MEMORANDUM OF DECISION

Honorable Jim D. Pappas, United States Bankruptcy Judge.

Introduction

When chapter 71 debtor Julie Acarregui filed her bankruptcy petition, she held interests in three college savings accounts. See Schedule A/B, Dkt. No. 1. She claims, to the extent these accounts were not excluded from the bankruptcy estate under § 541(b)(6), that the funds in the accounts are exempt pursuant to Idaho Code § 11-604A. Am. Schedule C, Dkt. No. 83. Trustee Janine Reynard ("Trustee") objected to Debtor's claim of exemption. Dkt. Nos. 80. Debtor also filed a Motion to Compel Abandonment as to the college savings accounts. Dkt. No. 72. Trustee objected to this motion. Dkt. No. 78.

On April 4, 2017, the Court conducted a hearing concerning Trustee's objection to Debtor's claim of exemption and Debtor's motion to abandon. Minute Entry, Dkt. No. 98. The parties executed stipulations reciting the relevant facts and submitting documentary exhibits and filed pre-hearing memoranda. See Dkt. Nos. 90, 91, 94, 95. At the hearing, the parties presented oral arguments and the Court then took the issues under advisement.

Having considered the record, as well as the applicable law, the Court concludes Debtor's interest in the funds in the college savings accounts that are property of the estate are not exempt under Idaho Code § 11-604A.2

Facts

Debtor Julie Acarregui filed the bankruptcy petition commencing this case on June 28, 2016, and in schedule A/B, she listed her interests in three college savings accounts she has maintained and funded for her children and a grandchild. Schedule A/B, Dkt. No. 1. The parties agreed that all of Debtor's deposits into these accounts, any dividends and capital gains, and the accounts' resulting share values prior to June 17, 2015, are excluded from property of the estate pursuant to § 541(b)(6). Stipulation at 2, Dkt. No. 91. The parties also stipulated that Debtor's deposits into the accounts, the dividends and capital gains accruing on those deposits, and the resulting values for the shares acquired during the period between June 27, 2015 and June 27, 2016, the day before the filing of the petition, amounted to $6,504.04. Id. Finally, they stipulated that the $6,504.04, plus any dividends and capital gains attributable to these deposits post-petition, are property of the bankruptcy estate. Id.

Debtor claims that her interest in the funds in the accounts that are property of the estate are exempt pursuant to Idaho Code § 11-604A.3 Schedule C, Dkt. No. 83. Trustee objected to this claim, arguing that Idaho Code § 11-604A does not apply because these college savings accounts were not established under the Idaho College Savings Program, as codified in chapter 54, title 33 of the Idaho Code, commonly referred to as the "IDEAL program".4 Dkt. No. 80.

Debtor also filed a Motion to Compel Abandonment of the college savings accounts, arguing that Debtor's interests therein are either not property of the estate, or are exempt. Dkt. No. 72. Trustee objected to the motion reiterating her position that a portion of the funds in the accounts is not exempt. Dkt. No. 78.

The parties stipulated that the college savings accounts in question here were established under Virginia's college savings program through American Funds Distributors, Inc., a California corporation authorized to do business in the state of Idaho. Stipulation at 1-2, Dkt. No. 91. The parties opined that the only issue to be resolved by the Court in this case is a legal one: whether Debtor's interest in the funds in the savings accounts that are property of the estate are exempt under Idaho Code § 11-604A. Id. at 2. The Court addresses that issue below.

