OPINION
The question in this case is whether an IRS claim for delinquent taxes secured outside of bankruptcy by a lien on a debt- or’s interest in an ERISA-qualified pension plan is secured in bankruptcy “by a hen on property in which the bankruptcy estate has an interest” under 11 U.S.C. § 506(a). This question has divided the courts that have considered it. We hold that such a claim is not secured within the meaning of § 506(a) because a debtor’s interest in an ERISA-qualified plan is excluded from the bankruptcy estate pursuant to 11 U.S.C. § 541(c)(2).
I. Background
Debtor-Appellant Donald Snyder is a vested participant in an ERISA-qualified pension plan. See Employment Retirement Income Security Act of 1974, 26 U.S.C. § 401 et seq., 29 U.S.C. § 1001 et seq. In accordance with the requirements set forth in 26 U.S.C. § 401(a)(13)(A) and 29 U.S.C. § 1056(d)(1), the pension plan contains-an anti-alienation clause. It provides:
Benefits payable under this Plan shall not be subject in any manner to anticipation, ahenation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, either voluntary or involuntary, prior to actually being received by the person entitled to the benefit under the Plan.
Snyder’s pension — that is, his interest in the plan — currently has a balance of about $200,000, but it is not yet in pay-out status. Snyder (or his surviving spouse or designated beneficiary) will begin receiving ben *1174 efit payments under the plan only upon: (1) Snyder’s normal retirement at age 60; (2) his early retirement at age 55 through 59; (3) his total disability; or (4) his death. Snyder is an able-bodied 49-year-old.
Snyder accrued unpaid tax liabilities in 1983-1986, 1989-1995, and 1997. The IRS has made assessments and has duly recorded notices of federal tax liens for the taxes due in each of those years, except 1997. Federal tax liens have therefore attached by operation of law to Snyder’s interest in his pension plan. See 26 U.S.C. §§ 6321, 6322. In December 1998, Snyder filed a Chapter 13 bankruptcy petition listing the IRS as an unsecured creditor in the amount of $158,228. The IRS filed a proof of claim in roughly that amount, but claimed $145,664 as secured by virtue of its liens on Snyder’s interest in the plan.
Snyder objected to the secured portion of the IRS’s claim. He argued that his interest in the plan was excluded from the bankruptcy estate pursuant to 11 U.S.C. § 541(c)(2), and that the IRS liens on that interest therefore could not secure the IRS’s claim in bankruptcy. The bankruptcy court overruled Snyder’s objection and allowed the IRS’s claim as secured. The district court affirmed. Both courts held that Snyder’s interest in the plan became property of the bankruptcy estate for the limited purpose of securing the IRS’s claim. Snyder timely appealed.
We review de novo the district court’s decision on appeal from a bankruptcy court.
Onink v. Cardelucci (In re Cardelucci),
II. Discussion
Pursuant to 11 U.S.C. § 541(a)(1), the property of a bankruptcy estate includes “all legal or equitable interest of the debt- or in property as of the commencement of the case,” “[e]xcept as provided in subsections (b) and (c)(2).” 11 U.S.C. § 541(a)(1). Subsection (c)(2) provides that a “restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable under applicable non-bankruptcy law is enforceable in a case under this title.”
Id.
§ 541(c)(2). In
Patterson v. Shumate,
The IRS argues that despite the anti-alienation clause, Snyder’s interest in his ERISA-qualified plan should be treated as property of the bankruptcy estate, though only for the limited purpose of securing the IRS’s claim. Outside of bankruptcy, the IRS stands in a different position from ordinary creditors in that the anti-alienation provisions in ERISA-quali-fied pension plans are not enforceable against it.
See, e.g., McIntyre v. United States (In re McIntyre),
The IRS argues that because the plan’s anti-alienation clause is not “enforceable under applicable nonbankruptcy law” against it, § 541(c)(2) does not exclude Snyder’s interest in the plan from the property of the bankruptcy estate insofar as it concerns the IRS. There are two possible results from adopting the IRS’s construction of 11 U.S.C. § 541 and treating its claim as secured in bankruptcy. The first is that if Snyder’s bankruptcy plan is confirmed by the bankruptcy court, Snyder would have to make full payment of the IRS’s secured claim during the life of the bankruptcy plan.
See
11 U.S.C. § 1325(a)(5)(B)(ii) (stating that a plan shall be confirmed if “with respect to each allowed secured claim ... the value, as of the effective date of the plan, of property to be distributed under the plan on account of such claim is not less than the allowed amount of such claim”). In that event, the IRS would get in bankruptcy a payment for which it would otherwise have had to wait. The wait would otherwise have been required because the IRS cannot, outside of bankruptcy, enforce its hens on Snyder’s interest in his ERISA plan until the plan enters pay-out status. Snyder has no right to demand payment from the plan trustee until that time, and it is a familiar maxim that the IRS merely steps into the shoes of the taxpayer and does not acquire any greater rights to property than the taxpayer himself enjoys.
