Court Allows 403(b) Bankruptcy Exclusion

July 11, 2007 ( - A U.S. Bankruptcy Court judge has ruled that a bankrupt couple could keep the wife's 403(b) assets out of their bankruptcy estate.

Noting that case law excluded 401(k) assets and assets of other Employee Retirement Income Security Act (ERISA) plans, Judge Colleen A. Brown of the U.S. Bankruptcy Court for the District of Vermont decided that 403(b) plans were also properly excludable.

Jean Leahy and her husband had filed for Chapter 7 bankruptcy protection for obligations stemming from her husband’s business debt, according to the ruling.

T he bankruptcy trustee argued that Bankruptcy Code exclusion only applies to the “gap” period between the withholding of the debtor’s wages by the employer and the employer’s remittance to the debtor’s plan. Brown rejected the argument.

The case is In re Leahy,Bankr. D. Vt., No. 06-10574, 7/3/07.