Analysis and Disposition

Under Idaho Code § 11-604A, may a debtor exempt her interest in funds in a college savings account not established under the IDEAL program? This is an issue of first impression in this District. While the Court on prior occasions has generally considered the exempt status of college savings accounts, the facts in those cases were different, and the rules announced in the Court's decisions cited by the parties do not address the specific issue at hand in this case.5

A. College Savings Accounts Generally

Generally, when a bankruptcy petition is filed, all legal and equitable interests of debtors in property flow into a bankruptcy estate, which is automatically created at the commencement of the case. § 541(a). However, Congress, in § 541(b), excluded certain property interests from the estate created when a bankruptcy case is commenced. Likely intending to encourage college savings by debtors, while at the same time protecting creditors from abusive "bankruptcy planning" schemes, in 2005, Congress enacted § 541(b)(6) providing that "funds ... contributed to an account in accordance with section 529(b)(1)(A) of the Internal Revenue Code of 1986 under a qualified State tuition program... not later than 365 days before the date of the filing of the petition in a case under this title" are not included in property of the estate. § 541(b)(6). The parties have agreed that, under § 541(b)(6), the bulk of the funds in the Debtor's college savings accounts is excluded from the estate, and that only those sums attributable to Debtor's deposits, any dividends or capital gains, and the account's resulting share values, within the 365 days prior to the commencement of her case, constitute estate property. The parties agreed that this amounts to a total of $6,504.04, together with any post-petition dividends and capital gains attributable to that amount.

In addition to excluding certain types of property from the bankruptcy estate, "the Code permits Debtors to shield certain property from administration by Trustee, through the use of exemptions." In re Hall, 464 B.R. 896, 903 (Bankr. D. Idaho 2012); § 522(b)(1). The Code allows states to "opt out" of the federal exemption scheme in favor of its own. § 522(b)(3). Idaho has chosen to opt out, so Debtor may claim only those exemptions allowable under Idaho law, as well as those listed in § 522(b)(3). Idaho Code § 11-609; 11 U.S.C. § 522(b)(3).

B. College Savings Programs and Idaho Code § 11-604A

Debtor claims that her interest in the college savings accounts that is not excluded from property of the estate is exempt under Idaho Code § 11-604A. That statute provides that:

Idaho Code § 11-604A(3).

While Idaho Code § 11-604A was enacted "to ensure the well-being of its citizens by protecting retirement income to which they are or may become entitled," the Legislature also sought to protect certain types of college savings accounts. Idaho Code §§ 11-604A(1), (4). It did this by expansively defining the term "employee benefit plan" to include "any rights accruing on account of money paid currently or in advance pursuant to a college savings program described in chapter 54, title 33, Idaho Code." Idaho Code § 11-604A(4)(b). Chapter 54, title 33 of the Idaho Code establishes the Idaho College Savings Program, commonly referred to as the IDEAL program. Idaho Code §§ 33-5401-5410.

C. The Parties' Arguments

The source of the parties' dispute in this case is Idaho Code § 11-604A(4)(b)'s reference to only those college savings programs "described in chapter 54, title 33, Idaho Code". Trustee argues that via the specific reference in Idaho Code § 11-604A(4)(b) to the statutes establishing the IDEAL program, only those college savings accounts established under that program are exempt.

Debtor disagrees. She argues that, because it is an exemption statute, the phrase "a college savings program described in chapter 54, title 33, Idaho Code" should not be read narrowly, but should be interpreted broadly to include Debtor's college savings accounts, despite her admission that they were established under Virginia law. To read the exemption statute as Trustee suggests, Debtor argues, would promote an absurd result: protecting Idaho college savings accounts, while subjecting virtually identical accounts to the claims of a debtor's creditors.

D. Interpretation of Idaho Code § 11-604A

In parsing the meaning of an Idaho statute, the Court is guided by the Supreme Court of Idaho, which has summarized its long-established standard for statutory interpretation as follows:

Stonebrook Const., LLC v. Chase Home Fin., LLC, 152 Idaho 927, 277 P.3d 374, 378 (2012) (quoting Curlee v. Kootenai Cty. Fire & Rescue, 148 Idaho 391, 224 P.3d 458, 465 (2012). A statute "is ambiguous where reasonable minds might differ or be uncertain as to its meaning. However, ambiguity is not established merely because the parties present differing interpretations to the court." Id. (quoting Payette River Prop. Owners Ass'n v. Bd. of Comm'rs of Valley Cnty., 132 Idaho 551, 976 P.2d 477, 483 (1999)).

