Kaitlin Nicole Williams
APPEARANCES: LAW OFFICES OF MAYER & NEWTON
John P. Newton, Jr., Esq.
1111 Northshore Drive
Suite S-570
Knoxville, Tennessee 37919
Attorneys for Debtor
MOSTOLLER, STULBERG, ALLEN, TIPPETT & BANKS
Ann Mostoller, Esq.
136 South Illinois Avenue
Suite 104
Oak Ridge, Tennessee 37830
Attorneys for Ann Mostoller, Chapter 7 Trustee
The record before the Court consists of six stipulations of fact submitted by the parties on December 4, 2025 [Doc. 48], together with five stipulated exhibits: (A) the Final Decree of Divorce between Debtor and Tyler James Williams entered in the Chancery Court for Sevier County, Tennessee (“Chancery Court“) on April 1, 2024 (“Divorce Decree“), with the incorporated Marital Dissolution Agreement (“MDA“) [Doc. 48-1]; (B) the Qualified Domestic Relations Order entered by the Chancery Court on January 3, 2025 (“QDRO“) [Doc. 48-21]; (C) a letter to Debtor‘s state-court attorney, Jimmy G. Carter, Jr., from the Administrative Committee of UPS 401(k) Savings Plan dated January 15, 2025, recognizing the QDRO (the “QDRO Approval Letter“) [Doc. 48-3]; (D) Debtor‘s Second Amended Schedule C filed on December 2, 2025, docketed at entry number 47 [Doc. 48-4]; and (E) the Objection, docketed at entry number 38 [Doc. 48-5]. Pursuant to
Notwithstanding that the Trustee and Debtor did not identify issues as directed in the Order entered on October 30, 2025 [Doc. 40], the Court identifies the determinative issue as whether the Retirement Benefit is property of the estate. If so, the issue becomes whether Debtor
This is a core proceeding pursuant to
I. FACTS
Debtor and Tyler James Williams were divorced on April 1, 2024. [Docs. 48 at ¶ 1, 48-1.] Pursuant to their MDA, through which they agreed to an equitable division of their property rights, Debtor and Mr. Williams agreed to the following relevant provision:
5. RETIREMENT BENEFITS:
a. Wife shall be awarded Eleven Thousand Dollars ($11,000) from Husband‘s 401(k) with VOYA, Wife‘s attorney shall prepare a Qualified Domestic Relations Order to effectuate the division of the 401(k). Husband shall provide all information necessary for the drafting of the Qualified Domestic Relations Order, and the parties shall sign any and all documents required to effectuate the division of the account.
b. Any other benefits presently titled solely in the name of a party will remain that party‘s sole and separate property, and the other shall make no claim against such.
[Doc. 48-1 at 7.] Neither party appealed the Divorce Decree. [Doc. 48 at ¶ 1.]
Debtor‘s counsel prepared and submitted a draft QDRO to the Plan Administrator for UPS on December 12, 2024, and to the Chancery Court on December 19, 2024. [Doc. 48-2 at 4.] The Chancellor entered the QDRO on January 3, 2025. [Docs. 48 at ¶ 3, 48-2.] On January 15, 2025, the Administrative Committee for UPS 401(k) Savings Plan emailed Debtor‘s counsel the QDRO Approval Letter, advising that it had reviewed the QDRO and “determined that the Order
5. The Alternate Payee [Debtor] shall be entitled to receive an amount which is equal to Eleven Thousand Dollars ($11,000) of the Participant‘s vested account balance under the Plan, determined as of April 1, 2024 (the “Valuation Date“), as if the Participant separated from service on that date. The amounts awarded to the Alternate Payee shall be credited or debited with investment gains and losses from the Valuation Date through the date said amounts are distributed to the Alternate Payee. Investment gains and losses shall be calculated in accordance with the terms of the Plan.
. . . .
7. The amounts awarded hereunder shall be paid to the Alternate Payee in a lump sum payment, as soon as practicable following the date this Order is determined by the Plan to be a qualified domestic relations order (within the meaning of Section 206(d) of ERISA).
. . . .
9. It is intended that this Order will qualify as a qualified domestic relations order under Section 206(d)(3) of ERISA, and shall be administered and interpreted in conformity with such Act. This Order does not require the Plan to provide any type or form of benefit or any option not otherwise provided to the Participant under the Plan. This Order further does not require the Plan to provide increased benefits (determined on the basis of actuarial value) and does not require the payment of benefits to an Alternate Payee which are required to be paid to another Alternate Payee under another order previously determined by the Plan to be a QDRO.
