## Facts

- Howard C. Green and Verla B. Green filed a Chapter 7 bankruptcy petition on July 27, 1989.
- Howard Green had worked for Wal‑Mart Stores, Inc. for about 16 years and participated in Wal‑Mart’s employee profit‑sharing plan.
- Wal‑Mart’s profit‑sharing plan was tax qualified under I.R.C. § 401(a) and therefore subject to ERISA, including ERISA’s anti‑alienation requirement reflected in the plan documents.
- In 1988, the Greens borrowed $45,000 from United Savings and Loan Association.
- To secure the loan, the Greens executed documents that attempted (a) to grant United Savings a security interest in Howard Green’s Wal‑Mart profit‑sharing plan account and (b) to name United Savings as an alternate/contingent beneficiary under plan forms.
- By the petition date, Howard Green’s plan account balance was approximately $100,000.
- The Chapter 7 trustee, William A. Wear, filed an adversary proceeding seeking turnover of the value of Howard Green’s plan interest and objecting to the Greens’ claimed exemptions in that interest; Wal‑Mart, Wachovia Bank and Trust (as plan-related custodian/trustee), the Greens, and United Savings were named as defendants.
- The matter was submitted on stipulated facts and briefs. Wal‑Mart and the Greens relied on ERISA’s anti‑alienation provisions to argue the account could not be reached in bankruptcy.

## Issues

1. Whether Howard Green’s interest in Wal‑Mart’s ERISA-qualified profit‑sharing plan was excluded from the bankruptcy estate under 11 U.S.C. § 541(c)(2) because of the plan’s anti‑alienation provisions.
2. If the plan interest was property of the estate, whether the Greens could exempt the plan interest under applicable Missouri exemption law.
3. Whether the creditor’s attempted security-interest/beneficiary paperwork altered the trustee’s ability to obtain turnover of the plan value.

## Decision

- The court treated the dispute as a core bankruptcy matter involving turnover of estate property and the allowance or disallowance of exemptions.
- The court held that Howard Green’s beneficial interest in the Wal‑Mart profit‑sharing plan became property of the Chapter 7 estate under 11 U.S.C. § 541(a).
- The court held that § 541(c)(2) did not exclude the plan interest from the estate on the theory that ERISA’s anti‑alienation provision, by itself, constituted “applicable nonbankruptcy law” for exclusion purposes; the court read § 541(c)(2) primarily as preserving restrictions enforceable under traditional spendthrift-trust law.
- The court rejected the view that ERISA’s anti‑alienation language alone prevented administration of the plan interest as estate property in this Chapter 7 case.
- The court denied the Greens’ claimed exemptions in the profit‑sharing plan interest under Missouri law.
- The court entered judgment for the trustee and ordered turnover of the value of Howard Green’s profit‑sharing plan account for administration in the bankruptcy case.

## Legal Principles

- Under 11 U.S.C. § 541(a), a bankruptcy estate includes all legal and equitable interests of the debtor as of the petition date unless an exclusion applies.
- Section 541(c)(2) enforces a transfer restriction on a beneficial interest in a trust only if the restriction is enforceable under “applicable nonbankruptcy law”; in this decision, the court did not treat ERISA’s anti‑alienation requirement, standing alone, as sufficient to exclude the interest from the estate.
- A debtor’s vested or accrued interest in an employer profit‑sharing/retirement plan can constitute a present property interest included in the estate even if the plan limits assignment or immediate distribution.
- Exemptions are construed under the governing state exemption scheme when the state has opted out of federal exemptions; the debtor bears the burden to establish that the claimed exemption applies to the asset at issue.
- When exemptions are denied and no exclusion applies, the trustee may obtain turnover of the value of the debtor’s plan interest for distribution to creditors.

## Conclusion

In *In re Green*, the Bankruptcy Court for the Western District of Missouri held that the debtor’s approximately $100,000 interest in Wal‑Mart’s ERISA-qualified profit‑sharing plan entered the Chapter 7 estate and was not excluded under § 541(c)(2) based solely on ERISA anti‑alienation language; the court also denied the debtors’ Missouri exemption claim and ordered turnover of the plan value to the Chapter 7 trustee.


In re Green, 115 B.R. 1001 (1990)