USCA11 Case: 20-12823 Date Filed: 01/24/2022 Page: 1 of 10
[PUBLISH] In the United States Court of Appeals For the Eleventh Circuit
____________________
No. 20-12823 ____________________
In re: TIMOTHY RUSSELL HOFFMAN, Debtor. ___________________________________________________ TIMOTHY RUSSELL HOFFMAN, Plaintiff-Appellant, versus SIGNATURE BANK OF GEORGIA,
Defendant-Appellee. USCA11 Case: 20-12823 Date Filed: 01/24/2022 Page: 2 of 10
2 Opinion of the Court 20-12823
Appeal from the United States District Court for the Northern District of Georgia D.C. Docket No. 3:19-cv-00095-TCB ____________________
Before WILSON, LAGOA, and ED CARNES, Circuit Judges. WILSON, Circuit Judge: Appellant-Debtor Timothy Hoffman appeals the district court’s affirmance of the bankruptcy court’s order granting Appel- lee-Creditor Signature Bank of Georgia’s (the Bank) objection to Hoffman’s claimed bankruptcy estate exemptions. The Bank ob- jected to Hoffman’s claimed exemptions of various retirement ac- counts. The bankruptcy court granted the Bank’s objections as to Hoffman’s Roth Individual Retirement Accounts (IRA), concluding that Roth IRAs—unlike traditional IRAs and 401(k) accounts—are not excluded from bankruptcy estates. The district court affirmed the bankruptcy court’s order. This appeal presents an issue of first impression for this court: Are Roth IRAs excluded from Georgia debtors’ bankruptcy estates pursuant to federal law? Because we answer the question in the affirmative, we reverse the district court’s affirmance of the bankruptcy court’s order and remand for further proceedings con- sistent with this opinion. USCA11 Case: 20-12823 Date Filed: 01/24/2022 Page: 3 of 10
20-12823 Opinion of the Court 3
I. Timothy Hoffman is a retired U.S. Air Force Colonel and private pilot. Hoping to help his son-in-law pursue his dream of opening a restaurant, Hoffman guaranteed a loan of approximately $432,000 with the Bank. The restaurant ultimately failed, resulting in Hoffman defaulting on his loan from the Bank and filing for Chapter 7 bankruptcy. In his bankruptcy schedules, Hoffman disclosed an interest in the following retirement accounts: (1) Traditional IRA, (2) Roth Conversion IRA, (3) Roth Contributory IRA, and (4) Fidelity 401(k). Hoffman claimed all of the accounts as exempt on his bank- ruptcy Schedule C. 1 The Bank filed an objection in the bankruptcy court to Hoff- man’s claimed exemptions, asserting that his retirement accounts either were not qualified retirement plans or did not otherwise qualify as exempt. In reply, Hoffman maintained that all of his re- tirement accounts are legally exempt. Specifically regarding the Roth IRAs, Hoffman asserted that they either were excluded from the estate pursuant to 11 U.S.C. § 541(c)(2), or, if not excluded,
1 One of the many forms a debtor has to complete when filing for bankruptcy is Schedule C: The Property You Claim as Exempt. Schedule C is where debt- ors list all of the legally exempt property that they want to keep. USCA11 Case: 20-12823 Date Filed: 01/24/2022 Page: 4 of 10
4 Opinion of the Court 20-12823
were exempt under O.C.G.A. § 44-13-100(a)(2)(E). 2 As to exclusion, Hoffman argued that Georgia’s revised garnishment statute applies to Roth IRAs. Accordingly, Hoffman contended that the court should revisit precedent analyzing a prior version of Georgia’s gar- nishment statute—a version that applied only to traditional IRAs. The bankruptcy court entered a final order overruling the Bank’s objections as to Hoffman’s traditional IRA and 401(k) ac- count but sustaining the objections as to Hoffman’s two Roth IRAs. Regarding Hoffman’s Roth IRAs, the bankruptcy court acknowl- edged that Georgia’s garnishment statute underwent an expansive overhaul but noted that there appeared to be no recent authority addressing the contention that Roth IRAs should be excluded un- der § 541(c)(2). 3
