11_USC_522

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LEXSTAT 11 USC 522

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*** CURRENT THROUGH PL 111-43, APPROVED 07/31/2009 ***

TITLE 11. BANKRUPTCY

CHAPTER 5. CREDITORS, THE DEBTOR, AND THE ESTATE SUBCHAPTER II. DEBTOR'S DUTIES AND BENEFITS

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11 USCS § 522

THE CASE NOTES SEGMENT OF THIS DOCUMENT HAS BEEN SPLIT INTO 2 DOCU-MENTS. THIS IS PART 1. USE THE BROWSE FEATURE TO REVIEW THE OTHER PART(S). § 522. Exemptions (a) In this section-- (1) "dependent" includes spouse, whether or not actually dependent; and (2) "value" means fair market value as of the date of the filing of the petition or, with respect to property that becomes property of the estate after such date, as of the date such property becomes property of the estate. (b) (1) Notwithstanding section 541 of this title [11 USCS § 541], an individual debtor may exempt from property of the estate the property listed in either paragraph (2) or, in the alternative, para-graph (3) of this subsection. In joint cases filed under section 302 of this title [11 USCS § 302] and individual cases filed under section 301 or 303 of this title [11 USCS § 301 or 303] by or against debtors who are husband and wife, and whose estates are ordered to be jointly administered under Rule 1015(b) of the Federal Rules of Bankruptcy Procedure, one debtor may not elect to exempt property listed in paragraph (2) and the other debtor elect to exempt property listed in paragraph (3) of this subsection. If the parties cannot agree on the alternative to be elected, they shall be deemed to elect paragraph (2), where such election is permitted under the law of the jurisdiction where the case is filed. (2) Property listed in this paragraph is property that is specified under subsection (d), unless the State law that is applicable to the debtor under paragraph (3)(A) specifically does not so authorize.

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(3) Property listed in this paragraph is-- (A) subject to subsections (o) and (p), any property that is exempt under Federal law, other than subsection (d) of this section, or State or local law that is applicable on the date of the filing of the petition at the place in which the debtor's domicile has been located for the 730 days immediately preceding the date of the filing of the petition or if the debtor's domicile has not been located at a single State for such 730-day period, the place in which the debtor's domicile was located for 180 days immediately preceding the 730-day period or for a longer portion of such 180-day period than in any other place; (B) any interest in property in which the debtor had, immediately before the commencement of the case, an interest as a tenant by the entirety or joint tenant to the extent that such interest as a ten-ant by the entirety or joint tenant is exempt from process under applicable nonbankruptcy law; and (C) retirement funds to the extent that 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 Internal Revenue Code of 1986 [26 USCS § 401, 403, 408, 408A, 414, 457, or 501(a)]. If the effect of the domiciliary requirement under subparagraph (A) is to render the debtor ineligi-ble for any exemption, the debtor may elect to exempt property that is specified under subsection (d). (4) For purposes of paragraph (3)(C) and subsection (d)(12), the following shall apply: (A) If the retirement funds are in a retirement fund that has received a favorable determination under section 7805 of the Internal Revenue Code of 1986 [26 USCS § 7805], and that determination is in effect as of the date of the filing of the petition in a case under this title, those funds shall be presumed to be exempt from the estate. (B) If the retirement funds are in a retirement fund that has not received a favorable determina-tion under such section 7805 [26 USCS § 7805], those funds are exempt from the estate if the debtor demonstrates that-- (i) no prior determination to the contrary has been made by a court or the Internal Revenue Service; and (ii) (I) the retirement fund is in substantial compliance with the applicable requirements of the Internal Revenue Code of 1986 [26 USCS §§ 1 et seq.]; or (II) the retirement fund fails to be in substantial compliance with the applicable requirements of the Internal Revenue Code of 1986 [26 USCS §§ 1 et seq.] and the debtor is not materially re-sponsible for that failure. (C) A direct transfer of retirement funds from 1 fund or account that is exempt from taxation under section 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code of 1986 [26 USCS § 401, 403, 408, 408A, 414, 457, or 501(a)], under section 401(a)(31) of the Internal Revenue Code of 1986 [26 USCS § 401(a)(31)], or otherwise, shall not cease to qualify for exemption under paragraph (3)(C) or subsection (d)(12) by reason of such direct transfer. (D) (i) Any distribution that qualifies as an eligible rollover distribution within the meaning of section 402(c) of the Internal Revenue Code of 1986 [26 USCS § 402(c)] or that is described in clause (ii) shall not cease to qualify for exemption under paragraph (3)(C) or subsection (d)(12) by reason of such distribution. (ii) A distribution described in this clause is an amount that-- (I) has been distributed from a fund or account that is exempt from taxation under section 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code of 1986 [26 USCS § 401, 403, 408, 408A, 414, 457, or 501(a)]; and


