In the Matter of: GREGORY D. HAWK; MARCIE H. HAWK, Debtors.
EVA S. ENGELHART, Chapter 7 Trustee, Appellee. GREGORY D. HAWK, Appellant,
from the United States District Court for the Southern
District of Texas
STEWART, Chief Judge, and WIENER and PRADO, Circuit Judges.
ON PETITION FOR REHEARING
C. PRADO, Circuit Judge
and Marcie Hawk's petition for panel rehearing is
GRANTED, and the opinion previously filed in this case is
withdrawn. This opinion is substituted therefor. The
Hawks' petition for rehearing en banc is DENIED.
filing for Chapter 7 bankruptcy, the Hawks claimed an
exemption for funds held in an individual retirement account
("IRA"). They sought to exempt the funds from the
bankruptcy estate because tax-exempt or tax-deferred assets
held in a qualifying retirement account are generally exempt
from creditors' claims under Texas law. However, over the
course of several months, the Hawks withdrew the funds from
the IRA. Texas law provides that amounts distributed from a
retirement account remain exempt only if rolled over into
another retirement account within sixty days. After
withdrawing the funds from the IRA, the Hawks did not roll
them over into another qualifying account. Thus, the
bankruptcy court held that the funds had lost their exempt
status and ordered that the Hawks turn over the funds to the
Trustee, Eva Engelhart. The district court upheld the
bankruptcy court's decision on appeal. We REVERSE and
December 15, 2013, the Hawks filed a voluntary bankruptcy
petition under Chapter 7 of the Bankruptcy Code.
Approximately one month later, the Hawks filed their schedule
of assets, which claimed an exemption for funds held in an
IRA managed by NFP Securities, Inc. The Hawks claimed that
the IRA funds were exempt from creditors' claims under
Texas Property Code § 42.0021 and were therefore
excluded from the property of the bankruptcy estate under 11
U.S.C. § 522(b). The meeting of creditors was held on
March 28, 2014, giving the parties in interest until April
28, 2014, to object to the Hawks' claimed exemptions.
See Fed. R. Bankr. P. 4003(b)(1). No party in
interest objected to the IRA exemption during that time. On
April 3, 2014, the Trustee filed a report declaring the
estate had no assets available for distribution to the
Hawks' creditors and proposing to abandon all nonexempt
assets. In May 2014, however, Res-TX One, one of the
Hawks' creditors, timely filed an adversary proceeding
objecting to the Hawks' discharge.
between December 11, 2013, and July 14, 2014, the Hawks
withdrew all of the funds from the IRA and used most of those
funds to pay for living and other expenses. They never
deposited the funds into another retirement account. When
Res-TX One deposed Mr. Hawk in November 2014, he stated that
approximately $30, 000 of the liquidated IRA funds remained
in his possession and that the funds were "in a
shoebox." The Trustee first learned about the liquidated
IRA funds from Mr. Hawk's deposition and subsequently
demanded that the Hawks give the funds to the estate. After
the Hawks refused, the Trustee filed a motion with the
bankruptcy court seeking to compel the Hawks to turn over the
an evidentiary hearing, the bankruptcy court ordered the
Hawks to turn over the funds that were withdrawn from the IRA
($133, 434.64 in total). The bankruptcy court concluded that
the funds "lost their exempt status" under Texas
law because the Hawks "did not roll them over to another
individual retirement account within 60 days." The Hawks
appealed to the district court, which affirmed the bankruptcy
court's decision. This appeal followed.
STANDARD OF REVIEW
"second review court, " "[o]ur review is
properly focused on the actions of the bankruptcy
court." In re Age Ref., Inc., 801 F.3d 530, 538
(5th Cir. 2015) (quoting In re T-H New Orleans Ltd.
P'ship, 116 F.3d 790, 796 (5th Cir. 1997)). "We
apply the same standard of review to the bankruptcy
court's findings of fact and conclusions of law as
applied by the district court." In re Pratt,
524 F.3d 580, 584 (5th Cir. 2008). The "[d]etermination
[of] whether an exemption from the bankruptcy estate exists
is a question of law, which we review de novo."
In re Zibman, 268 F.3d 298, 301 (5th Cir. 2001).
"Although we may 'benefit from the district
court's analysis of the issues presented, the amount of
persuasive weight, if any, to be accorded the district
court's conclusions is entirely subject to our
discretion.'" In re Age Ref., 801 F.3d at
538 (quoting In re CPDC, Inc., 337 F.3d 436, 441
(5th Cir. 2003)).
11 U.S.C. § 541(a), the commencement of a bankruptcy
case creates a bankruptcy estate comprising, among other
things, "all legal or equitable interests of the debtor
in property as of the commencement of the case." The
debtor may then remove certain types of property from the
estate by electing to take advantage of the exemptions
described in federal or state law. 11 U.S.C. § 522(b).
"An exemption is an interest withdrawn from the estate
(and hence from the creditors) for the benefit of the
debtor." Owen v. Owen, 500 U.S. 305, 308
(1991). To claim exemptions, the debtor must file a list of
property claimed as exempt on the schedule of assets. 11
U.S.C. § 522(l); Fed.R.Bankr.P. 4003(a). A
party in interest may then "file an objection to the
list of property claimed as exempt within 30 days after the
meeting of creditors . . . or within 30 days after any
amendment to the list or supplemental schedules is filed,
whichever is later." Fed.R.Bankr.P. 4003(b)(1).
"Unless a party in interest objects, the property
claimed as exempt on such list is exempt." 11 U.S.C.
§ 522(l). "Anything properly exempted
passes through bankruptcy; the rest goes to the
creditors." Payne v. Wood, 775 F.2d 202, 204
(7th Cir. 1985).
court has not previously addressed whether a debtor who
withdraws funds from a retirement account and does not
deposit the funds into another retirement account within
sixty days loses the exemption pursuant to Texas law.
However, the parties direct us to this court's case law
regarding Texas homesteads. Indeed, there are clear parallels
between the Texas statutes governing retirement accounts and
those governing homesteads. Texas Property Code §
[A] person's right to the assets held in . . . an
individual retirement account . . . is exempt from
attachment, execution, and seizure for the satisfaction of
debts to the extent the . . . account is exempt from federal
income tax, or to the extent federal income tax on the