[Doc. 48-2 at ¶¶ 5, 7, 9.]
Debtor filed the Voluntary Petition commencing this Chapter 7 bankruptcy case on December 9, 2024. [Docs. 1, 48 at ¶ 2.] On September 10, 2025, Debtor filed an Amended Schedule C, reflecting, inter alia, an exemption in the Retirement Benefit as “401(k); UPS 401(k)” in the amount of $11,000 pursuant to
In her brief, the Trustee relies on the unpublished decision by Judge Richard Stair, Jr. in In re Rimmer, No. 01-30221 (Bankr. E.D. Tenn. June 15, 2001) [Doc. 49-1], in which he sustained the chapter 7 trustee‘s objection to the debtor‘s claimed exemption, found that the debtor was not a “participant in or beneficiary of” her former spouse‘s retirement account because a QDRO was not in place as of the petition date so that under
Debtor argues that the Retirement Benefit is not property of the estate under
As previously stated, the threshold issue is whether the Retirement Benefit is property of the estate. Because the Court finds that the Retirement Benefit is not property of Debtor‘s bankruptcy estate, the exemption issue is moot, and the Trustee‘s objection will be overruled.
II. ANALYSIS
Debtor‘s bankruptcy estate, which included all of her property and property interests at the time, was created when she filed her bankruptcy case.
The QDRO Approval Letter recognized the parties’ QDRO and makes clear that Mr. Williams‘s 401(k) plan from which Debtor was awarded the Retirement Benefit is an ERISA-qualified plan. [Doc. 48-3.] Accordingly, there is no dispute that the plan from which the Retirement Benefit arose falls within the scope of
In In re Lawson, the debtor filed her bankruptcy case on March 20, 2015. Id. at 569. Two months earlier, on January 6, 2015, the state court held a hearing in the pending divorce between the debtor and her then-husband. Id. at 568. At that hearing, the court read into the record the terms of the settlement agreement between the debtor and her spouse, which included an equal division of the husband‘s 403(b) retirement account. Id. On January 8, the state court entered an order styled as a “Judgment Entry” stating that “the proposed shared parenting plan and
[The state court] had entered an order styled as a “judgment entry” approving a property settlement between the Debtor and her husband, but not a formal qualified domestic relations order (“QDRO“) as defined in the Employee Retirement Income Security Act,
29 U.S.C. §§ 1001 –1461 (“ERISA“) . . . [, and the trustee could] stand in the shoes of the Debtor and ultimately receive the Debtor‘s share of the funds from the Plan upon completion of the divorce without running afoul of either the ERISA-required anti-alienation provision of the Plan itself or the exemptions applicable to qualified tax-advantaged retirement accounts under Ohio and federal bankruptcy law.
The court examined “the distinct forms of interest” that each party argued the debtor held in the 403(b) retirement account as of the petition date. Id. at 570. The court initially looked to whether the debtor held “a beneficial interest in the Plan assets, either by virtue of her designation by [the ex-husband] as a beneficiary, her status as [his] spouse, and/or the entry by the State Court of its January 8, 2015 Judgment Entry, which approved the division of the Plan assets.” Id. “The proper legal characterization of these distinct rights,” the court stated, “informs the further inquiries about what is or is not excluded from property of the bankruptcy estate and what property of the bankruptcy estate is exempt.” Id.
First, the court found that the state court‘s “Judgment Entry” was a “domestic relations order” because it was signed by the state court judge, it granted the parties’ a divorce after approving and adopting the proposed settlement and property division agreement that had been read into the record, and the order did not include any stay of its effectiveness pending entry of a
A domestic relations order, therefore, vests the spouse with rights protected by ERISA. The QDRO, by contrast, is necessary to take the next step of transferring the assets into the spouse‘s name in her own qualified plan or individual retirement account. As explained by the Ninth Circuit Court of Appeals, “[t]he QDRO provisions of ERISA do not suggest that [an alternate payee] has no interest in the plans until she obtains a QDRO, they merely prevent her from enforcing her interest until the QDRO is obtained.” In re Gendreau, 122 F.3d 815, 819 (9th Cir. 1997).