(II) to the extent allowed by law, is deposited in such a fund or account not later than 60 days after the distribution of such amount. (c) Unless the case is dismissed, property exempted under this section is not liable during or after the case for any debt of the debtor that arose, or that is determined under section 502 of this title [11 USCS § 502] as if such debt had arisen, before the commencement of the case, except-- (1) a debt of a kind specified in paragraph (1) or (5) of section 523(a) [11 USCS § 523(a)] (in which case, notwithstanding any provision of applicable nonbankruptcy law to the contrary, such property shall be liable for a debt of a kind specified in section 523(a)(5) [11 USCS § 523(a)(5)]); (2) a debt secured by a lien that is-- (A) (i) not avoided under subsection (f) or (g) of this section or under section 544, 545, 547, 548, 549, or 724(a) of this title [11 USCS § 544, 545, 547, 548, 549, or 724(a)]; and (ii) not void under section 506(d) of this title [11 USCS § 506(d)]; or (B) a tax lien, notice of which is properly filed; (3) a debt of a kind specified in section 523(a)(4) or 523(a)(6) of this title [11 USCS § 523(a)(4) or 523(a)(6)] owed by an institution-affiliated party of an insured depository institution to a Federal depository institutions regulatory agency acting in its capacity as conservator, receiver, or liquidat-ing agent for such institution; or (4) a debt in connection with fraud in the obtaining or providing of any scholarship, grant, loan, tuition, discount, award, or other financial assistance for purposes of financing an education at an institution of higher education (as that term is defined in section 101 of the Higher Education Act of 1965 (20 U.S.C. 1001)). (d) The following property may be exempted under subsection (b)(2) of this section: (1) The debtor's aggregate interest, not to exceed $ 20,200 in value, in real property or personal property that the debtor or a dependent of the debtor uses as a residence, in a cooperative that owns property that the debtor or a dependent of the debtor uses as a residence, or in a burial plot for the debtor or a dependent of the debtor. (2) The debtor's interest, not to exceed $ 3,225 in value, in one motor vehicle. (3) The debtor's interest, not to exceed $ 525 in value in any particular item or $ 10,775 in aggre-gate value, in household furnishings, household goods, wearing apparel, appliances, books, animals, crops, or musical instruments, that are held primarily for the personal, family, or household use of the debtor or a dependent of the debtor. (4) The debtor's aggregate interest, not to exceed $ 1,350 in value, in jewelry held primarily for the personal, family, or household use of the debtor or a dependent of the debtor. (5) The debtor's aggregate interest in any property, not to exceed in value $ 1,075 plus up to $ 10,125 of any unused amount of the exemption provided under paragraph (1) of this subsection. (6) The debtor's aggregate interest, not to exceed $ 2,025 in value, in any implements, profes-sional books, or tools, of the trade of the debtor or the trade of a dependent of the debtor. (7) Any unmatured life insurance contract owned by the debtor, other than a credit life insurance contract. (8) The debtor's aggregate interest, not to exceed in value $ 10,775 less any amount of property of the estate transferred in the manner specified in section 542(d) of this title [11 USCS § 542(d)], in any accrued dividend or interest under, or loan value of, any unmatured life insurance contract owned by the debtor under which the insured is the debtor or an individual of whom the debtor is a dependent.


