               United States Court of Appeals
                          For the Eighth Circuit
                      ___________________________

                              No. 18-3415
                      ___________________________

                           In re: Brian A. Lerbakken

                             lllllllllllllllllllllDebtor

                           ------------------------------

                              Brian A. Lerbakken

                            lllllllllllllllllllllAppellant

                                         v.

                          Sieloff and Associates, P.A.

                            lllllllllllllllllllllAppellee

                           ------------------------------

National Consumer Bankruptcy Rights Center; National Association of Consumer
                           Bankruptcy Attorneys

                lllllllllllllllllllllAmici on Behalf of Appellant(s)
                                      ____________

                  Appeal from the United States Bankruptcy
                    Appellate Panel for the Eighth Circuit
                               ____________
                           Submitted: November 14, 2019
                              Filed: February 7, 2020
                                  ____________

Before COLLOTON, WOLLMAN, and BENTON, Circuit Judges.
                        ____________

BENTON, Circuit Judge.

       A state court awarded Brian A. Lerbakken part of his ex-wife’s Individual
Retirement Account and her 401(k) in a dissolution decree. Lerbakken filed for
bankruptcy, claiming that his interests in the IRA and 401(k) are exempt as
“retirement funds.” Sieloff & Associates, P.A., a creditor, objected to the exemptions.
The bankruptcy court disallowed them, ruling that Lerbakken’s interests in the IRA
and 401(k) are not retirement funds. In re Lerbakken, Order, BKY 18-50037 (Bankr.
D. Minn. May 15, 2018). Lerbakken appealed to the Bankruptcy Appellate Panel,
which affirmed. Lerbakken v. Sieloff & Assoc., P.A. (In re Lerbakken), 590 B.R.
895, 897-98 (B.A.P. 8th Cir. 2018). Lerbakken appeals the BAP’s judgment. Having
jurisdiction under 28 U.S.C. § 158(d)(1), this court affirms.

                                          I.

      Sieloff represented Lerbakken in his dissolution in Minnesota. The court’s
decree awarded Lerbakken all of his ex-wife’s IRA and half of her 401(k). The court
ordered Lerbakken to submit a Qualified Domestic Relations Order (QDRO).
Lerbakken refused, which leaves him with only a domestic relations order.

      Two months after the decree, the court ordered an attorney’s lien against
Lerbakken for Sieloff’s legal services. The court expressly permitted Sieloff to
recover the unpaid fees from Lerbakken’s interests in his ex-wife’s IRA and 401(k).
The unpaid fees exceed the total of Lerbakken’s interests.


                                         -2-
       Six months after the decree, Lerbakken filed for bankruptcy under Chapter 7,
claiming that his interests in the IRA and 401(k) are exempt from the bankruptcy
estate as “retirement funds” under 11 U.S.C. § 522(b)(3)(C). Sieloff, a scheduled
creditor, objected to the exemptions.

       The bankruptcy court1 disallowed the exemptions. It ruled that Lerbakken’s
interests in his ex-wife’s IRA and 401(k) are not “retirement funds.” The Bankruptcy
Appellate Panel (BAP) affirmed.2 It ruled, relying on Clark v. Rameker, 573 U.S. 122,
130 (2014), that section 522(b)(3)(C) applied only to the person who created and
contributed to the retirement account.

      On appeal, this court again reviews the bankruptcy court’s decision,
independently applying the same standard as the BAP. See Treadwell v. Glenstone
Lodge, Inc. (In re Treadwell), 637 F.3d 855, 863 (8th Cir. 2011). This court reviews
the bankruptcy court’s findings of fact for clear error, and its conclusions of law de
novo. Id.

                                         II.

       When a debtor files for bankruptcy, all of his or her property becomes property
of a bankruptcy estate. Taylor v. Freeland & Kronz, 503 U.S. 638, 642 (1992). See
also 11 U.S.C. § 541 (describing the formation of a bankruptcy estate). A debtor may
prevent the distribution of property claimed as exempt. Taylor, 503 U.S. at 642. One
exemption is “retirement funds to the extent those funds are in a fund or account that
is exempt from taxation under section 401, 403, 408, 408A, 414, 457, or 501(a) of the


      1
       The Honorable Robert J. Kressel, Judge, United States Bankruptcy Court for
the District of Minnesota.
      2
      The Honorable Anita L. Shodeen, Bankruptcy Judge, United States Bankruptcy
Appellate Panel for the Eighth Circuit, writing for a unanimous panel.

                                         -3-
Internal Revenue Code.” 11 U.S.C. § 522(b)(3)(C). This exemption “requires that
funds satisfy not one but two provisions to be exempt: the funds must be ‘retirement
funds,’ and they must be held in a covered account.” Clark, 573 U.S. at 131.

       The first issue is whether Lerbakken’s interests in the IRA and 401(k) are
“retirement funds” and thus eligible for exemption under 11 U.S.C. § 522(b)(3)(C)
when the accounts were created and maintained by his ex-wife and Lerbakken’s
interests resulted from a divorce decree.

