*

Honorable John F. Nangle, Senior U.S. District Judge for

the Eastern District of Missouri, sitting by designation. 

United States Court of Appeals, Eleventh Circuit.

No. 95-8347.

In re Virginia Ann MEEHAN, Debtor.

Virginia Ann MEEHAN, Plaintiff-Appellant,

v.

A. Stephenson WALLACE, Chapter 7 Trustee, Defendant-Appellee.

Jan. 8, 1997.

Appeal from the United States District Court for the Southern

District of Georgia. (No. 93-10463), John S. Dalis, Judge; (No.

CV194-027), Dudley H. Bowen, Jr., Judge..

Before TJOFLAT and ANDERSON, Circuit Judges, and NANGLE*

, Senior

District Judge.

ANDERSON, Circuit Judge:

Appellant Virginia Ann Meehan is a Chapter 7 debtor. The

contested property is debtor's individual retirement account (IRA),

which debtor claims is excluded from property of the estate under

11 U.S.C.A. § 541(c)(2). Both the bankruptcy court and the

district court rejected debtor's argument and held that the IRA was

included in her bankruptcy estate. We hold that debtor's IRA is

excluded from the estate under 11 U.S.C.A. § 541(c)(2) because of

the restriction on its transferability. Accordingly, we reverse.

I. FACTS

The facts are not in dispute. Debtor Virginia Ann Meehan

filed for relief under Chapter 7 of the Bankruptcy Code on March

25, 1993, as a result of $125,000 of unsecured debt incurred from

her ownership and operation of a children's store. Included in

debtor's schedules was an IRA, which was opened in 1983 and valued
 1

"An IRA ... is defined as a personal tax deferred,

retirement account which an employed person can establish under

specified deposit limits for individuals and married couples. 

Withdrawals may be made from an IRA prior to age 591/2 but such

withdrawals are subject to a ten percent penalty tax. An IRA is

neither established nor maintained by an employer or employee

organization. Instead, an IRA is maintained by an individual

pursuant to the restrictions contained in 26 U.S.C. § 408." In

re Herbert, 140 B.R. 174, 176 (Bankr.N.D.Ohio 1992). 

at $20,954.47. The parties stipulated that debtor's IRA was one

defined by § 408 of the Internal Revenue Code [Title 26 of the

United States Code].1

II. DISCUSSION

A. Standard of Review

 The sole question at issue in this case is whether 11

U.S.C.A. § 541(c)(2) excludes from the property of a bankruptcy

estate an IRA which is subject to a restriction on transfer by a

state statute. The proper construction of the Bankruptcy Code,

whether by the bankruptcy court or by the district court, is a

matter of law. Accordingly, we subject such interpretations to de

novo review. In re Haas, 48 F.3d 1153, 1155 (11th Cir.1995).

B. Analysis

 Property of a bankruptcy estate includes "all legal and

equitable interests of the debtor in property as of the

commencement of the case." 11 U.S.C.A. § 541(a)(1). The scope of

§ 541(a)(1) is broad, and includes property of all types, tangible

and intangible, as well as causes of actions. United States v.

Whiting Pools, Inc., 462 U.S. 198, 205 & n. 9, 103 S.Ct. 2309, 2313

& n. 9, 76 L.Ed.2d 515 (1983).

 Debtor argues that her IRA is excluded from the bankruptcy

estate pursuant to 11 U.S.C.A. § 541(c)(2), which provides:
 2

Other restrictions or conditions on transfer do not result

in exclusion from the bankruptcy estate. 11 U.S.C.A. §

541(c)(1). 

 3Appellee also argues that the IRA should be included in the

estate because the nonbankruptcy law restricting its transfer,

O.C.G.A. § 18-4-22(a), is invalidated by 11 U.S.C.A. §

541(c)(1)(A). Section 541(c)(1)(A), in pertinent part, states

the following:

Except as provided in paragraph (2) of this subsection,

an interest of the debtor in property becomes property

of the estate ... notwithstanding any provision in an

agreement, transfer instrument, or applicable

nonbankruptcy law— ... that restricts or conditions

transfer of such interest by the debtor.

We disagree with appellee's interpretation of §

541(c)(1)(A). Section 541(c)(1)(A) says expressly,

"[e]xcept as provided in (c)(2)," and (c)(2) excludes a

beneficial interest in a trust if the trust is subject to a

A restriction on the transfer of a beneficial interest of the

debtor in a trust that is enforceable under applicable

nonbankruptcy law is enforceable in a case under this title.2

Debtor argues that her IRA should be excluded from the estate

under § 541(c)(2) because O.C.G.A. § 18-4-22(a) imposes a

restriction on transfer by garnishment. Section 18-4-22(a)

provides in relevant part:

Funds or benefits from an individual retirement account as

defined in Section 408 of the United States Internal Revenue

Code of 1983, as amended, [are] exempt from the process of

garnishment until paid or otherwise transferred to a member of

such program or beneficiary thereof.

