In re: JOSE L. GARCIA-MORALES
- Summarized by Jonathan Batiste , Rensselaer Polytechnic Institute
- 6 months 10 hours ago
- Case Type:
- Consumer
- Case Status:
- Affirmed
- Citation:
- No. 24-1384 (10th Circuit, Aug 19,2025) Published
- Tag(s):
-
- Ruling:
- The circuit court affirmed the district court’s decision affirming the bankruptcy court’s denial of Appellant’s motion to compel turnover of Debtor’s federal income tax refund. “Attributed to” means some degree of causation under Colorado law, and the “but-for” test applies. The Colorado Legislature did not intend for a pro-rata method to be used for determining causation. Exemption statutes must be liberally construed in Colorado. Debtor’s refund, stemming from a refundable child tax credit, was wholly exempt under Colorado law. The lower courts did not err in their decisions.
- Procedural context:
- Debtor filed for chapter 7 bankruptcy. Debtor and the trustee agreed that Debtor would turn over any tax refunds to the trustee, who would then return any exempt portion to Debtor. The bankruptcy court approved the agreement. The trustee moved to compel turnover of non-exempt portions of a tax refund Debtor received post-petition; Debtor claimed that 100 percent of the refund was exempt. The bankruptcy court denied the trustee’s motion, and the trustee appealed to the district court. The district court affirmed the bankruptcy court’s decision, and the trustee appealed to the circuit court.
- Facts:
- Jose L. Garcia Morales (“Debtor”) petitioned for chapter 7 bankruptcy in 2021. Debtor listed his 2021 tax returns payable in 2022 in his schedule of assets; however, he maintained that such refunds would be exempt and valueless to creditors. Debtor filed joint tax returns with his spouse, but his spouse did not join the petition for bankruptcy. Debtor was entitled to a $1,455 federal income tax refund. Debtor and trustee agreed that Debtor would turn over any tax refunds to the trustee and keep the non-exempt portion of the refunds. The trustee moved to compel turnover of the non-exempt portion of the tax refunds when they were received. However, the bankruptcy court denied the motion after concluding that the refund was 100 percent exempt under Colorado law. The court found the refund to be exempt because it was caused by a refundable child tax credit. The trustee appealed, and the district court affirmed the bankruptcy court’s decision. The trustee then appealed again to the circuit court. When applying Colorado law, the circuit court recognized that the Colorado Supreme Court had not interpreted the meaning of “attributed to” in the context of the tax exemption statute. The court looked at the statute’s plain meaning and determined that “but-for” causation was applicable. The Colorado Legislature could have specified the use of a pro-rata method in the statute, but it did not do so. The court found that exemption statutes must be liberally construed in Colorado.
- Judge(s):
- Bacharach, Phillips, and Federico
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