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MShore
MShore, Attorney
Category: Legal
Satisfied Customers: 25285
Experience:  Negotiate, Draft, and Review many complex commercial agreements each year.
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Can a lien be placed on ones retirement accounts (401K, IRA,

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Can a lien be placed on one's retirement accounts (401K, IRA, etc.) in the event of a judgment of Fraud. I know that it typically is not the case, except in the event of an IRS judgment or a divorce. However, Fraud can be a 'gray' area...
Submitted: 5 years ago.
Category: Legal
Expert:  MShore replied 5 years ago.
Thank you for the post, I am happy to assist you by answering your questions. Yes, even in cases of fraud, retirement accounts are exempt from a money judgment. For your reference, here is the law: http://codes.lp.findlaw.com/nycode/CVP/52/5205

Please let me know if you need additional guidance.
Customer: replied 5 years ago.
Does it matter the venue...i.e. an agency such as the SEC vs an individual?
Expert:  MShore replied 5 years ago.
Yes, it does. Is this a securities fraud case?
Customer: replied 5 years ago.
From one aspect, yes...what would be the difference?
Expert:  MShore replied 5 years ago.
The difference is that federal law applies, not state. Federal exemptions in this instance would not include retirement benefits unless from Foreign service or Civil service retirement. Social Security however is exempt. For your reference, see http://us-code.vlex.com/vid/sec-exemptions-19223298
Customer: replied 5 years ago.
One last question, does the federal law only apply to securities fraud judgements for an agency, or if an individual brings the suit, or both...actually, is securities fraud a federal offense and will always trump state law, no matter who brings the suit?
Expert:  MShore replied 5 years ago.
Securities fraud is a federal issue generally because it involves interstate commerce, this is why the federal government prosecutes these cases. If an individual brings a federal law would still apply generally given the ruling in Romano. For your reference, see http://stillmanfriedman.com/sitecontent.cfm?pageid=15&itemid=9600 (good article on state court preclusion)
Customer: replied 5 years ago.
So, net-net, securities fraud is generally a federal issue, which precludes state law; hence, retirement accounts are fair game...I guess one would then need to place the retirement accounts into an irrevocable trust. Thanks.
Expert:  MShore replied 5 years ago.
Thank you, XXXXX XXXXX to click Accept if I have answered your questions.
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Customer: replied 5 years ago.
Messer's Shore, are you there?
Expert:  MShore replied 5 years ago.
Yes, I am.
Customer: replied 5 years ago.
We are having some debates here in Brooklyn...

Attempting to read the link you provided "http://us-code.vlex.com/vid/sec-exemptions-19223298"...

It appears that those that have Tenancy in Entirety shares in coops are exempt from federal judgements (very common in NYC). Additionally, it does mention retirement accounts, but it is difficult to determine which type...
Expert:  MShore replied 5 years ago.
Yes, property held as Tenants by the Entirety immediately before commencement of the case is exempt.

Regarding which retirement accounts, I believe they are enumerated: "Foreign Service Retirement and Disability payments, 22 U.S.C. 1104; (!2) Social security payments, 42 U.S.C. 407; Injury or death compensation payments from war risk hazards, 42 U.S.C. 1717; Wages of fishermen, seamen, and apprentices, 46 U.S.C. 601; (!3) Civil service retirement benefits, 5 U.S.C. 729, 2265; (!4) Longshoremen's and Harbor Workers' Compensation Act death and disability benefits, 33 U.S.C. 916; Railroad Retirement Act annuities and pensions, 45 U.S.C. 228(L); (!5) Veterans benefits, 45 U.S.C. 352(E); (!6) Special pensions paid to winners of the Congressional Medal of Honor, 38 U.S.C. 3101; (!7) and Federal homestead lands on debts contracted before issuance of the patent, 43 U.S.C. 175."
Customer: replied 5 years ago.
The section on retirement accounts is noted "section 401(a), 403(a), 403(b), or 408 of the Internal Revenue Code of 1986" in the link...which, I think, includes both employee 401k plans (401) and IRAs (408). However, it appears that sec 522 applies to bankruptcy. If one had a securities fraud judgment against them, are the above exempt or would one have to go through bankruptcy? Thanks.
Expert:  MShore replied 5 years ago.
They are not automatically exempt, even in bankruptcy.It really boils down to what the judgment debtor's financial wherewithal. Here is a great article on the subject: http://www.schlecterlaw.com/publications/pdf/WhittierLawReview2006.pdf
Customer: replied 5 years ago.
I guess the crux of the question is what actually is exempt from a federal civil judgment, with securities fraud being the example. We understand that there are subtle exemptions, but from the average person (in NYC for this example), what would be exempt regarding 'normal, large' assets...bank accounts, apartments, retirement accounts, etc. From what we can determine, coops where the shares are owned as Tenants in Entirety are quasi exempt and it is very gray with retirement accounts. State level civil judgments appear relatively straight-forward to determine exemptions, but the federal level is proving quite difficult to determine...
Expert:  MShore replied 5 years ago.
The reason it is so difficult to determine is because there is no bright line of exemptions in a fraud cause, this is because of the nature of the act or omission giving rise to the judgment (i.e. rewarding a person whom committed fraud to the detriment of those defrauded is akin to unjust enrichment).
Customer: replied 5 years ago.
Is there any true exemptions? I guess it may depend on whether the retirement accounts, coop purchase, etc. were prior to any issues related to the judgement/issue...
Expert:  MShore replied 5 years ago.
No, unfortunately not. In fraud claims the judge looks to the judgment debtor's resources with or without the retirements account and balances the judgment debtor's position against that of the parties whom have been defrauded.
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