2Pursuant to 11 U.S.C. § 522(b)(2), Georgia has opted out of the federal bank- ruptcy estate exemptions, and O.C.G.A. § 44-13-100 governs the exemptions available to a debtor in bankruptcy in Georgia. 3 The bankruptcy court also found that a Roth IRA is exempt under O.C.G.A. § 44-13-100(a)(2)(E), but only to the extent that it is reasonably necessary for the support of the debtor and his dependents. The court concluded that Hoff- man’s Roth IRAs were not exempt under state law, and thus properly included in the estate, because the funds were not reasonably necessary to support him and his wife. Hoffman does not take issue with this alternative finding on ap- peal. Instead, Hoffman argues only that his Roth IRAs should be excluded from the bankruptcy estate pursuant to federal law (11 U.S.C. § 541(c)(2))— not that they should be exempt under state law (O.C.G.A. § 44-13- 100(a)(2)(E)). USCA11 Case: 20-12823 Date Filed: 01/24/2022 Page: 5 of 10
20-12823 Opinion of the Court 5
Hoffman appealed the bankruptcy court’s ruling that the un- distributed funds in his Roth IRAs are not excluded from his bank- ruptcy estate. The district court agreed with the bankruptcy court’s assessment, declining to rule otherwise on an issue of first impres- sion. Hoffman timely appealed. This appeal requires us to determine what is properly in- cluded in, and excluded from, the property of a bankruptcy estate. After a careful review of the record and with the benefit of oral argument, we reverse the ruling of the district court. Statutory in- terpretation as well as the development of caselaw in this area con- vince us that IRAs—whether they be traditional IRAs or Roth IRAs—are excluded from the bankruptcy estates of Georgia debt- ors pursuant to the Bankruptcy Code and Georgia’s garnishment statute. This conclusion follows naturally from the applicable law and statutory amendments, an overview of which we provide be- low. II. We act as a second court of review in bankruptcy appeals, independently examining the factual and legal determinations of the bankruptcy court and applying the same standard of review as the district court. In re Brown, 742 F.3d 1309, 1315 (11th Cir. 2014). When, as here, the district court affirms the bankruptcy court’s or- der, we consider the bankruptcy court’s decision directly. Id. Be- cause the sole issue in this case is a pure question of law—the proper construction and interpretation of the Bankruptcy Code— USCA11 Case: 20-12823 Date Filed: 01/24/2022 Page: 6 of 10
6 Opinion of the Court 20-12823
we conduct a de novo review. See In re Meehan, 102 F.3d 1209, 1210 (11th Cir. 1997). III. The Bankruptcy Code provides that property of a bank- ruptcy estate includes “all legal or equitable interests of the debtor in property as of the commencement of the case.” 11 U.S.C. § 541(a)(1).
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USCA11 Case: 20-12823 Date Filed: 01/24/2022 Page: 1 of 10
[PUBLISH] In the United States Court of Appeals For the Eleventh Circuit
____________________
No. 20-12823 ____________________
In re: TIMOTHY RUSSELL HOFFMAN, Debtor. ___________________________________________________ TIMOTHY RUSSELL HOFFMAN, Plaintiff-Appellant, versus SIGNATURE BANK OF GEORGIA,
Defendant-Appellee. USCA11 Case: 20-12823 Date Filed: 01/24/2022 Page: 2 of 10
2 Opinion of the Court 20-12823
Appeal from the United States District Court for the Northern District of Georgia D.C. Docket No. 3:19-cv-00095-TCB ____________________
Before WILSON, LAGOA, and ED CARNES, Circuit Judges. WILSON, Circuit Judge: Appellant-Debtor Timothy Hoffman appeals the district court’s affirmance of the bankruptcy court’s order granting Appel- lee-Creditor Signature Bank of Georgia’s (the Bank) objection to Hoffman’s claimed bankruptcy estate exemptions. The Bank ob- jected to Hoffman’s claimed exemptions of various retirement ac- counts. The bankruptcy court granted the Bank’s objections as to Hoffman’s Roth Individual Retirement Accounts (IRA), concluding that Roth IRAs—unlike traditional IRAs and 401(k) accounts—are not excluded from bankruptcy estates. The district court affirmed the bankruptcy court’s order. This appeal presents an issue of first impression for this court: Are Roth IRAs excluded from Georgia debtors’ bankruptcy estates pursuant to federal law? Because we answer the question in the affirmative, we reverse the district court’s affirmance of the bankruptcy court’s order and remand for further proceedings con- sistent with this opinion. USCA11 Case: 20-12823 Date Filed: 01/24/2022 Page: 3 of 10