See United States v. Nat’l Bank of Commerce,
The second, and more likely, result of treating the IRS’s claim as secured in bankruptcy is that confirmation of Snyder’s bankruptcy plan would be defeated. If this happens, the IRS could escape from having some or all of the non-lien debt wiped out in bankruptcy. The bankruptcy plan would likely be defeated because of the difficulty of fully paying the IRS’s $145,664 claim over the life of the plan.
See
11 U.S.C. § 1325(a)(6) (stating that a plan shall be confirmed
if
“the debtor will be able to make all payments under the plan and to comply with the plan”). Like Snyder, the bankruptcy trustee cannot gain access to the collateral securing the IRS’s claim' — •that is, to Snyder’s interest in his ERISA plan — until the plan enters pay-out status.
See Magill v. State Employees Retirement Sys. (In re Lyons),
During the past decade, the IRS has taken inconsistent positions on the question before us. In
In re Lyons,
The Lyons approach is not consistent with section 506(a) of the Bankruptcy Code. Under section 506(a), a creditor’s rights in property are dependent on the bankruptcy estate’s interest in property; the determination of the estate’s interest is separate from and must precede the determination of the creditor’s interest. If the estate has no interest in the property at issue, as was the case in both the Patterson and Lyons situations, it is not. possible for the claim of any creditor, including the [IRS], to be secured by that property under section 506(a). Therefore, Lyons is inconsistent with the statute, in that the Lyons analysis essentially gives one particular creditor (the [IRS]) an interest in property where the estate has no interest in that property. Accordingly, Lyons [is] viewed as legally unsound.
I.R.S. Litig. Bulletin No. 431,
In 1998, in
In re Persky,
Two years after Persky, the IRS took the opposite position. In April 2000, the Assistant Chief Counsel for the IRS wrote:
Not following Lyons leads to results that are straightforward: ERISA-quali-fied plans and similar interests are excluded from the bankruptcy estate with respect to the [IRS] and all other creditors. Because they are not property of the estate, they cannot be used in determining the value of the [IRS’s] secured claim. On the other hand, to the extent that the [IRS] has a lien that survives the bankruptcy, it can pursue collection outside bankruptcy. However, given the statutory framework of sections 541 *1177 and 506 and the Supreme Court’s reasoning in Patterson ..., upon reconsideration we now believe that the holding in Lyons is correct. The wording of each section, on its face, supports the court’s reasoning. In addition, there is nothing in the legislative history that would call for a different result.
I.R.S. Chief Corns. Advis. 200041029,
Courts have split on the question presented in this case. Cases agreeing with Snyder’s position include
In re Wingfield,
Cases agreeing with the IRS’s current position include
In re Berry,
[H]ad the learned District Court judge had the benefit of the Keyes decision, decided subsequently to the District Court’s Memorandum Opinion ..., the District Court may have reconsidered its position. If this court were writing this decision on a clean slate, it would adhere to the position that 11 U.S.C. § 506(a) means what it says, and that a secured claim arises from a hen upon property upon which the estate has an interest.
In re McIver,
*1178 We agree with the position taken in the first group of cases described above. That is, we agree with the position the IRS took in its 1996 litigation bulletin and in Persky, and disagree with the position it took in 2000.
Today, the IRS argues that the question of enforceability under applicable nonbank-ruptcy law — and, derivatively, exclusion from the bankruptcy estate — must be analyzed by looking at the specific creditor seeking secured status and asking whether the trust’s anti-alienation clause would be enforceable against that creditor in particular. We believe that this argument misconceives the character of §§ 506(a) and 541. Section 506(a) provides that in order for a claim to be secured in bankruptcy, it must be secured by a lien on “property in which the estate has an interest.” 11 U.S.C. § 506(a) (“An allowed claim of a creditor secured by a lien on property in which the estate has an interest ... is a secured claim to the extent of the value of such creditor’s interest in the estate’s interest in such property .... ” (emphasis added)).
Section 541 is concerned with describing what property shall be included in a bankruptcy estate, not with describing the treatment particular creditors shall receive in the course of bankruptcy proceedings. “Section 541 ... governs the creation and content of the bankruptcy estate.”
Reed v. Drummond (In re Reed),
Subsection (2) carves out an exception to § 541(a)(1) and (c)(1). It provides that trust anti-alienation provisions otherwise enforceable under nonbankruptcy law will operate in a bankruptcy case to prevent the transfer of the debtor’s interest in the trust to the bankruptcy estate. The fact that the clause may be unenforceable
against the IRS
is neither here nor there.
See In re Mueller,
The parties do not dispute that the anti-alienation clause in Snyder’s ERISA plan is enforceable under nonbankruptcy law against everyone except the IRS. This is enough to prevent the transfer of Snyder’s
*1179
interest in the plan to the bankruptcy estate.
See Arkison v. UPS Thrift Plan (In re Rueter),
Although exclusion of Snyder’s interest in the plan from the bankruptcy estate precludes the IRS from attaining secured status in the bankruptcy proceeding, the IRS’s liens against Snyder’s interest are not extinguished or otherwise affected. The liens continue to exist, but outside of bankruptcy.
See In re Taylor,
We REVERSE the decision of the district court and REMAND for further proceedings.