Debtor is correct in that, in Idaho, exemption statutes are to be liberally construed in favor of the debtor. In re Hall, 464 B.R. at 903. But even so, "the statutory language may not be `tortured' in the guise of liberal construction." In re Wiley, 352 B.R. 716, 718 (Bankr. D. Idaho 2006) (citing In re Collins, 97.3 IBCR 78, 79 (Bankr. D. Idaho 1997)).

1. The exemption statute's language: "A college savings program described in chapter 54, title 33, Idaho Code".

Debtor argues that the Legislature's use of the word "a" in the phrase "a college savings program" in Idaho Code § 11-604A(4)(b) demonstrated its intent to protect accounts established under any qualified state college savings program. The Court comes to the opposite conclusion. And while Debtor's approach would have been a laudable gesture for the Legislature to promote, the Court cannot ignore what the statutes plainly says. Because the phrase in the exemption statute protecting "a college savings program" is modified by the language immediately following that phrase ("described in chapter 54, title 33, Idaho Code"), the Court concludes that only those savings accounts established under the IDEAL program may be exempted.

Debtor further argues that the word "described" in the statute should be read to include college savings accounts similar to those set up under the IDEAL program. Debtor contends this interpretation is preferable because Idaho Code § 33-5401(6), part of the laws establishing the IDEAL program, defines "financial institution," to include, "any ... brokerage firm... or other similar entity authorized to do business in [the State of Idaho.]" Debtor's Mem. at 6, Dkt. No. 90 (citing Idaho Code § 33-5401(6)). Debtor argues that, if this definition is faithfully applied, her accounts qualify as exempt because the entity holding the savings account funds in this case is indeed authorized to do business in the state of Idaho.

While Debtor makes a point, to base the decision in this case on this argument, however, would require the Court to ignore the other important requirements for qualifying accounts in chapter 54, title 33 of the Idaho Code. For example, Debtor's interpretation would ignore the role played by the IDEAL college savings program board established under Idaho Code § 33-5402, a body that promulgates many of the specific rules and requirements for accounts established under the IDEAL program. See Idaho Code § 33-5404. That board prescribes the form of application for an account; fixes an application fee; establishes procedures to change designated beneficiaries; may shorten the time for notice to withdraw from the accounts; and is responsible for adopting rules to prevent contributions in excess of those necessary to pay qualified higher education expenses of the beneficiaries, among other things. See Idaho Code § 33-5404(1)(a), (1)(b), (5), (13). These provisions, among others, make clear to the Court that the "college savings program described in chapter 54, title 33, Idaho Code" can only mean the IDEAL program, as governed by the board established in Idaho Code § 33-5402. No other state program, including the Virginia program, would fit this "description."

The Court concludes that the plain language of Idaho Code § 11-604A(4)(b) exempts only those college savings accounts established under the IDEAL program described in Idaho Code chapter 54, title 33. Because Debtor's accounts were not IDEAL program accounts, the funds in those accounts that are not estate property are not exempt.

2. Legislative History

While its terms are plain, even if the exemption statute was ambiguous, the Court would conclude that legislative history supports its interpretation of Idaho Code § 11-604A(4)(b).

Debtor points to the Statement of Purpose from 2001 Senate Bill 1118 amending the former version of § 11-604A to support her position. Debtor's Mem. at 7, Dkt. No. 90. That statement begins:

2001 Idaho Laws Ch. 288 (S.B. 1118) (emphasis added). Then, after discussing a lack of clarity concerning the community property rights of spouses in account funds, and recent iterations of individual retirement accounts, the statement concludes:

Id.

The Legislature's statement both explains deficiencies in the prior version of the statute, and enumerates the clarifications the new statute was intended to implement. Relevant here, the Legislature explained the clarification that "college savings plans are covered" by the statute was necessary because, under the prior law, "college savings programs, described in 33-5401, Idaho Code were not clearly covered." (emphasis added). The statute as amended "fixed" this deficiency by exempting savings accounts established under "college savings programs described in chapter 54, title 33, Idaho Code." Idaho Code § 11-604A(b)(4). Read in this fashion, the statement of purpose supports the interpretation assigned to the statute by the Court, not Debtor's position.