Id. at 572. Accordingly, because the debtor “became an ERISA-qualified beneficiary” when the state court entered the Judgment Entry, her beneficial interest in her ex-husband‘s 403(b) retirement plan was excluded as property of the estate by
The bankruptcy court disagreed, holding that under North Carolina law:
A final order resolving an equitable distribution proceeding . . . fixes the parties’ rights and transforms the more general right to equitable distribution into concrete interests in specific property. After being signed and entered by the trial court, an equitable distribution order such as the Consent Order is treated as an award under
N.C. Gen. Stat. § 50-20.1 and each spouse‘s interests “vest” on the date of the order‘s entry.The entry of an equitable distribution order, therefore, represents a key moment in a divorce-related division of property interests. If the Debtor and her ex-spouse were separated and still in the midst of a pending proceeding, the Trustee may be correct that the Debtor would merely possess a claim or right to equitable distribution rather than an interest in specific property. However, in this case the Debtor has already concluded the proceeding through entry of the Consent Order. The Debtor‘s interest is no longer an amorphous, unknown claim to as-yet-undivided marital property; rather, the Debtor‘s interests are now explicated and firmly fixed in the Consent Order. The terms of the Consent Order, signed and entered by the state court [prepetition], “constitute a full and final resolution of the Debtor‘s claims for Equitable Distribution, Post-Separation Support/Alimony and Attorney Fees, and [the ex-spouse‘s] claims for Equitable Distribution.”
Id. at *3-4 (citation modified).
Although the Trustee is correct that the Consent Order would not qualify as a QDRO, that fact does not preclude a finding that the Consent Order vested the Debtor‘s ownership interest in . . . the 401(k) account. Rather, the division of the parties’ property interests were completed upon entry of the Consent Order; the envisioned QDRO is merely a procedural device for implementing the terms of that Consent Order. James R. Turner, 2 EQUITABLE DISTRIBUTION OF PROPERTY § 6:20 (4th ed. 2023).
State courts have adopted a two-pronged approach to dividing retirement benefits as part of an equitable distribution of marital property—“[t]he first order is the underlying substantive order stating the rights of the parties to the retirement benefits at issue,” while the second “is a DRO – a separate order aimed at the plan administrator, directing it to send a separate benefit check to the nonowning spouse.” Id. This divided approach reflects a deliberate choice made by state courts. Attempting to draft the initial substantive order to also meet the requirements of a QDRO “is rarely advisable, as such an order will contain many terms involving other assets and issues” and may simply “confuse the plan administrator, who could respond by refusing to qualify the order.” Id. Instead, “the best procedure is almost always to draft the DRO as a separate document, focusing only upon dividing retirement benefits in a form which the plan administrator will recognize.” In line with this rationale, a “majority of states” adhere to the “general rule in modern practice” that a DRO “is not a substantive order at all” but is instead “a procedural device for enforcing the terms of the underlying substantive order.” Id. (citing White v. White, 568 S.E.2d 283, 285 (N.C. Ct. App. 2002), aff‘d, 579 S.E.2d 248 (N.C. 2003)). As the Ninth Circuit Court of Appeals remarked, “the QDRO provisions of ERISA do not suggest that [the alternate payee] has no interest in the plan [ ] until she obtains a QDRO, they merely prevent her from enforcing that interest until the QDRO is obtained.” Trs. of Dirs. Guild of Am.-Producer Pension Benefits Plans v. Tise, 234 F.3d 415, 421 (9th Cir. 2000) (quoting In re Gendreau, 122 F.3d 815, 819 (9th Cir. 1997)).
Id. at *5 (alterations in original).
