1

The Debtor initially exempted $9,635.85 of the IRA under 11 U.S.C.

§ 522(d)(5) and $9,260.15 thereof under § 522(d)(10)(E). The Debtor now

admits that the amount of such exemption under § 522(d)(5) is impermissible

and, thus, now exempts $6,949.80 of the IRA thereunder; accordingly, the Debtor

exempts the remainder of the IRA, or $11,946.20, under § 522(d)(10)(E). See

Debtor’s Resp.¶ 7a.

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE WESTERN DISTRICT OF PENNSYLVANIA

IN RE: :

:

PAMELA A. LEE, :

: Bankruptcy No. 05-27255-MBM

 Debtor. :

................................................................:...............................................................

Robert Shearer, Trustee, : Chapter 7

Movant, :

:

v. : Related to Doc. No. 12

:

Pamela A. Lee, :

Respondent. :

MEMORANDUM

AND NOW, this 14th day of October, 2005, upon consideration of (a) the

objection by Robert Shearer, the Chapter 7 Trustee for the above-captioned

debtor (hereafter “the Trustee”), to the exemption by such debtor (hereafter “the

Debtor”) of a portion – in particular, $11,946.20 – of a Northwestern Mutual IRA

valued at $18,896.41 (hereafter “the IRA”) under 11 U.S.C. § 522(d)(10)(E),1 and

(b) the Debtor’s response;

and subsequent to notice and an evidentiary hearing on the matter held on

October 13, 2005,

it is hereby determined that the Court shall issue an order that the

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Trustee’s objection to exemption is OVERRULED and the Debtor’s exemption of

$11,946.20 of the IRA is, accordingly, ALLOWED under § 522(d)(10)(E). The

Court rules as it does for several reasons.

As an initial matter, the Trustee contests whether any portion of the IRA

may be exempted via § 522(d)(10)(E) on two discrete grounds, namely (a) that

the Debtor is not presently receiving a distribution from the IRA at the present

time, and (b) that the IRA is not reasonably necessary for the support of the

Debtor. The Trustee, as the party objecting to the Debtors’ exemptions, bears

the burden of showing that the Debtors are not entitled to such exemptions. See

In re Brown, 165 B.R. 512, 514 (Bankr.M.D.Fla. 1994); In re Frederick, 183 B.R.

968, 970 (Bankr.M.D.Fla. 1995).

With respect to the Trustee’s first ground for objection, that is that the

Debtor is not presently receiving a distribution from the IRA at the present time,

the Trustee relies on the Third Circuit’s decision in In re Clark, 711 F.2d 21 (3rd

Cir. 1983), and certain of the cases that rely thereon. The Court must reject such

ground for objection by the Trustee, however, because, and as the Court held in

a decision rendered just one day earlier in another bankruptcy case,

the portion of Clark relevant to a resolution of the instant matter

[(i.e., whether a debtor must presently be receiving a distribution

from, for instance, an IRA in order to exempt the same under

§ 522(d)(10)(E))] has essentially been overruled by the U.S.

Supreme Court’s recent decision in Rousey v. Jacoway, 125 S.Ct.

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1561, 161 L.Ed.2d 563 (U.S. 2005). The Court so holds because,

“[a]lthough the Supreme Court did not specifically reject (or even

consider) ... [the Clark court’s] interpretation of § 522(d)(10)(E) in

Rousey v. Jacoway, its opinion [in Rousey] leaves no room for th[e]

interpretation [in Clark].” Supreme Court Holds that IRAs are

Exemptible Under Code § 522(d)(10)(E), 25 No. 5 Bankruptcy Law

Letter 1 (May 2005) (quotation found in last paragraph of text prior

to final heading in the article); see also Arthur H. Boelter, 2

Representing the Bankrupt Taxpayer § 9:21 (2005), at n.29 (“the

split in the circuits[, including that engendered by the Third Circuit’s

decision in Clark,] should be resolved following the U.S. Supreme

Court acceptance of certiorari in the case of Rousey v. Jacoway). 

Therefore, it matters not when considering whether the Annuity and

the IRA may be exempted under § 522(d)(10)(E) whether the

Debtors are receiving, or are presently entitled to receive,

payments therefrom.

In re Booth, Bankr.No. 05-27660-MBM (related to Doc. No. 14) (dated Oct. 13,

2005), at 5-6.

Consequently, the Court need only focus on the second of the Trustee’s

grounds for objection, that is that the IRA is not reasonably necessary for the

support of the Debtor. After a relatively short evidentiary hearing dedicated to

such issue, and upon application of the eleven factors relevant to a resolution of

such issue, which factors are set out in In re Gralka, 204 B.R. 184, 190

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(Bankr.W.D.Pa. 1997) (quoting In re Cauvel, 146 B.R. 166, 167 (Bankr.W.D.Pa.

1992)) but which will not be repeated herein, the Court concludes that the

Trustee has failed to preponderantly prove that the IRA is not reasonably

necessary for the support of the Debtor. The Court, in particular, is swayed by

the unrebutted testimony of the Debtor’s expert witness, a forensic economist, to

the effect that the Debtor can be expected to fully exhaust, by roughly age 78, all

of the funds that will be in the IRA when she reaches her age of retirement. Such

witness’ computation was based upon, inter alia, the monthly expenses that the

Debtor presently incurs with several modifications, which present expenses the

Court finds to be far from exorbitant and, thus, in line with the Court’s decision in

Gralka – i.e., although the Court stated in Gralka that “lifestyle maintenance” is

not necessarily equivalent to that which is reasonably necessary for the support

of a debtor, see Gralka, 204 B.R. at 191, such equivalence can be found to exist

if, as in the instant case, a debtor’s present lifestyle is frugal. Necessary to the

Court’s ruling, of course, is its conclusion, as a matter of law, “that the issue is

not whether the ... IRA[] is necessary to ... [the Debtor’s] immediate support, but

rather whether ... [the same] would be necessary for ... [her] support after ... [she]

ha[s retired].” Id. at 190.

Because the Court concludes that the IRA is reasonably necessary for the

support of the Debtor, and since the Debtor, as a matter of law, need not

presently be receiving a distribution from the IRA in order to exempt the same

under § 522(d)(10)(E), the Court determines that it shall issue an order that the

Trustee’s objection to exemption is OVERRULED and the Debtor’s exemption of

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$11,946.20 of the IRA is, accordingly, ALLOWED under § 522(d)(10)(E).

BY THE COURT

 /s/ 

M. BRUCE McCULLOUGH,

U.S. Bankruptcy Judge

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IN THE UNITED STATES BANKRUPTCY COURT

FOR THE WESTERN DISTRICT OF PENNSYLVANIA

IN RE: :

:

PAMELA A. LEE, :

: Bankruptcy No. 05-27255-MBM

 Debtor. :

................................................................:...............................................................

Robert Shearer, Trustee, : Chapter 7

Movant, :

:

v. : Related to Doc. No. 12

:

Pamela A. Lee, :

Respondent. :

ORDER OF COURT

AND NOW, this 14th day of October, 2005, for the reasons set forth in

the accompanying Memorandum of the same date, it is hereby ORDERED,

ADJUDGED, AND DECREED that the Trustee’s objection to exemption is

OVERRULED and the Debtor’s exemption of $11,946.20 of the Northwestern

Mutual IRA is, accordingly, ALLOWED under § 522(d)(10)(E).

BY THE COURT

 /s/ 

M. BRUCE McCULLOUGH,

U.S. Bankruptcy Judge

To be served by Case Administrator:

John P. Vetica, Jr., Esq.

Robert Shearer, Esq.

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