      In Clark, the Court defined “retirement funds” as “sums of money set aside for
the day an individual stops working.” Clark, 573 U.S. at 127. The Court focused on
three significant legal characteristics of ordinary retirement funds. Id. at 125.
Account holders of ordinary retirement funds (1) are able to make additional
contributions to the funds, (2) are not obligated to withdraw the funds, and (3) must
pay a penalty to withdraw the funds at any time, for any purpose, prior to the age of
59 ½. Id. at 128. Ultimately, “retirement funds” are “funds objectively set aside for
one’s retirement,” not “a pot of money that can be freely used for current
consumption.” Id. at 128-29.

                                         III.

       As for the IRA, Lerbakken’s most cogent argument is that the Internal Revenue
Code says that an IRA transferred incident to divorce is “treated as an individual
retirement account of such [recipient] spouse, and not of such [donor] individual.”
26 U.S.C. § 408(d)(6). Lerbakken then reasons that an IRA transferred incident to
divorce necessarily satisfies the legal characteristics of an ordinary IRA. See Clark,
573 U.S. at 127.

       Unfortunately for Lerbakken, these tax provisions do not make his IRA interest
“retirement funds” under the Bankruptcy Code. The date of filing, January 23, 2018,

                                         -4-
determines the property of the bankruptcy estate. See 11 U.S.C. §§ 522(b)(3)(A), 541.
“A debtor’s exemptions are determined as of the time of the filing of his [bankruptcy]
petition.” In re Peterson, 897 F.2d 935, 937 (8th Cir. 1990). Exemptions are “not of
property which would or might be exempt if some condition not performed were
performed, but of property to which there is... a present right of exemption” on the
date when the petition is filed. Myers v. Manley, 318 U.S. 622, 626 (1943).

       When Lerbakken filed for bankruptcy on January 23, 2018, his interest in his
ex-wife’s IRA was subject to a condition not performed—it had not been renamed, or
transferred into an account under his name. See I.R.S. Pub. No. 590-A, Cat. No.
66302J at 28 (Dec. 21, 2018) (https://www.irs.gov/pub/irs-pdf/p590a.pdf) (describing
the “two commonly used methods of transferring IRA assets to a ... former spouse”).

       The issue then is whether Lerbakken’s conditional interest in his ex-wife’s IRA
has the legal characteristics of ordinary retirement funds. As for the first
characteristic, Lerbakken could make additional contributions, on January 23, 2018,
to his ex-wife’s IRA. See I.R.S. Pub. No. 504, Cat. No. 15006I at 18-19 (Feb. 5,
2019) (https://www.irs.gov/pub/irs-pdf/p504.pdf).

       Second, state law obligates Lerbakken to withdraw his conditional interest in
the IRA. Lerbakken’s interest is defined by state law. See Butner v. United States,
440 U.S. 48, 55 (1979) (holding that, absent a contrary federal interest, “[p]roperty
interests are created and defined by state law”). The governing state law—the
dissolution decree and the court-ordered attorney’s lien—define Lerbakken’s interest
as a debt owed to Sieloff. By the decree and lien, Lerbakken is supposed to effectuate
a transfer or renaming of his ex-wife’s IRA to pay a debt “regardless of [his]
proximity to retirement.” See Clark, 573 U.S. at 128. The purpose of the second
characteristic is to preserve the account for retirement. Id. Because the dissolution
of Lerbakken’s ex-wife’s IRA is obligatory, his interest does not satisfy the second
characteristic.

                                         -5-
       Third, no transfer of the IRA had occurred by January 23, 2018, so Lerbakken
was free from the rules that encourage leaving the funds untouched until retirement
age. See 26 U.S.C. §§ 408(d)(6), 72(t)(1), (2)(C), (3)(A). See also Clark, 573 U.S.
at 128-29. Lerbakken’s IRA interest was not subject to the rules for ordinary IRAs
transferred incident to divorce because it had not been transferred. See 26 U.S.C. §
408(d)(6). Lerbakken’s IRA interest is not “treated as an individual retirement
account” belonging to him. See id. Rather, Lerbakken’s interest in the IRA was a
sum of money in his ex-wife’s IRA, not an account “set aside for the day when an
individual stops working.” Clark, 573 U.S. at 127.

      Lerbakken’s interest in his ex-wife’s IRA lacks most of the legal characteristics
of ordinary “retirement funds,” and is not exempted as “retirement funds” under
section 522(b)(3)(C).3

                                          IV.

      As for the 401(k),4 Lerbakken did not have a QDRO on January 23, 2018. He
cannot access his interest in the account without a QDRO. See 29 U.S.C. §
1056(d)(1), (3)(A). See also 26 U.S.C. §§ 72(t)(2)(C), 414(p)(1)(A), 401(a)(13)(A)-
(B). “The QDRO provisions of ERISA do not suggest that an alternate payee [what
Lerbakken would be] has no interest in the plans until [he] obtains a QDRO, they
merely prevent [him] from enforcing [his] interest until the QDRO is obtained.” See

      3
        Because Lerbakken’s conditional interest in the IRA is not “retirement funds,”
this court need not address the “covered account” requirement. See Clark, 573 U.S.
at 131. See also 11 U.S.C. § 522(b)(3)(C).
      4
        Although Lerbakken’s interest in the 401(k) may be an ERISA-qualified plan
and thus excluded from his bankruptcy estate by the anti-alienation language of 29
U.S.C. § 1056(d)(1), Lerbakken has waived this issue, as he expressly says. See
Patterson v. Shumate, 504 U.S. 753, 760 (1992) (holding that ERISA’s anti-
alienation provision “constitutes an enforceable transfer restriction for purposes of 11
U.S.C. § 541(c)(2)’s exclusion of property from the bankruptcy estate”).