20-12823 Opinion of the Court 3
I. Timothy Hoffman is a retired U.S. Air Force Colonel and private pilot. Hoping to help his son-in-law pursue his dream of opening a restaurant, Hoffman guaranteed a loan of approximately $432,000 with the Bank. The restaurant ultimately failed, resulting in Hoffman defaulting on his loan from the Bank and filing for Chapter 7 bankruptcy. In his bankruptcy schedules, Hoffman disclosed an interest in the following retirement accounts: (1) Traditional IRA, (2) Roth Conversion IRA, (3) Roth Contributory IRA, and (4) Fidelity 401(k). Hoffman claimed all of the accounts as exempt on his bank- ruptcy Schedule C. 1 The Bank filed an objection in the bankruptcy court to Hoff- man’s claimed exemptions, asserting that his retirement accounts either were not qualified retirement plans or did not otherwise qualify as exempt. In reply, Hoffman maintained that all of his re- tirement accounts are legally exempt. Specifically regarding the Roth IRAs, Hoffman asserted that they either were excluded from the estate pursuant to 11 U.S.C. § 541(c)(2), or, if not excluded,
1 One of the many forms a debtor has to complete when filing for bankruptcy is Schedule C: The Property You Claim as Exempt. Schedule C is where debt- ors list all of the legally exempt property that they want to keep. USCA11 Case: 20-12823 Date Filed: 01/24/2022 Page: 4 of 10
4 Opinion of the Court 20-12823
were exempt under O.C.G.A. § 44-13-100(a)(2)(E). 2 As to exclusion, Hoffman argued that Georgia’s revised garnishment statute applies to Roth IRAs. Accordingly, Hoffman contended that the court should revisit precedent analyzing a prior version of Georgia’s gar- nishment statute—a version that applied only to traditional IRAs. The bankruptcy court entered a final order overruling the Bank’s objections as to Hoffman’s traditional IRA and 401(k) ac- count but sustaining the objections as to Hoffman’s two Roth IRAs. Regarding Hoffman’s Roth IRAs, the bankruptcy court acknowl- edged that Georgia’s garnishment statute underwent an expansive overhaul but noted that there appeared to be no recent authority addressing the contention that Roth IRAs should be excluded un- der § 541(c)(2). 3
2Pursuant to 11 U.S.C. § 522(b)(2), Georgia has opted out of the federal bank- ruptcy estate exemptions, and O.C.G.A. § 44-13-100 governs the exemptions available to a debtor in bankruptcy in Georgia. 3 The bankruptcy court also found that a Roth IRA is exempt under O.C.G.A. § 44-13-100(a)(2)(E), but only to the extent that it is reasonably necessary for the support of the debtor and his dependents. The court concluded that Hoff- man’s Roth IRAs were not exempt under state law, and thus properly included in the estate, because the funds were not reasonably necessary to support him and his wife. Hoffman does not take issue with this alternative finding on ap- peal. Instead, Hoffman argues only that his Roth IRAs should be excluded from the bankruptcy estate pursuant to federal law (11 U.S.C. § 541(c)(2))— not that they should be exempt under state law (O.C.G.A. § 44-13- 100(a)(2)(E)). USCA11 Case: 20-12823 Date Filed: 01/24/2022 Page: 5 of 10
20-12823 Opinion of the Court 5
Hoffman appealed the bankruptcy court’s ruling that the un- distributed funds in his Roth IRAs are not excluded from his bank- ruptcy estate. The district court agreed with the bankruptcy court’s assessment, declining to rule otherwise on an issue of first impres- sion. Hoffman timely appealed. This appeal requires us to determine what is properly in- cluded in, and excluded from, the property of a bankruptcy estate. After a careful review of the record and with the benefit of oral argument, we reverse the ruling of the district court. Statutory in- terpretation as well as the development of caselaw in this area con- vince us that IRAs—whether they be traditional IRAs or Roth IRAs—are excluded from the bankruptcy estates of Georgia