Appellee, the bankruptcy trustee, sets forth two reasons why

debtor's IRA should not qualify for the § 541(c)(2) exclusion:

first, because the transfer restriction is contained only in the

Georgia statute and is not contained within the IRA document

itself; and second, because debtor Meehan had access to the IRA

funds for personal use and the restriction was applicable only to

creditors.3
restriction on transfer (such as O.C.G.A. § 18-4-22(a))

enforceable under nonbankruptcy law. 

In rejecting Meehan's claim for exclusion of the property,

both the bankruptcy court and the district court relied in part on

the fact that the restriction on transfer was contained only within

the Georgia statute; the courts below found it significant that

the IRA document itself contained no restriction on transfer. Both

the district court and the bankruptcy court relied on dicta in

Patterson v. Shumate, 504 U.S. 753, 112 S.Ct. 2242, 119 L.Ed.2d 519

(1992), which suggests that IRAs ordinarily will not qualify for

exclusion under § 541(c)(2) because such plans usually lack

transfer restrictions enforceable under applicable nonbankruptcy

law. Read by itself, the dicta would provide some support for the

interpretation of the courts below. However, read within its

context, it is clear that the Court was commenting upon the fact

that IRAs are not subject to the ERISA-mandated anti-alienation

provision, (i.e. federal law does not mandate that IRAs contain

such clauses). Thus, the Court was commenting on the fact that IRA

documents typically would not contain transfer restrictions. It is

clear from the context of the Shumate dicta that the Court was not

addressing the very different factual situation of this case—i.e.,

where state law provides a restriction on the transferability of

the IRA.

We conclude that § 541(c)(2) exclusion is not lost merely

because the IRA document itself does not contain the restriction,

it being contained instead in the Georgia statute. Our conclusion

is supported by the plain meaning of the language of § 541(c)(2),
 4

Apparently only beneficial interests in trusts qualify for

the § 541(c)(2) exclusion. 11 U.S.C.A. § 541(c)(2) (referring to

"[a] restriction on the transfer of a beneficial interest of the

debtor in a trust"). No argument is made that Meehan's IRA is

not a trust. Moreover, by definition, an IRA is a trust. 26

U.S.C.A. § 408(a) ("the term "individual retirement account'

means a trust ..."). 

 5

The district court thought that the language of § 541(c)(2)

suggested that the restriction must be found in the trust

document itself in order to avoid an "implausible ... empty

duplication." In re Meehan, 173 B.R. 818, 821 (S.D.Ga.1994). 

Explaining, the district court said:

Filling in the blanks as required by Meehan's proposed

application of § 541(c)(2) to her IRA yields a

meaningless tautology: "[a] restriction [in O.C.G.A. §

18-4-22(a) ] ... that is enforceable under [O.C.G.A. §

18-4-22(a) ] ... is enforceable in a case under this

title."

In other words, the district court substituted the reference

to the Georgia statute in lieu of the shaded portion of §

541(c)(2) as follows:

A restriction on the transfer of beneficial interest of

the debtor in a trust that is enforceable under

applicable nonbankruptcy law is enforceable in a case

under this title.

The problem with the district court's construction is that

it assumes that the phrase "in a trust" modifies the word

"restriction." Rather, we believe that the phrase "in a

trust" modifies the immediately preceding phrase "beneficial

interest of the debtor." With this more natural reading of

the language of the statute, so that the phrase "in a trust"

means only that the statute is talking about a beneficial

interest in a trust, the district court's implausible

duplication disappears. Accord In re Yuhas, 186 B.R. 381,

385 (Bankr.D.N.J.1995). 

which requires only that the restriction be "enforceable under

applicable nonbankruptcy law."4 Nothing in the language of the

statute suggests that the restriction must be contained both within

a relevant nonbankruptcy statute and also within the trust

instrument itself.5 Section 18-4-22(a) of the Official Code of

Georgia Annotated clearly constitutes "applicable nonbankruptcy
 6

In re Solomon, 67 F.3d 1128 (4th Cir.1995), is not to the

contrary. Although in the Chapter 13 context Solomon did say

that an IRA would be part of the bankruptcy estate, the Fourth

Circuit did not address the possible applicability of § 541(c)(2)

to exclude the IRA. 

law." In order for the restriction in § 18-4-22(a) to be

enforceable, nothing in Georgia law requires that the restriction

be repeated in any IRA document. Common sense also supports our

interpretation; a restriction is no less enforceable because it is

located in the statute rather than in the document.

