a wide disparity in the treatment of debtors epitomized by the cases of O.J. Simpson and Wilma Wilbur. Proposed law would only accentuate the disparity, providing protection in bankruptcy for essentially unlimited retirement assets while denying access to bankruptcy for those with retirement income but few assets. So long as the bankruptcy law is based largely on protection of assets, rather than a necessary level of income, and so long as that protection is based on the tax treatment of so-called retirement accounts, rather than on the actual use of those funds for retirement income support, glaring inequities will inevitably result