If I File Bankruptcy, Will My Annuity Be Taken?
By Casey Yontz – Bankruptcy Lawyer Mesa
If you have an annuity, and are fling for bankruptcy in Arizona, it is very important to seek the advice of an a bankruptcy Attorney in Arizona, because our bankruptcy laws in regards to annuities are complex.
There is new case law that was decided by the Bankruptcy Appellant Panel, at the end of 2010 (and is currently pending in the 9th Circuit Court of Appeals). Here is a brief explanation of where everything stands now, and how your annuity could be affected.
To begin, it must be pointed out, that Arizona is a Federal bankruptcy exemption “opt out” state. What that means, is when you file bankruptcy as an Arizona resident, you must use Arizona exemptions. You cannot, in most circumstances, use Federal exemptions.
Arizona Revised Statute Section 33-1126(A)(7) states that an annuity is exempt if the following criteria are met:
“An annuity contract where for a continuous unexpired
period of two years such contract has been owned by a
debtor and has named as beneficiary the debtor, debtor’s
surviving spouse, child, parent, brother or sister, or any
other dependent family member, except for the amount
of any premium that is avoidable by a creditor as a
On its face, the exemption appears very straight forward. That is, if you have an annuity, and someone related to you is listed as a beneficiary of it, it will be exempt, or protected from creditors. For years, that is how the exemption has been interpreted.
Since November 2010, however, the Bankruptcy Appellant Panel, for the 9th Circuit, decided that in order for the exemption to apply, the beneficiary must be a “dependent.” So, for example, if you have an annuity, and your adult non-dependent children are the beneficiaries of it, it would be subject to creditors, and the exemption would probably be challenged by the bankruptcy trustee.
If a non-dependent family member is beneficiary of your annuity, all is not lost. Other even more recent case law has determined that in some situations, an Arizona Debtor may use the more “debtor friendly” Federal exemption that would allow this protection, if the annuity is qualified by various sections of the Internal Revenue Code. The ability to use this exemption depends on the form of the annuity. Therefore it is very important to discuss this with your Mesa Bankruptcy Attorney.
If you have an annuity and are considering filing bankruptcy, you need to seek the advice of an Arizona Bankruptcy Attorney who has experience with this situation, because as you can see, this has become a complicated area of law.
Anyone considering filing bankruptcy should seek the advice of an experienced Arizona Bankruptcy attorney. Bankruptcy is not a “straight forward” process. Please don’t hesitate to call us to schedule a free consultation.
The Yontz Law Group, P.C. – 480-355-1377