(9) Professionally prescribed health aids for the debtor or a dependent of the debtor. (10) The debtor's right to receive-- (A) a social security benefit, unemployment compensation, or a local public assistance benefit; (B) a veterans' benefit; (C) a disability, illness, or unemployment benefit; (D) alimony, support, or separate maintenance, to the extent reasonably necessary for the sup-port of the debtor and any dependent of the debtor; (E) a payment under a stock bonus, pension, profitsharing, annuity, or similar plan or contract on account of illness, disability, death, age, or length of service, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor, unless-- (i) such plan or contract was established by or under the auspices of an insider that employed the debtor at the time the debtor's rights under such plan or contract arose; (ii) such payment is on account of age or length of service; and (iii) such plan or contract does not qualify under section 401(a), 403(a), 403(b), or 408 of the Internal Revenue Code of 1986 [26 USCS § 401(a), 403(a), 403(b), or 408]. (11) The debtor's right to receive, or property that is traceable to-- (A) an award under a crime victim's reparation law; (B) a payment on account of the wrongful death of an individual of whom the debtor was a de-pendent, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor; (C) a payment under a life insurance contract that insured the life of an individual of whom the debtor was a dependent on the date of such individual's death, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor; (D) a payment, not to exceed $ 20,200, on account of personal bodily injury, not including pain and suffering or compensation for actual pecuniary loss, of the debtor or an individual of whom the debtor is a dependent; or (E) a payment in compensation of loss of future earnings of the debtor or an individual of whom the debtor is or was a dependent, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor. (12) Retirement funds to the extent that 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 Internal Revenue Code of 1986 [26 USCS § 401, 403, 408, 408A, 414, 457, or 501(a)]. (e) A waiver of an exemption executed in favor of a creditor that holds an unsecured claim against the debtor is unenforceable in a case under this title with respect to such claim against property that the debtor may exempt under subsection (b) of this section. A waiver by the debtor of a power un-der subsection (f) or (h) of this section to avoid a transfer, under subsection (g) or (i) of this section to exempt property, or under subsection (i) of this section to recover property or to preserve a trans-fer, is unenforceable in a case under this title. (f) (1) Notwithstanding any waiver of exemptions but subject to paragraph (3), the debtor may avoid the fixing of a lien on an interest of the debtor in property to the extent that such lien impairs an ex-emption to which the debtor would have been entitled under subsection (b) of this section, if such lien is--


(A) a judicial lien, other than a judicial lien that secures a debt of a kind that is specified in sec-tion 523(a)(5) [11 USCS § 523(a)(5)]; or (B) a nonpossessory, nonpurchase-money security interest in any-- (i) household furnishings, household goods, wearing apparel, appliances, books, animals, crops, musical instruments, or jewelry that are held primarily for the personal, family, or household use of the debtor or a dependent of the debtor; (ii) implements, professional books, or tools, of the trade of the debtor or the trade of a de-pendent of the debtor; or (iii) professionally prescribed health aids for the debtor or a dependent of the debtor. (2) (A) For the purposes of this subsection, a lien shall be considered to impair an exemption to the extent that the sum of-- (i) the lien; (ii) all other liens on the property; and (iii) the amount of the exemption that the debtor could claim if there were no liens on the property; exceeds the value that the debtor's interest in the property would have in the absence of any liens. (B) In the case of a property subject to more than 1 lien, a lien that has been avoided shall not be considered in making the calculation under subparagraph (A) with respect to other liens. (C) This paragraph shall not apply with respect to a judgment arising out of a mortgage foreclo-sure. (3) In a case in which State law that is applicable to the debtor-- (A) permits a person to voluntarily waive a right to claim exemptions under subsection (d) or prohibits a debtor from claiming exemptions under subsection (d); and (B) either permits the debtor to claim exemptions under State law without limitation in amount, except to the extent that the debtor has permitted the fixing of a consensual lien on any property or prohibits avoidance of a consensual lien on property otherwise eligible to be claimed as exempt property; the debtor may not avoid the fixing of a lien on an interest of the debtor or a dependent of the debtor in property if the lien is a nonpossessory, nonpurchase-money security interest in imple-ments, professional books, or tools of the trade of the debtor or a dependent of the debtor or farm animals or crops of the debtor or a dependent of the debtor to the extent the value of such imple-ments, professional books, tools of the trade, animals, and crops exceeds $ 5,475. (4) (A) Subject to subparagraph (B), for purposes of paragraph (1)(B), the term "household goods" means-- (i) clothing; (ii) furniture; (iii) appliances; (iv) 1 radio; (v) 1 television; (vi) 1 VCR; (vii) linens; (viii) china; (ix) crockery;


