Annuity Payments and Filing Bankruptcy in Minneapolis, MN

Posted by Col Ovik on November 24, 2022 at 5:30 AM
Col Ovik


Not all annuity payments in a bankruptcy will be exempt. For the annuity payment to be exempt in a bankruptcy filing it must be the type described by Congress under exemption § 522(d)(10). 

11 U.S.C. § 522(d)(10) which exempts: 

(10) The debtor's right to receive — 

(E) a payment under a stock bonus, pension, profit-sharing, annuity, or similar plan or contract on account of illness, disability, death, age, or length of service, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor, unless, —

(i) such plan or contract was established by or under the auspices of an insider that employed the debtor at the time the debtor's rights under such plan or contract arose;

(ii) such payment is on account of age or length of service; and(iii) such payment is on account of age or length of service; and

(iii) such plan or contract does not qualify under section 401(a), 403(a), 403(b), or 408 of the Internal Revenue Code of 1986. § 522(d)(10)


Paragraph (10) exempts certain benefits that are akin to future earnings of the debtor. These include benefits under a certain stock bonus, pension, profit-sharing, annuity or similar plan based on illness, disability, death, age or length of service. But an annuity purchased with non-exempt assets likely will fail to meet the criteria to be exempted under § 522(d)(10).  

The debtor’s intention for purchasing the annuity may have been to provide for age or disability, but the court will look beyond the debtor’s stated intention. Even if the annuity purchase had nothing to do with bankruptcy planning and the annuity was purchased years in advance of the bankruptcy filing . The eighth circuit courts have held, to exempt annuities purchased without anticipation of a bankruptcy would disregard the controlling law that determines qualification for the exemption under the statue based on the nature of the investment. 


The court has held an annuity is no less of a financial investment than a purchase of stocks, bonds, real estate, or a simple bank account. The eighth circuit has held to allow the annuity would convert a statute intended to protect "benefits that are akin to future earnings" — which for the elderly are typically retirement earnings — into a statute conferring vastly broader bankruptcy protection. As the bankruptcy court observed:

If annuity payments were "on account of age" merely because the debtor purchased the annuity when she was past retirement age, all persons past retirement age should move their assets into such an annuity and then file bankruptcy. . . . Under this scheme, no debtor past retirement age would have any assets subject to execution, could live in a million-dollar home, have a substantial stream of income, virtually live off his creditors, and yet be judgment proof. In re Eilbert, 162 F.3d 523 at 526 (8th Cir. 1998).



Simply because an annuity is purchased without the anticipation of an imminent bankruptcy and the debtor is past retirement age or plans to use the annuity during retirement does not mean that it will qualify for exemption under 11 U.S.C. § 522(d)(10). Contact the attorneys at LifeBackLaw and see us at and let us help you get your life back.


Topics: Monthly Annuity, Annuity Is Exempt Asset in Bankruptcy, Are Annuities Exempt in Bankruptcy?

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