- Case Type:
- Consumer
- Case Status:
- Affirmed
- Citation:
- No. 24-1384 (10th Circuit, Aug 19,2025) Published
- Tag(s):
-
- Ruling:
- The US Court of Appeals for the Tenth Circuit upheld lower court rulings that no portion of Jose Garcia-Morales’ $1,455 federal income tax refund, which was based on a refundable child tax credit, needs to be turned over to the trustee in his Chapter 7 bankruptcy.
- Procedural context:
- The debtor claimed an $1,800 Child Tax Credit refund for the 2021 tax year (receiving a total refund of $1,455) pursuant to Colo. Rev. Stat. § 13-54-102(1)(o), which provides an exception for an income tax refund “attributed to” an earned income tax credit or child tax credit.
Both the district and bankruptcy courts determined that Colorado law clearly established the full exemption, even in the case of a Chapter 7 bankruptcy, where an individual’s assets are liquidated and the proceeds distributed to creditors.
Robertson B. Cohen, the chapter 7 trustee, appealed and argued for a pro-rata approach, where if a tax refund is attributed to both refundable child tax credits and wage withholdings, courts must determine what percentage of the refund should be attributed to each source.
(D.C. No. 1:23-CV-02178-PAB Both the district and bankruptcy courts d
The trustee, Robertson Cohen, appealed and argued for a pro-rata approach, where if a tax refund is attributed to both refundable child tax credits and wage withholdings, courts must determine what percentage of the refund should be attributed to each source. But this interpretation of the statute “would needlessly convolute the best interpretation of this language,” Federico said.
- Facts:
- The debtor claimed an $1,800 Child Tax Credit refund for the 2021 tax year (receiving a total refund of $1,455) pursuant to Colo. Rev. Stat. § 13-54-102(1)(o), which provides an exception for an income tax refund “attributed to” an earned income tax credit or child tax credit.
Both the district and bankruptcy courts determined that Colorado law clearly established the full exemption, even in the case of a Chapter 7 bankruptcy, where an individual’s assets are liquidated and the proceeds distributed to creditors.
Robertson B. Cohen, the chapter 7 trustee, appealed and argued for a pro-rata approach, where if a tax refund is attributed to both refundable child tax credits and wage withholdings, courts must determine what percentage of the refund should be attributed to each source.
However, the 10th circuit disagreed, holding that the trustee's proposed reading, would needlessly convolute the best interpretation of this language. "Nothing in the statutory language suggests that we should use a pro-rata method. Indeed, the Colorado Legislature couched the phrase “full amount” to describe the refund, which suggests the very opposite of a pro-rata method. See Colo. Rev. Stat. §13-54-102(1)(o) (2021) (providing an exemption for “[t]he full amount of any federal or state income tax refund attributed to an earned income tax credit or a child tax credit” (emphases added)).
- Judge(s):
- Federico, Richard E.N.
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