(x) kitchenware; (xi) educational materials and educational equipment primarily for the use of minor dependent children of the debtor; (xii) medical equipment and supplies; (xiii) furniture exclusively for the use of minor children, or elderly or disabled dependents of the debtor; (xiv) personal effects (including the toys and hobby equipment of minor dependent children and wedding rings) of the debtor and the dependents of the debtor; and (xv) 1 personal computer and related equipment. (B) The term "household goods" does not include-- (i) works of art (unless by or of the debtor, or any relative of the debtor); (ii) electronic entertainment equipment with a fair market value of more than $ 550 in the ag-gregate (except 1 television, 1 radio, and 1 VCR); (iii) items acquired as antiques with a fair market value of more than $ 550 in the aggregate; (iv) jewelry with a fair market value of more than $ 550 in the aggregate (except wedding rings); and (v) a computer (except as otherwise provided for in this section), motor vehicle (including a tractor or lawn tractor), boat, or a motorized recreational device, conveyance, vehicle, watercraft, or aircraft. (g) Notwithstanding sections 550 and 551 of this title [11 USCS §§ 550 and 551], the debtor may exempt under subsection (b) of this section property that the trustee recovers under section 510(c)(2), 542, 543, 550, 551, or 553 of this title [11 USCS § 510(c)(2), 542, 543, 550, 551, or 553], to the extent that the debtor could have exempted such property under subsection (b) of this section if such property had not been transferred, if-- (1) (A) such transfer was not a voluntary transfer of such property by the debtor; and (B) the debtor did not conceal such property; or (2) The debtor could have avoided such transfer under subsection (f)(1)(B) of this section. (h) The debtor may avoid a transfer of property of the debtor or recover a setoff to the extent that the debtor could have exempted such property under subsection (g)(1) of this section if the trustee had avoided such transfer, if-- (1) such transfer is avoidable by the trustee under section 544, 545, 547, 548, 549, or 724(a) of this title [11 USCS § 544, 545, 547, 548, 549, or 724(a)] or recoverable by the trustee under section 553 of this title [11 USCS § 553]; and (2) the trustee does not attempt to avoid such transfer. (i) (1) If the debtor avoids a transfer or recovers a setoff under subsection (f) or (h) of this section, the debtor may recover in the manner prescribed by, and subject to the limitations of, section 550 of this title [11 USCS § 550], the same as if the trustee had avoided such transfer, and may exempt any property so recovered under subsection (b) of this section. (2) Notwithstanding section 551 of this title [11 USCS § 551], a transfer avoided under section 544, 545, 547, 548, 549, or 724(a) of this title [11 USCS § 544, 545, 547, 548, 549, or 724(a)], un-der subsection (f) or (h) of this section, or property recovered under section 553 of this title [11