Having found that the debtor was a fully vested owner in the 401(k) award, the Myatt court then found that the funds were not property of the estate under
In interpreting the language of
11 U.S.C. § 541(c)(2) , the Supreme Court confirmed that a debtor may exclude from property of the estate any interest – as a plan participant – in a plan or trust that includes a restriction on transfer enforceable under nonbankruptcy law, including an ERISA-qualified plan. Patterson, 504 U.S. at 758. Similarly, despite some disagreement, “most courts addressing the issue have determined that a debtor‘s interest as an alternate payee in the undistributed funds of an ERISA-qualified plan is not property of the bankruptcy estate.” In re Dyckman, No. 1:10-bk-08586-MDF, 2012 WL 1302613, at *4 (Bankr. M.D. Pa. Apr. 16, 2012) (citing Nelson v. Ramette (In re Nelson), 322 F.3d 541, 545 (8th Cir. 2003)). Under this line of reasoning, “therefore, a person who acquires an interest in an ERISA plan via a QDRO can exclude that interest from a bankruptcy estate in the same way that the plan participant himself could have excluded it.” Nelson, 322 F.3d at 545; see also Ostrander v. Lalchandani (In re Lalchandani), 279 B.R. 880 (B.A.P. 1st Cir. 2002); In re Farmer, 295 B.R. 322, 324-25 (Bankr. W.D. Wis. 2003); In re Hthiy, 283 B.R. 447, 451 (Bankr. E.D. Mich. 2002)[8]; In re Seddon, 255 B.R. 819 (Bankr. W.D.N.C. 2000). Because the QDRO is merely a procedural device, courts have also found that a debtor‘s interest is excluded even in the absence of a QDRO, where an equitable distribution order or divorce decree establishes the debtor‘s interest. See, e.g., Cooper v. Childon (In re Chilson), No. 1:15-cv-00020-MR, Bankr. Case No. 12-10848, 2016 WL 1079149, at *5-6 (W.D.N.C. Mar. 18, 2016); Walsh v. Dively (In re Dively), 551 B.R. 570, 575-76 (W.D. Pa. 2016); Wilson v. Wilson (In re Wilson), 158 B.R. 709, 711 (Bankr. S.D. Ohio 1993).
Id. at *7 (citation modified).
Application of Tennessee law results in the same determination. In Tennessee, “[a] Final Decree of Divorce that incorporates the spouses’ marital dissolution agreement is ‘the controlling document that sets forth the division of property.‘” Pruitt v. Pruitt, 293 S.W.3d 537, 542 (Tenn. Ct. App. 2008) (citation omitted). Under
“Typically, in Tennessee, a proposed QDRO is prepared by the parties’ attorneys and submitted to the trial court for approval and entry, after which, it is submitted to the administrator who administers the pension plan in question.” Jordan v. Jordan, 147 S.W.3d 255, 260 (Tenn. Ct. App. 2004) (footnote omitted). “The purpose of the QDRO is to allow [one former spouse] to reach the [other former spouse‘s] interest in the 401(k) plan as allowed by [ERISA].” Lagrone v. Lagrone, No. 01A01–9603–CH–00125, 1996 WL 512032, at *3 (Tenn. Ct. App. Sept. 11, 1996). “Notwithstanding their importance, issues and practice surrounding QDROs can give rise to contentious proceedings after a judgment of absolute divorce has been granted, because ‘ERISA does not necessarily require that a QDRO be part of the actual judgment in a case.‘” Stiel v. Stiel, 348 S.W.3d 879, 892 (Tenn. Ct. App. 2011) (citation omitted). Nor is there a “statute of limitation for the entry of a QDRO . . .[; however, b]efore an alternate payee becomes entitled to rights under an ERISA plan, the proposed QDRO must be qualified.” Jordan, 147 S.W.3d at 260. Accordingly, a “judgment of divorce [awarding such benefits] ‘create[s]’ [the former spouse‘s] right to receive benefits under [the other spouse‘s]
Tennessee courts also have held that any subsequent documents, including QDROs, may not alter or amend the final divorce decree.
As this court has stated in several opinions, parties may not amend the terms of the property division in a final judgment by a subsequent agreement, such as a QDRO. Cook v. Cook, No. E2007–00750–COA–R3–CV, 2008 WL 555692, at *7 (Tenn. Ct. App. Feb. 29, 2008); see Maxwell v. Maxwell, No. 01A01–9402–CV–00086, 1994 WL 527134, at *2 (Tenn. Ct. App. Sept. 28, 1994) (vacating a QDRO that was ordered by the court after the divorce decree had become final because the QDRO was inconsistent with the parties’ divorce decree); see also Lagrone, 1996 WL 512032, at *3 (vacating a QDRO that did not conform to the provisions of the Final Decree of divorce which had become final before the QDRO was entered).
