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Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 

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PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT FILED _____________ _.U=nited Stares Court of Appeals Tenth Circuit 

In re: LAWRENCE DOUGLAS KULP ) 

and DEBRA LYNN KULP, ) 

) 

Debtors. ) 

LAWRENCE DOUGLAS KULP, DEBRA 

LYNN KULP, 

Plaintiffs-Appellants, 

NOV 2 7 1991 

ROBERT L. HOECKER 

Clerk 

) 

) 

) 

) 

) 

) 

) 

No. 90-1190 

vs. 

SALLY J. ZEMAN, Chapter 13 ) 

trustee, RESOLUTION TRUST ) 

CORPORATION, as Receiver for ) 

Mesa Federal Savings and Loan) 

Association of Colorado, · ) 

Defendants-Appellees. 

) 

) 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF COLORADO 

(D.C. No. 90-Z-515) 

(Bankr. C. No. 89-B-1379-A) 

Submitted on the briefs:* 

Milnor H. Senior, III, Robert I. Cohen, Michael John Vos, of 

Senior and Cohen, P.C., Denver, Colorado, for 

Plaintiffs-Appellants. 

Stephanie Rowe, Sally J. Zeman, Standing Chapter 13 Trustee, 

District of Colorado, Donald E. Jordan, John P. Gormley, of 

Williams, Turner & Holmes, Grand Junction, Colorado, for 

Defendants-Appellees. 

* The parties agree that oral argument is unnecessary and that 

the case may be submitted on the briefs. Fed. R. App. P. 34(f); 

10th Cir. R. 34.1.2. The case therefore is ordered submitted 

without oral argument. 

Appellate Case: 90-1190 Document: 010110097015 Date Filed: 11/27/1991 Page: 1 
Before ANDERSON and BALDOCK, Circuit Judges, and SAM, District 

Judge.** 

BALDOCK, Circuit Judge. 

Plaintiffs-appellants (debtors) Lawrence and Debra Kulp filed 

for Chapter 13 bankruptcy protection. Defendants-appellees, a 

creditor and the bankruptcy trustee, objected to debtors' Chapter 

13 plan, contending that it inappropriately exempted the entire 

balance of debtors' individual retirement accounts (IRA's) from 

the bankruptcy estate. The bankruptcy court agreed with the 

defendants and refused to confirm the plan. Debtors appeal from 

the district court judgment which affirmed the bankruptcy court 

order. We reverse the judgment and remand to the district court 

for proceedings consistent with this opinion. 

Under the Bankruptcy Code, virtually all property in which 

the debtor has a legal or equitable interest at the commencement 

of the case is included in the bankruptcy estate. See 11 u.s.c. 

§ 541(a)(l). 1 However, debtors may exempt certain properties from 

the estate. 11 u.s.c. § 522(b). Section 522 provides a list of 

exemptions, but grants States the authority to "opt out" of the 

federal list. In States that have "opted out, 11 debtors are 

permitted to exempt only 11 property that is exempt 

under . state or local law .. II § 522(b)(2)(A). Colorado 

** Honorable David Sam, United States District Judge for the 

District of Utah, sitting by designation. 

1 The parties apparently agree that the IRA's should be 

included in the estate pursuant to§ 541(a)(l). 

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Appellate Case: 90-1190 Document: 010110097015 Date Filed: 11/27/1991 Page: 2 
has opted out of the federal exemption list. See Colo. Rev. Stat. 

Ann. S 13-54-107 (West 1987). Because debtors filed in Colorado, 

the Colorado exemption statute is at issue. See Colo. Rev. Stat. 

S 13-54-104 (West 1987 & Supp. 1990). We review de !1QYQ the 

bankruptcy and district courts' legal interpretation of the 

relevant Colorado statutes. See In re Mullet, 817 F.2d 677, 679 

(10th Cir. 1987). 

Colorado exempts seventy-five percent of certain types of 

"earnings" from garnishment or levy, see§ 13-54-104(2)(a), and 

defines "earnings" as follows: 

(l)(b) "Earnings" means compensation paid or payable for 

personal services, whether denominated as ..• avails 

of any pension or retirement benefits, or a deferred 

compensation plan ... or otherwise. 

(1.1) For purposes of this section and only for the 

purpose of claiming an exemption in bankruptcy. "avails 

of any pension or retirement benefits or deferred 

compensation plan" means profits or proceeds in any 

pension or retirement plan, including those in which the 

debtor has received benefits or payments or has the 

present right to receive benefits or payments or has the 

right to receive benefits or payments in the future and 

including ••. avails of any individual retirement 

account, as defined in 26 u.s.c. 408 ...• 

§ 13-54-104 (emphasis supplied). As is evident from the quoted 

language, the statute establishes a bankruptcy exemption for 

pension or retirement benefits including IRA's. At issue in this 

case is the district court's interpretation of the "avails of an 

individual retirement account." The district court, relying on an 

unpublished district court order, held that the "avails" of an IRA 

account include only the accumulated interest in the account and 

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Appellate Case: 90-1190 Document: 010110097015 Date Filed: 11/27/1991 Page: 3 
not the account "corpus." Under this interpretation, the debtors 

would be allowed to exempt seventy-five percent of the accumulated 

interest in the account but none of the corpus. Because debtors' 

Chapter 13 plan exempted seventy-five percent of the entire IRA 

balance, the district court affirmed the bankruptcy court's order 

refusing to confirm the plan. 

As with any question of statutory interpretation, we begin 

with the words chosen by the legislature. The statute defines 

"avails" as "profits or proceeds." Defendants point to Black's 

Law Dictionary (5th ed. 1979), which defines "profits" as "the 

gross proceeds of a business transaction less the costs of the 

transaction; i.e. net proceeds." Id. at 1090. It defines 

"proceeds" as "[i]ssues; income; yield; receipts; produce; money 

or articles or other thing of value arising or obtained by the 

sale of property; the sum, amount, or value of property sold or 

converted into money or into other property." Id. at 1084. 