debt- ors pursuant to the Bankruptcy Code and Georgia’s garnishment statute. This conclusion follows naturally from the applicable law and statutory amendments, an overview of which we provide be- low. II. We act as a second court of review in bankruptcy appeals, independently examining the factual and legal determinations of the bankruptcy court and applying the same standard of review as the district court. In re Brown, 742 F.3d 1309, 1315 (11th Cir. 2014). When, as here, the district court affirms the bankruptcy court’s or- der, we consider the bankruptcy court’s decision directly. Id. Be- cause the sole issue in this case is a pure question of law—the proper construction and interpretation of the Bankruptcy Code— USCA11 Case: 20-12823 Date Filed: 01/24/2022 Page: 6 of 10
6 Opinion of the Court 20-12823
we conduct a de novo review. See In re Meehan, 102 F.3d 1209, 1210 (11th Cir. 1997). III. The Bankruptcy Code provides that property of a bank- ruptcy estate includes “all legal or equitable interests of the debtor in property as of the commencement of the case.” 11 U.S.C. § 541(a)(1). The Code, however, “excludes from the bankruptcy es- tate property of the debtor that is subject to a restriction on transfer enforceable under ‘applicable nonbankruptcy law.’” Patterson v. Shumate, 504 U.S. 753, 755 (1992) (quoting § 541(c)(2)). “[A]pplica- ble nonbankruptcy law” has been interpreted to include “any rele- vant nonbankruptcy law”—whether it be federal or state law. Id. at 759. On appeal, Hoffman contends that his Roth IRAs should be excluded from his estate pursuant to 11 U.S.C. § 541(c)(2). Section 541(c)(2) provides that “[a] restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable under applicable nonbankruptcy law is enforceable in a case under this title.” Thus, a debtor’s property is excluded from his bankruptcy estate pursuant to § 541(c)(2) if three elements are met: (1) the debtor has “a bene- ficial interest in a trust”; (2) the interest has a restriction on transfer; and (3) the restriction is enforceable under either state or federal law. See id.; see also In re Upshaw, 542 B.R. 619, 622 (Bankr. N.D. Ga. 2015). USCA11 Case: 20-12823 Date Filed: 01/24/2022 Page: 7 of 10
20-12823 Opinion of the Court 7
The relevant state law here is the exemptions provision of Georgia’s garnishment statute, O.C.G.A. § 18-4-6 (exemptions pro- vision). Georgia’s current exemptions provision provides that “[c]ertain earnings or property” may be exempt from the process of garnishment. Id. § 18-4-6(a)(1). One such example of exempt property concerns funds from an IRA: “Funds or benefits from an individual retirement account or from a pension or retirement pro- gram shall be exempt from the process of garnishment until paid or otherwise distributed to a member of such program or benefi- ciary thereof.” Id. § 18-4-6(a)(2). We have found that the prior version of the exemptions pro- vision, § 18-4-22(a), 4 “clearly constitutes ‘applicable nonbankruptcy law’” and that the prohibition on garnishment is an enforceable re- striction on transfer for the purposes of 11 U.S.C. § 541(c)(2). See Meehan, 102 F.3d at 1211–12. We therefore concluded that an IRA established under 26 U.S.C. § 408—a traditional IRA—is excluded from a debtor’s estate under § 541(c)(2) because it is exempt from garnishment pursuant to Georgia law. Id. at 1211–14. At the time that we decided Meehan, traditional IRAs were the only type of IRAs in existence. It was not until the following
4 The prior version of the exemptions provision provided that “funds or bene- fits from an individual retirement account as defined in Section 408 of the United States Internal Revenue Code of 1986, as amended, shall be exempt from the process of garnishment until paid or otherwise transferred to a mem- ber of such program or beneficiary thereof.” O.C.G.A. § 18-4-22(a) (amended 2006) (current version at § 18-4-6). USCA11 Case: 20-12823 Date Filed: 01/24/2022 Page: 8 of 10