In addition to the plain meaning of § 541(c)(2) and common

sense, we believe our conclusion is supported by the case law. In

Whetzal v. Alderson, 32 F.3d 1302 (8th Cir.1994), the Eighth

Circuit held that a debtor's interest in his civil service

retirement benefits was excluded from his bankruptcy estate under

§ 541(c)(2) because of the statutory restriction on alienation

contained in 5 U.S.C. § 8346(a). As in this case, the restriction

on transfer was contained in the statute, as neither the Whetzal

opinion nor the statute indicate that there would be a plan

document.6

 See also In re Yuhas, 186 B.R. 381 (Bankr.D.N.J.1995)

(where an IRA which did not contain a provision restricting

creditor access to funds was nevertheless excluded from the

bankruptcy estate under § 541(c)(2) because a state statute

restricting access constituted "applicable non-bankruptcy law").

 The appellee-trustee also argues that debtor Meehan's IRA

cannot be excluded from her bankruptcy estate because she could

withdraw the corpus of the trust and incur only a 10% penalty tax.

The district court perceived an inequity in allowing debtors to

shield IRA funds from creditors notwithstanding the debtors'
 7

Before Shumate, the Ninth, Eleventh, Eighth and Fifth

Circuits interpreted "applicable nonbankruptcy law" to include

only state spendthrift trust law. Daniel v. Security Pacific

Nat'l Bank (In re Daniel), 771 F.2d 1352 (9th Cir.1985), cert.

denied, 475 U.S. 1016, 106 S.Ct. 1199, 89 L.Ed.2d 313 (1986); 

Lichstrahl v. Bankers Trust (In re Lichstrahl), 750 F.2d 1488

(11th Cir.1985); Samore v. Graham (In re Graham), 726 F.2d 1268

(8th Cir.1984); Goff v. Taylor (In re Goff), 706 F.2d 574 (5th

Cir.1983). In contrast, the Tenth, Third, Sixth and Fourth

circuits did not limit § 541(c)(2) to state spendthrift trust

law. Gladwell v. Harline (In re Harline), 950 F.2d 669 (10th

Cir.1991), cert. denied, 505 U.S. 1204, 112 S.Ct. 2991, 120

L.Ed.2d 869 (1992); Velis v. Kardanis, 949 F.2d 78 (3d

Cir.1991); Forbes v. Lucas (In re Lucas), 924 F.2d 597 (6th

Cir.), cert. denied, 500 U.S. 959, 111 S.Ct. 2275, 114 L.Ed.2d

726 (1991); Moore v. Rain (In re Moore), 907 F.2d 1476 (4th

Cir.1990). 

ability to withdraw the corpus for personal use. In addition to

the district court, bankruptcy courts have relied on this factor.

See In re Van Nostrand, 183 B.R. 82, 85 (Bankr.D.N.J.1995); In re

Harless, 187 B.R. 719, 726 (Bankr.N.D.Ala.1995). Although we

recognize the force of the trustee's argument, we conclude that the

case law indicates otherwise.

The Supreme Court in Patterson v. Shumate, 504 U.S. 753, 112

S.Ct. 2242, 119 L.Ed.2d 519 (1992), resolved a split among the

circuits regarding whether the phrase "applicable nonbankruptcy

law" referred to in § 541(c)(2) was limited only to state

spendthrift trust law or instead encompassed federal law as well.7

The Court rejected those pre-Shumate cases which had limited the §

541(c)(2) exclusion to state spendthrift trust law. Shumate, 504

U.S. at 761 & n. 4, 112 S.Ct. at 2248 & n. 4. The pre- Shumate

cases had declined to apply the § 541(c)(2) exclusion to ERISA

plans because plan beneficiaries have a greater ability to access

plan funds than beneficiaries of spendthrift trusts. See e.g., In

re Goff, 706 F.2d at 587; In re Lichstrahl, 750 F.2d at 1490.
 8

The caption of the Shumate case in the district court was

Creasy v. Coleman Furniture Corp. 

 9The pension plan satisfied the applicable ERISA

requirements, and qualified for favorable tax treatment under the

Internal Revenue Code (I.R.C.). See ERISA, § 201(d)(1), 29

U.S.C.A. § 1056(d) (requiring that "[e]ach pension plan shall

provide that benefits provided under the plan may not be assigned

or alienated"); I.R.C., 26 U.S.C.A. § 401(a)(13)(A)

(conditioning qualification under ERISA and thus exemption from

taxation on the non-transferability of pension benefits: "[a]

trust shall not constitute a qualified trust under this section

unless the plan of which trust is a part provides that benefits

provided under the plan may not be assigned or alienated"). 

