Walsh v. Dively, 551 B.R. 570 (W.D. Pa. 2016)
Facts: When husband and wife were divorced in Pennsylvania, they agreed that the wife would receive 50% of the husband’s retirement. The agreement was incorporated into the divorce decree, but no DRO was entered.
The wife then filed for Chapter 7 bankruptcy. The bankruptcy trustee moved in bankruptcy court for authority to ask the state court to issue a DRO. The bankruptcy court denied the motion. The trustee then appealed.
Issue: Should the trustee be permitted to seek a DRO?
Answer to Issue: No
Summary of Rationale: The trustee has a duty to collect property of the estate in bankruptcy. But retirement plans with an antialienation provision are not part of an estate in bankruptcy. Patterson v. Shumate, 504 U.S. 753 (1992). The retirement plan at issue was governed by ERISA, and it was subject to the statutory antialienation provision in ERISA unless a QDRO was entered. Because a DRO had not even been entered, let alone qualified by the plan, there was no QDRO, and the antialienation provision remained operative. Thus, the pension was not part of the wife’s estate in bankruptcy.
Note: As we shall shortly see, it is quite important that the state court awarded the wife an actual interest in a retirement plan, and not an award of cash she could spend freely for any purpose.
In re Kizer, 539 R. 316 (Bankr. E.D. Mich. 2015)
Facts: In a consent judgment of divorce, a court awarded the husband 50% of three retirement accounts owned by the wife. The wife was also awarded the marital home, but required to pay the husband for his interest. Because she lacked the funds to make the payments, she agreed to pay for the home by giving up her interest in the requirement accounts, increasing the husband’s interest to 100%.
QDROs were subsequently entered and approved, directing the administrators of the accounts to transfer to the husband 100% of the balance of certain accounts. The plan administrators complied with the QDROs by giving the husband accounts containing the funds at issue. A finding of fact was made that the husband could make withdrawals from these accounts at any time, without any form of early withdrawal penalty. (The husband claimed that his withdrawals were subject to a penalty, but he failed to produce supporting evidence, even after the court gave the husband additional time.)
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