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year, 1998, that Roth IRAs were created with the enactment of 26 U.S.C. § 408A. Section 408A(a) instructs us that “a Roth IRA shall be treated for purposes of this title in the same manner as an indi- vidual retirement plan.” In 2005, eight years after Meehan and seven years after the creation of Roth IRAs, the Bankruptcy Court for the Northern Dis- trict of Georgia considered whether Meehan’s reasoning should ex- tend to a Roth IRA. See In re Bramlette, 333 B.R. 911, 914 (Bankr. N.D. Ga. 2005). The Bramlette court declined to extend Meehan’s reasoning, finding that Roth IRAs should be included in a debtor’s bankruptcy estate when they were not statutorily exempt from gar- nishment. Id. The court reasoned that the exemptions provision “applies only to an individual retirement account within the mean- ing of 26 U.S.C. § 408 and Georgia law provides no similar protec- tion for a Roth IRA established under 26 U.S.C. § 408A.” Id. However, in April 2006—the year after Bramlette was de- cided—the Georgia Assembly amended the exemptions provision to include IRAs listed under 26 U.S.C. § 408 or § 408A. The amended statute stated that “funds or benefits from an individual retirement account as defined in Section 408 or 408A . . . shall be exempt from the process of garnishment.” O.C.G.A. § 18-4-22(a) (amended 2016) (current version at § 18-4-6). A decade later, in 2016, the Georgia Assembly further amended the exemptions provision, now codified at § 18-4-6, to state that “[f]unds or benefits from an individual retirement ac- count . . . shall be exempt from the process of garnishment.” USCA11 Case: 20-12823 Date Filed: 01/24/2022 Page: 9 of 10
20-12823 Opinion of the Court 9
O.C.G.A. § 18-4-6(a)(2). Georgia’s current exemptions provision thus no longer differentiates between a traditional IRA and a Roth IRA, referring solely to “an individual retirement account.” See id. IV. We find that the development of the caselaw in this area and the subsequent amendments to the Georgia Code reflect the Geor- gia Assembly’s intention to clarify that both traditional IRAs as de- fined in 26 U.S.C. § 408 and Roth IRAs as defined in § 408A are exempt from garnishment, thus subjecting IRAs to a restriction on transfer by state statute, see Meehan, 102 F.3d at 1211–12, and mak- ing both types of IRAs eligible for exclusion under the Bankruptcy Code. The current version of the exemptions provision compels this result. By no longer listing the kinds of retirement accounts that are exempt from garnishment, and instead exempting “indi- vidual retirement account[s],” there is no basis for us to conclude that Georgia intended to treat traditional IRAs differently than Roth IRAs for the purpose of garnishment. It is undisputable that a Roth Individual Retirement Account, by its very name and defini- tion, is “an individual retirement account.” See O.C.G.A. § 18-4- 6(a)(2); see also 26 U.S.C. § 408A(a) (noting that Roth IRAs shall be treated “in the same manner” as IRAs for the purposes of this title). As noted above, a debtor’s property is excluded from his bankruptcy estate pursuant to federal law if: (1) the debtor has “a beneficial interest in a trust”; (2) the interest has a restriction on transfer; and (3) the restriction is enforceable under either state or federal law. See § 541(c)(2); Upshaw, 542 B.R. at 622. Roth IRAs USCA11 Case: 20-12823 Date Filed: 01/24/2022 Page: 10 of 10
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meet all three requisite elements. No one contests that, just like a traditional IRA’s corpus, a Roth IRA’s corpus qualifies as a benefi- cial interest in a trust. And, pursuant to both the 2006 and the 2016 amendments to the exemptions provision, Roth IRAs have a re- striction on transfer that is enforceable under state law. The Bank offers no viable reason why Roth IRAs should not be treated like traditional IRAs in the context of bankruptcy estate exclusion. V. We accordingly now hold that Roth IRAs are excluded from a Georgia debtor’s bankruptcy estate pursuant to federal law. The judgment of the district court is therefore reversed, and the case is remanded so that the district court may reverse the order of the bankruptcy court. REVERSED and REMANDED.