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April 8, 2025

Trustee May Not Liquidate Estate Property Solely to Benefit a DSO Creditor

Affirming Bankruptcy Judge Michael Romero, the district court holds that an exemption remains valid even though the exempt property remains subject to a nondischargeable domestic support obligation.

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Opinion Link

View Opinion

https://abi-opinions.s3.us-east-1.amazonaws.com/Tucker.pdf

Case Details

Case Citation

Rodriguez v. Tucker (In re Tucker), 24-304 (D. Colo. March 27, 2025)

Case Name

Rodriguez v. Tucker (In re Tucker)

Case Type

Consumer

Court

10th Circuit

Colorado

Bankruptcy Tags

Consumer Bankruptcy

Consumer Debt

Discharge/Dischargeability

Comments

Submitted by Neil Gordon on April 8, 2025

It is strange that the court does not cite the 2010 Supreme Court case of Schwab v. Reilly, which effectively overruled many of the cases cited in the opinion. The Supreme Court had reversed the third circuit by holding that a debtor's exemptions do NOT remove an asset from the bankruptcy estate. The exemption is to the debtor's interest in the asset stated in dollar terms and not the asset itself. If the trustee were to sell the asset and pay the net proceeds to the DSO claimant, that should be permitted. It would be the opposite of the trustee selling an asset for the trustee's own benefit and not for the benefit of anyone else. Most DSO claimants in a chapter 7 case are themselves in poor financial shape and urge the trustee to administer assets and distribute to them what they can because they cannot afford the cost of hiring an attorney outside of bankruptcy to pursue the asset(s). It is not comparable to the typical secured creditor who is fully able to pursue outside of bankruptcy its legal remedies.