Lawless v. Newton, Jr (In re Lawless)
- Summarized by Dean Langdon , DelCotto Law Group PLLC
- 8 years 3 months ago
- Citation:
- File name 14a0928n.06; Docket No. 14-5290
- Tag(s):
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- Ruling:
- The Sixth Circuit affirmed the Bankruptcy Court for the Eastern District of Tennessee, which held that because the debtor could elect to take a lump sum distribution of his retirement funds, it was excluded from the Tennessee statute which exempted such funds and constituted property of the debtor's bankruptcy estate. The decision was not recommended for publication.
- Procedural context:
- Mr. Lawless' trustee objected to his claimed exemption of retirement funds. The bankruptcy court sustained the objection, which was affirmed on appeal to the district court. Mr. Lawless appealed to the Sixth Circuit, which also affirmed the ruling of the bankruptcy court.
- Facts:
- Mr. Lawless was an insurance agent at Nationwide Insurance with more than 30 years of service. Since 1986, he participated in Nationwide's Agent Security Compensation Plan (the "Plan"), a non-qualified deferred-compensation plan. After filing bankruptcy in late 2010, the trustee objected to Mr. Lawless' claimed exemption in the Plan under Tenn. Code. Ann. Sec 26-2-112. That statute exempts retirement plans, but excludes plans if a debtor has the option to receive a lump-sum payment or periodic payments over less than 60 months. Although Mr. Lawless had not elected a lump-sum payment, a 2009 amendment to the Plan provided the option to change how funds would be paid. Mr. Lawless also argued that Section 409A of the Internal Revenue Code caused the Plan to fall under the Tennessee statute because for assets accrued after 2004, it requires 12 month's advance notice of a change in distribution, and requires that distribution be delayed for 5 years. The Sixth Circuit held that while Section 409A may affect the timing of a distribution, it did not change the plain language of the Tennessee statute, which excluded a lump-sum distribution, regardless of when it was made.
- Judge(s):
- Siler, Sutton and McKeague; opinion by McKeague
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