                                          -6-
Nelson v. Ramette, 322 F.3d 541, 544 (8th Cir. 2003). In the absence of a QDRO,
state law determines Lerbakken’s property interest in the 401(k) on January 23, 2018.
See Butner, 440 U.S. at 55. The governing state law—the dissolution decree and the
court-ordered attorney’s lien—define Lerbakken’s interest in his ex-wife’s 401(k) as
a debt owed to Sieloff.

       By Clark’s framework, Lerbakken’s 401(k) interest is not a “retirement fund.”
As for the first legal characteristic of ordinary retirement funds, Lerbakken could not
make additional contributions to his ex-wife’s 401(k) on January 23, 2018, because
contributions must be made by the employer or employee, not an ex-spouse. See 26
U.S.C. §§ 401(a)(1), (13)(A)-(B). Second, Lerbakken is obligated by state law to
withdraw the funds to pay Sieloff for legal services, not to use the funds for
retirement. Third, without a QDRO, Lerbakken could not make a withdrawal on
January 23, 2018. See 29 U.S.C. § 1056(d)(1), (3)(A). See also 26 U.S.C. §§
72(t)(2)(C), 414(p)(1)(A). See also Nelson, 322 F.3d at 544.

      Lerbakken’s conditional interest in the 401(k) lacks the legal characteristics of
ordinary “retirement funds,” and is not exempted as “retirement funds” under section
522(b)(3)(C).5

                                          V.

        Lerbakken advances four broad arguments. First, he says that the BAP and
the bankruptcy court misapplied Clark by limiting the “retirement funds” exemption
“to individuals who create and contribute funds into the retirement account.” In re
Lerbakken, 590 B.R. at 897 (discussing the ordinary usage of retirement funds as
excluding funds set aside for retirement by a different person). As Clark says, the key


      5
       Because Lerbakken’s conditional interest in the 401(k) is not “retirement
funds,” this court need not address the “covered account” requirement. See Clark,
573 U.S. at 131. See also 11 U.S.C. § 522(b)(3)(C).

                                         -7-
features of “retirement funds” are the objective legal characteristics. Clark, 573 U.S.
at 125, 128-29. As discussed, Lerbakken’s interests in the IRA and 401(k) do not
have the necessary legal characteristics.

       Second, Lerbakken argues that the similar tax treatment of transferred and
surviving-spouse IRAs necessitates treating accounts transferred incident to divorce
the same as accounts inherited by surviving spouses. 26 U.S.C. §§ 408(d)(3)(C)(ii),
(d)(6). However, the Court suggests that even a surviving spouse—which Lerbakken
is not—does not have “retirement funds” when the surviving spouse does not roll over
the IRA into his own IRA. See Clark, 573 U.S. at 125. Lerbakken failed to roll over
the funds from his ex-wife’s accounts into his own accounts by January 23, 2018,
when exemptions are determined. 11 U.S.C. §§ 522(b)(2)(A), 541.

       Third, Lerbakken asserts that the funds in his ex-wife’s IRA and 401(k) were
intended to support both spouses in retirement. However, Clark explicitly prohibits
a “case-by-case, fact-intensive” examination of subjective purpose—which forbids
examining Lerbakken’s (or his ex-wife’s) intent. Clark, 573 U.S. at 127. See also id.
at 133 (“the possibility” that debtors may use funds for “retirement purposes” does not
mean an IRA meets the “defining legal characteristics of retirement funds”).

      Finally, Lerbakken advances other policy reasons for his exemptions. To the
contrary, the exemption provisions of the Bankruptcy Code “effectuate a careful
balance between the interests of creditors and debtors.” Clark, 573 U.S. at 129.
Indeed, permitting debtors to enjoy cash windfalls through exemption “would convert
the Bankruptcy Code’s purposes of preserving debtors’ ability to meet their basic
needs and ensuring they have a ‘fresh start’ into a ‘free pass.’” Id. at 130 (citations
omitted). In Lerbakken’s words, “It was [his] strategy to use the determination in the
bankruptcy that the accounts were exempt to prevent [Sieloff] from enforcing its lien
against the accounts after the bankruptcy case in state court.”



                                         -8-
       Because Lerbakken’s interests in his ex-wife’s IRA and 401(k) are not
“retirement funds” under 11 U.S.C. § 522(b)(3)(C), the bankruptcy court and the BAP
correctly disallowed the exemptions from the bankruptcy estate.


                                   *******

      The judgment is affirmed.
                      ______________________________




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