USCS § 553], may be preserved for the benefit of the debtor to the extent that the debtor may ex-empt such property under subsection (g) of this section or paragraph (1) of this subsection. (j) Notwithstanding subsections (g) and (i) of this section, the debtor may exempt a particular kind of property under subsections (g) and (i) of this section only to the extent that the debtor has ex-empted less property in value of such kind than that to which the debtor is entitled under subsection (b) of this section. (k) Property that the debtor exempts under this section is not liable for payment of any administra-tive expense except-- (1) the aliquot share of the costs and expenses of avoiding a transfer of property that the debtor exempts under subsection (g) of this section, or of recovery of such property, that is attributable to the value of the portion of such property exempted in relation to the value of the property recovered; and (2) any costs and expenses of avoiding a transfer under subsection (f) or (h) of this section, or of recovery of property under subsection (i)(1) of this section, that the debtor has not paid. (l) The debtor shall file a list of property that the debtor claims as exempt under subsection (b) of this section. If the debtor does not file such a list, a dependent of the debtor may file such a list, or may claim property as exempt from property of the estate on behalf of the debtor. Unless a party in interest objects, the property claimed as exempt on such list is exempt. (m) Subject to the limitation in subsection (b), this section shall apply separately with respect to each debtor in a joint case. (n) For assets in individual retirement accounts described in section 408 or 408A of the Internal Revenue Code of 1986 [26 USCS § 408 or 408A], other than a simplified employee pension under section 408(k) of such Code [26 USCS § 408(k)] or a simple retirement account under section 408(p) of such Code [26 USCS § 408(p)], the aggregate value of such assets exempted under this section, without regard to amounts attributable to rollover contributions under section 402(c), 402(e)(6), 403(a)(4), 403(a)(5), and 403(b)(8) of the Internal Revenue Code of 1986 [26 USCS § 402(c), 402(e)(6), 403(a)(4), 403(a)(5), and 403(b)(8)], and earnings thereon, shall not exceed $ 1,095,000 in a case filed by a debtor who is an individual, except that such amount may be in-creased if the interests of justice so require. (o) For purposes of subsection (b)(3)(A), and notwithstanding subsection (a), the value of an inter-est in-- (1) real or personal property that the debtor or a dependent of the debtor uses as a residence; (2) a cooperative that owns property that the debtor or a dependent of the debtor uses as a resi-dence; (3) a burial plot for the debtor or a dependent of the debtor; or (4) real or personal property that the debtor or a dependent of the debtor claims as a homestead; shall be reduced to the extent that such value is attributable to any portion of any property that the debtor disposed of in the 10-year period ending on the date of the filing of the petition with the in-tent to hinder, delay, or defraud a creditor and that the debtor could not exempt, or that portion that


