The American Bankruptcy Institute Journal published an article written by Chicago Bankruptcy group partner David C. Christian II and associate James B. Sowka in the September 2011 issue. The article discussed a recent Northern District of Illinois Bankruptcy Court decision finding that a chapter 7 debtor could not shield non-qualified ERISA top-hat plan benefits from creditors. In the case, a team of Seyfarth attorneys including David, James, Shawn Wood, Jason DeJonker and Ryan Pinkston persuaded the bankruptcy court that the top-hat plan at issue constituted property of the bankruptcy estate and was not subject to exemption under Illinois law.
“The current economic climate may result in more top-hat plan participants and sponsors seeking bankruptcy protection,” surmise David and James. “Therefore, bankruptcy practitioners should be aware that although top-hat and other types of retirement plans, such as excess-benefit plans, are regulated under ERISA, they are exempt from many of ERISA’s substantive requirements. In bankruptcy cases of plan sponsors, these plans give rise to unsecured claims. When a plan beneficiary seeks bankruptcy protection, his or her right to receive payments constitutes property of the estate that will not be exempt in most states.”