The Court also notes that the amendment to Idaho Code § 11-604A that added the college savings account exemption at issue here was made shortly after Idaho enacted the IDEAL program, rather than earlier, when § 529 of the Internal Revenue Code was enacted by Congress.6 To the Court, this also indicates that the Legislature intended to exempt only those accounts established under its own newly-enacted college savings program, and not a broader range of programs, such as any account complying with § 529 of the Internal Revenue Code.

In sum, both the legislative history and the timing of the amendment to the exemption statute indicate that the Idaho's Legislature intended to exempt only those college savings accounts established under the IDEAL program under Idaho Code § 11-604A(4)(b).

3. An Absurd Result?

Finally, Debtor suggests that the Court should ignore the plain meaning of the exemption statute, and adopt her interpretation, because to do otherwise leads to an absurd result. Debtor argues that it is absurd to protect IDEAL program college savings accounts while exposing nearly identical college savings accounts established under the laws of other states to creditor's claims, especially for debtors who relocate to Idaho after the accounts are established.7

To be sure, the Idaho Supreme Court "disfavors a statutory construction that would lead to absurd or unreasonably harsh results." Ada Cty. Highway Dist. v. Total Success Invs., LLC, 145 Idaho 360, 179 P.3d 323, 331 (2008). But the result of the Court's plain meaning interpretation of the exemption statute here is not absurd or unreasonably harsh.

That the Idaho Legislature desired to extend protection from creditor reach to college savings accounts established under the IDEAL program, but not other programs, is not patently absurd. To encourage the success of the program, the Idaho Legislature may have sought to create an advantage for those using such accounts, as opposed to other, similar ones. And, as noted above, the Legislature may have been interested in shielding only those accounts subject to local control, through the board, as opposed to those governed by rules enacted by other state legislatures and bodies. Moreover, if the Legislature was generally motivated to protect all qualified college savings programs, it could have easily done so by using a simple reference to § 529 of the Internal Revenue Code, rather than the IDEAL program, to qualify for an exemption. It did not. And while this decision might seem unfair to those with similar non-IDEAL program college savings accounts, the approach adopted by the Legislature was not patently absurd. As a result, the plain meaning of the statute adopted by the Idaho Legislature stands. It is not unreasonably harsh, either, because the exemption limitation can be easily discerned by simply reading the statute.

The Debtor's interest in the funds in the college savings accounts not excluded from the bankruptcy estate are not exempt.

D. Motion to Compel Abandonment

On request of a party in interest, after notice and a hearing, the Court may order the trustee to abandon property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate. § 554(b); In re Garcia, 521 B.R. 680, 684 (Bankr. D. Idaho 2014) (citing Johnston v. Webster (In re Johnston), 49 F.3d 538, 540 (9th Cir. 1995), among other cases). The Court has explained that compelling abandonment should be the exception, not the rule, and "absent an attempt by the trustee to churn property worthless to the estate just to increase fees, abandonment should rarely be ordered. Garcia, 521 B.R. at 684 (citations and quotations omitted).

Here, Debtor has not shown either basis exists to compel Trustee to abandon the college savings accounts. There is no evidence to show that Debtor's nonexempt interest in the college savings accounts are burdensome to the estate. Absent an exemption, some portion of the accounts have value to the estate. Thus, Debtor's motion to compel abandonment of the college savings accounts will be denied.8

Conclusion

Debtor's interest in the funds in the college savings accounts that constitute property of the estate, totaling $6,504.04 plus any post-petition dividends and capital gains attributable to this amount, is not exempt. Because this interest in the accounts is not burdensome and has value to the estate, the Court declines to compel Trustee to abandon the interest.

A separate order will be entered.