791 F.3d 1182
10th Cir.2015Background
- Debtors Michael and Rebecca Gordon filed Chapter 7 bankruptcy and claimed a $2,051 savings-account balance as exempt under Colo. Rev. Stat. § 13-54-102(1)(s) (retirement/pension exemption).
- The $2,051 originated as the remainder of a lump-sum distribution from the Gordons’ 401(k); it was not commingled and had been used for living expenses.
- The Chapter 7 Trustee objected, arguing the statutory exemption covers only property held in or payable from a retirement plan, not funds once distributed.
- The bankruptcy court sustained the objection; the district court affirmed; the Tenth Circuit reviewed de novo the statutory interpretation.
- The central question: whether § 13-54-102(1)(s) exempts retirement-plan distributions (money already paid out) or only property still held in or payable from the plan.
Issues
| Issue | Gordon's Argument | Trustee's Argument | Held |
|---|---|---|---|
| Does § 13-54-102(1)(s) exempt funds once distributed from a retirement plan? | The statute’s repeated references to “benefits or payments” indicate distributions are also exempt; Colorado’s exemptions are liberally construed and absent limiting words, distributions should remain exempt. | The statute’s plain text exempts only property “held in or payable from” a plan; distributed funds are no longer in the plan and are not covered. | The court held the exemption applies only to property held in or payable from a retirement plan, not to funds already distributed. |
| Do legislative history or Colorado’s exemption scheme support treating distributions as exempt? | Previous garnishment language and a broad statutory scheme suggest distributions were historically protected and should remain so. | The legislature’s current wording differs from prior provisions; when the legislature intends to exempt proceeds it does so expressly (examples: life-insurance proceeds, military pensions). | The court found the changed statutory language and legislative drafting practices indicate distributions are not exempt; child-support carve-outs remain sensible. |
Key Cases Cited
- Cohen v. Borgman, 698 F.3d 1255 (10th Cir. 2012) (use of Colorado exemption scheme and statutory interpretation principles)
- Kulp v. Zeman (In re Kulp), 949 F.2d 1106 (10th Cir. 1991) (de novo review of state exemption statutory interpretation)
- Guidry v. Sheet Metal Workers Nat’l Pension Fund, 39 F.3d 1078 (10th Cir. 1994) (creditor’s rights against a retirement plan end after distribution)