In deciding whether the ERISA plan in which Shumate

participated was excluded from the estate under § 541(c)(2), the

district court in Shumate relied on the pre-Shumate cases which

narrowly interpreted § 541(c)(2). Creasy v. Coleman Furniture

Corp., 83 B.R. 404, 406-08 (W.D.Va.1988).8 The district court thus

inquired into whether the pension plan at issue, which satisfied

the applicable requirements for ERISA,9 qualified as a state

spendthrift trust. Creasy, 83 B.R. at 407-09. The crux of the

district court's inquiry focused on the degree of dominion and

control which Shumate exercised over the pension plan. Creasy, 83

B.R. at 408-09 (citing In re Lichstrahl, 750 F.2d at 1490; In re

Goff, 706 F.2d at 588). Shumate controlled 96% of the voting stock

of the plan sponsor, and therefore had the power to terminate the

plan and receive his interest in a lump sum. The district court

concluded: "Shumate exercised such power over the ... pension

trust that he could control it to suit his needs." Creasy, 83 B.R.

at 408. As a result of Shumate's extensive control over the plan,

the district court found that the plan was "inconsistent with the

notion of spendthrift trusts," and held that it was not covered by
§ 541(c)(2). Id.

The Fourth Circuit reversed the district court's holding in

light of In re Moore, 907 F.2d 1476 (4th Cir.1990), which held that

"applicable nonbankruptcy law" includes the law of ERISA. Shumate

v. Patterson, 943 F.2d 362, 363 (4th Cir.1991). The Fourth Circuit

stated that the district court's "focus on state spendthrift trust

law, which looks to the reality behind the non-alienation

provision, is misplaced." Id. at 364. The Fourth Circuit

explained that because "ERISA requires a plan to have a

non-alienation provision, ... [n]o more inquiry need be made to

determine whether the trust is controlled by the settlor or the

beneficiary, or whether they are the same person." Id.

The Supreme Court affirmed the Fourth Circuit, holding that

the phrase "applicable nonbankruptcy law" contained in § 541(c)(2)

is not limited to state law. 504 U.S. at 758, 112 S.Ct. at 2246.

The Court then determined that the "anti-alienation provision

contained in the ERISA qualified plan at issue satisfie[d] the

literal terms of § 541(c)(2)." 504 U.S. at 759, 112 S.Ct. at 2247.

While the Court did not expressly address the control analysis upon

which the district court so heavily relied, it did so implicitly in

rejecting the argument that § 541(c)(2) exclusion should be limited

to spendthrift trusts. 504 U.S. at 761-62, 112 S.Ct. at 2248.

Significantly, because the facts of the case involved extensive

control by Shumate, the Supreme Court's holding necessarily means

that such control does not bar exclusion pursuant to § 541(c)(2).

Our analysis is supported by both the Ninth and Eighth

Circuits. In In re Conner, 73 F.3d 258 (9th Cir.), cert. denied,
--- U.S. ----, 117 S.Ct. 68, 136 L.Ed.2d 29 (1996), the Ninth

Circuit construed Shumate as apparently discounting the

significance of a debtor's control over the assets of the plan. 73

F.3d at 260 (9th Cir.1996); accord In re Rueter, 11 F.3d 850 (9th

Cir.1993). The fact that the debtor could have withdrawn his plan

benefits did not prevent the court from excluding the plan under §

541(c)(2). In re Conner, 73 F.3d at 260. In Whetzal, the Eighth

Circuit rejected the trustee's argument that the debtor's option to

withdraw the Civil Service retirement benefits in a lump sum should

make the § 541(c)(2) exclusion inapplicable. 32 F.3d 1302. The

court relied upon Shumate and its emphasis on the important

congressional policy of protecting pension benefits. Id. at 1304.

In light of the foregoing precedent, and in light of the

congressional concern about protecting pension benefits as

recognized by the Supreme Court in Shumate, we conclude that debtor

Meehan's potential access to the IRA funds is not sufficient to

deprive her of the § 541(c)(2) exclusion.

III. CONCLUSION

Because debtor's IRA is subject to a statutory restriction, it

is excluded from the estate under § 541(c)(2). Accordingly, the

judgment of the district court is reversed, and the case is

remanded so that the district court may reverse the order of the

bankruptcy court.

REVERSED and REMANDED.