Defendants contend that both of these terms, "profits" and 

"proceeds," refer only to the interest earned on an investment and 

not the investment corpus. 

Defendants interpretation of "avails" and "profits" and 

"proceeds" strikes us as contrived. It twists the statute and the 

well-established meanings of the words involved. For example, 

Black's Law Dictionary, in defining "avails," tracks the statute 

with the terms "profits" and "proceeds" and then refers expressly 

to "the corpus or proceeds" of ·an estate after payment of debts. 

Id. 171 (4th ed. 1951). See also Ballentine's Law Dictionary 114 

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Appellate Case: 90-1190 Document: 010110097015 Date Filed: 11/27/1991 Page: 4 
'\ 

(3d ed. 1969) (Avails are "[t]he proceeds of the sale of 

property."). In spite of the bankruptcy court authority to the 

contrary,~ In re Toner, 105 B.R. 978, 984 (Bankr. D. Colo. 

1989), we see no supportable reason for limiting this wording to 

the accumulated interest in an IRA account. 

If the Colorado legislature had intended to limit the 

exemption to the accumulated interest in the IRA account or other 

retirement investment, it easily could have drafted the statute as 

such without reliance on the word "avails." Notwithstanding the 

clear meaning of "avails," however, the defendants argue that the 

term refers only to accumulated interest income because the 

bankruptcy exemption was codified under Colo. Rev. Stat. 

S 13-54-104 rather than§ 102. Section 104 addresses exempt 

"earnings" whereas S 102 addresses exempt "property." And the 

term "earnings," defendants argue, clearly indicates accumulated 

interest rather than corpus. The statement of purpose attached to 

the Colorado Senate version of the bill belies defendants' 

argument: 

The definition of "earnings" in section 13-54-104(1) 

serves two purposes: 1) it is used in calculating how 

much income can be garnished to pay a judgment creditor 

and 2) it is used by debtors to claim property exempt in 

a bankruptcy proceeding .... 

The purpose of the bill was to allow a debtor in 

bankruptcy to claim an exemption for ERISA plans, IRA 

accounts, KEOGH plans, and any kind of pension or plan 

in which the debtor has received payments or has a 

present or future right to receive payments. 

Senate Committee of Reference Report, Committee on Business 

Affairs and Labor, Explanation of amendment to H.B. 1237 (1988) 

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Appellate Case: 90-1190 Document: 010110097015 Date Filed: 11/27/1991 Page: 5 
(emphasis supplied). A plain reading of this statement of purpose 

indicates that the legislature intended to subject the entire 

"account," corpus and interest, to the seventy-five percent 

bankruptcy exemption. 

Our interpretation is consistent with the Colorado 

Constitution, art. XVIII,§ 1, which requires that exemption 

statutes be interpreted liberally. See Frank v. First Nat'l Bank, 

653 P.2d 748 (Colo. App. 1982); In re Ferguson, 15 B.R. 439 

(Bankr. D. Colo. 1981); In re Alvarez, 14 B.R. 940 (Bankr. D. 

Colo. 1981). In any event, defendants' interpretation is 

illogical; it leaves no protection for the interest because the 

corpus that creates the interest is nonexempt. See Schlosser, 

Exempting Retirement Benefits From Bankruptcy in Colorado, 18 

Colo. Law. 17, 20 (1989). 2 In other words, it kills the goose 

which lays the golden eggs. 

We hold that the debtors are permitted under the Bankruptcy 

Code and the relevant Colorado law to exempt seventy-five percent 

2 We find this authority persuasive given that the author, 

Chuck Schlosser, testified before both houses of the Colorado 

legislature at the behest of the sponsor of the bill which amended 

Colo. Rev. Stat.§ 13-54-104 to.include IRA's. The author argues 

that the legislative history and language of the bill clearly 

indicate that the provision is intended to cover the entire 

account balance. 

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Appellate Case: 90-1190 Document: 010110097015 Date Filed: 11/27/1991 Page: 6 
I f \ '~ 

of the entire balance of their IRA's from the bankruptcy estate. 

Accordingly, we REVERSE the judgment and REMAND the case to the 

district court with instructions to remand the case to the 

bankruptcy court for proceedings consistent with this opinion. 3 

3 Defendants, citing In re Mata, 115 B.R. 288 (Bankr. D. Colo. 

1990), and In re Lennen, 71 B.R. 80 (Bankr. N.D. Cal. 1987), argue 

in the alternative that Colo. Rev. Stat.§ 13-54-104 violates the 

constitution's uniformity requirement for bankruptcy laws because 

it creates a bankruptcy exemption which is not available to other 

Colorado debtors. U.S. Const. art. I,§ 8; Hanover National Bank 

v. Moyses, 186 U.S. 181 (1902) (geographical uniformity required 

in bankruptcy laws). This argument is meritless. The In re Mata 

and In re Lennen cases confuse the geographical uniformity 

doctrine with the well-established principle that states may pass 

laws which do not conflict with the federal scheme. See In re 

Shumaker, 124 B.R. 820, 825-26 (Bankr. D. Mont. 1991) (citing 

Sturges v. Crowninshield, 17 U.S. 122 (1819) and Matter of 

Sullivan, 680 F.2d 1131 (7th Cir.), cert. denied, 459 U.S. 992 

(1982)). In this case, we have no conflict because 11 u.s.c. 

§ 522 expressly delegates to states the power to create bankruptcy 

exemptions. 

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Appellate Case: 90-1190 Document: 010110097015 Date Filed: 11/27/1991 Page: 7