Pruitt, 293 S.W.3d at 544; see also Watson v. Clark, No. M2003-02398-COA-R3-CV, 2005 WL 856083, at *4 (Tenn. Ct. App. Apr. 13, 2005) (“The intent of [a] QDRO is to recognize the existence of the marital rights awarded to [the former spouse] by the Final Decree of Divorce and . . . should not be construed in any manner inconsistent with any ‘applicable judicial decision.‘” (citation modified)); Gose v. Gose, No. 03A01-9506-CH-0268, 1997 WL 129367, at *2 (Tenn. Ct. App. Mar. 24, 1997) (“Because of the different circumstances in which a QDRO may prove necessary, it is not essential that such an order be part of the judgment in the action. For one thing, the Federal law does not require that a QDRO be part of the actual judgment in the case. . . . In this case, the divorce decree as to pension benefits, could not have been enforced without the QDRO, and the QDRO was necessary as an aid to enforcing the previously entered judgment.” (citation omitted)); cf., In re Estate of Todd, No. W2018-01088-COA-R3-CV, 2019 WL 1036080, at *4 (Tenn. Ct. App. Mar. 5, 2019) (finding that even though the divorce decree
The Trustee argues that the facts of In re Rimmer are identical to the facts of this case. The Court, however, observes two seminal distinctions. First, in Rimmer, the court found that the record failed to establish that the debtor was either a participant or a beneficiary to her former spouse‘s 401(k) plan. In re Rimmer, No. 01-30221, at 4. More determinative, however, is that the question of whether the retirement funds in question in In re Rimmer were property of the estate was not raised or addressed.10
Other cases relied on by the Trustee in her reply likewise are inapposite or unavailing. For example, the Trustee argues that the bankruptcy court in In re West, 507 B.R. 252 (Bankr. N.D. Ill. 2014), “ruled . . . that a QDRO was required and because one had been entered, the debtor‘s interest in the Retirement Plan at issue was property of the estate.” [Doc. 51 at 1.] In In re West, however, the parties provided the court with “no evidence” that the retirement plan contained a restriction on transfer; in fact, “neither party . . . provided the court with the Retirement Plan itself” so that the court could not analyze and determine whether the plan “contain[ed] an enforceable transfer restriction under applicable nonbankruptcy law.” Id. at 257.
The Court also disagrees with the Trustee‘s assertion that “cases cited by the Debtor in her brief in this case clearly require that a QDRO be entered.” [Doc. 51 at 2.] To the contrary, in Ostrander v. Lalchandani (In re Lalchandani), 279 B.R. 880 (B.A.P. 1st Cir. 2002), cited by Debtor [Doc. 50 at 3], the BAP affirmed the bankruptcy court‘s determination that the payment
Here, the Retirement Benefit indisputably is an ERISA-qualified plan. [See Doc. 48-3.] The parties also have stipulated that Debtor was awarded the Retirement Benefit through the parties’ Divorce Decree incorporating the MDA, which was not appealed. [Docs. 48 at ¶ 1, 48-1.] When that judgment became final under Tennessee law on May 1, 2024,13 Debtor had a fully vested interest in the Retirement Benefit, notwithstanding that the QDRO – which was merely a
Under federal and Tennessee law, Debtor held a beneficial interest in the Retirement Benefit, which is a trust for which the transfer is restricted and enforceable under applicable nonbankruptcy law (i.e., an ERISA-qualified plan). Accordingly, Debtor‘s interest in the Retirement Benefit is not property of the bankruptcy estate under
III. CONCLUSION
Because the Court finds that the Retirement Benefit is not property of Debtor‘s bankruptcy estate, the Trustee‘s Objection will be overruled. The Court will enter an Order consistent with this Memorandum.
FILED: March 26, 2026
BY THE COURT
s/ Suzanne H. Bauknight
SUZANNE H. BAUKNIGHT
UNITED STATES BANKRUPTCY JUDGE
Notes
In re Hthiy, 283 B.R. at 449-50 (citation modified) (quoting Boggs v. Boggs, 520 U.S. 833, 846-47 (1997)).In creating the QDRO mechanism Congress was careful to provide that the alternate payee, the “spouse, former spouse, child, or other dependent of a participant,” is to be considered a plan beneficiary.
29 U.S.C. § 1056(d)(3)(K) ,(J) . These provisions are essential to one of REA‘s [Retirement Equity Act of 1984, Pub. L. 98-397, 98 Stat. 1426] central purposes, which is to give enhanced protection to the spouse and dependent children in the event of divorce or separation, and in the event of death the surviving spouse. Apart from these detailed provisions, ERISA does not confer beneficiary status on nonparticipants by reason of their marital or dependent status. . . . The QDRO provisions protect those persons who, often as a result of divorce, might not receive the benefits they otherwise would have had available during their retirement as a means of income.