the debtor could not exempt, under subsection (b), if on such date the debtor had held the property so disposed of. (p) (1) Except as provided in paragraph (2) of this subsection and sections 544 and 548 [11 USCS §§ 544 and 548], as a result of electing under subsection (b)(3)(A) to exempt property under State or local law, a debtor may not exempt any amount of interest that was acquired by the debtor during the 1215-day period preceding the date of the filing of the petition that exceeds in the aggregate $ 136,875 in value in-- (A) real or personal property that the debtor or a dependent of the debtor uses as a residence; (B) a cooperative that owns property that the debtor or a dependent of the debtor uses as a resi-dence; (C) a burial plot for the debtor or a dependent of the debtor; or (D) real or personal property that the debtor or dependent of the debtor claims as a homestead. (2) (A) The limitation under paragraph (1) shall not apply to an exemption claimed under subsec-tion (b)(3)(A) by a family farmer for the principal residence of such farmer. (B) For purposes of paragraph (1), any amount of such interest does not include any interest transferred from a debtor's previous principal residence (which was acquired prior to the beginning of such 1215-day period) into the debtor's current principal residence, if the debtor's previous and current residences are located in the same State. (q) (1) As a result of electing under subsection (b)(3)(A) to exempt property under State or local law, a debtor may not exempt any amount of an interest in property described in subparagraphs (A), (B), (C), and (D) of subsection (p)(1) which exceeds in the aggregate $ 136,875 if-- (A) the court determines, after notice and a hearing, that the debtor has been convicted of a fel-ony (as defined in section 3156 of title 18 [18 USCS § 3156]), which under the circumstances, dem-onstrates that the filing of the case was an abuse of the provisions of this title; or (B) the debtor owes a debt arising from-- (i) any violation of the Federal securities laws (as defined in section 3(a)(47) of the Securities Exchange Act of 1934 [15 USCS § 78c(a)(47)]), any State securities laws, or any regulation or or-der issued under Federal securities laws or State securities laws; (ii) fraud, deceit, or manipulation in a fiduciary capacity or in connection with the purchase or sale of any security registered under section 12 or 15(d) of the Securities Exchange Act of 1934 [15 USCS § 78l or 78o(d)] or under section 6 of the Securities Act of 1933 [15 USCS § 77f]; (iii) any civil remedy under section 1964 of title 18; or (iv) any criminal act, intentional tort, or willful or reckless misconduct that caused serious physical injury or death to another individual in the preceding 5 years. (2) Paragraph (1) shall not apply to the extent the amount of an interest in property described in subparagraphs (A), (B), (C), and (D) of subsection (p)(1) is reasonably necessary for the support of the debtor and any dependent of the debtor. HISTORY: (Nov. 6, 1978, P.L. 95-598, Title I, § 101, 92 Stat. 2586; July 10, 1984, P.L. 98-353, Title III, Subtitle A, § 306, Subtitle H, § 453, 98 Stat. 353, 375; Oct. 27, 1986, P.L. 99-554, Title II, Subtitle C, § 283(i), 100 Stat. 3117; Nov. 29, 1990, P.L. 101-647, Title XXV, Subtitle B, § 2522(b), 104 Stat. 4866; Oct. 22, 1994, P.L. 103-394, Title I, § 108(d), Title III, §§ 303, 304(d), 310, Title V, §


501(d)(12), 108 Stat. 4112, 4132, 4133, 4137, 4145; Feb. 12, 1998, 63 Fed. Reg. 7179; Nov. 1, 2000, P.L. 106-420, § 4, 114 Stat. 1868; Feb. 20, 2001, 66 Fed. Reg. 10910.) (As amended Feb. 24, 2004, 69 Fed. Reg. 8482; April 20, 2005, P.L. 109-8, Title II, Subtitle B, § 216, Subtitle C, § 224(a), (e)(1), Title III, §§ 307, 308, 313(a), 322(a), 119 Stat. 55, 62, 65, 81, 87, 96; Feb. 14, 2007, 72 Fed. Reg. 7082.) HISTORY; ANCILLARY LAWS AND DIRECTIVES Prior law and revision: Legislative Statements Section 522 of the House amendment represents a compromise on the issue of exemptions be-tween the position taken in the House bill, and that taken in the Senate amendment. Dollar amounts specified in section 522(d) of the House bill have been reduced from amounts as contained in H.R. 8200 as passed by the House. The States may, by passing a law, determine whether the Federal ex-emptions will apply as an alternative to State exemptions in bankruptcy cases. Section 522(c)(1) tracks the House bill and provides that dischargeable tax claims may not be col-lected out of exempt property. Section 522(f)(2) is derived from the Senate amendment restricting the debtor to avoidance of nonpossessory, nonpurchase money security interests. Exemptions: Section 522(c)(1) of the House amendment adopts a provision contained in the House bill that dischargeable taxes cannot be collected from exempt assets. This changes present law, which allows collection of dischargeable taxes from exempt property, a rule followed in the Senate amendment. Nondischargeable taxes, however, will continue to the [be] collectable out of exempt property. It is anticipated that in the next session Congress will review the exemptions from levy currently contained in the Internal Revenue Code [title 26] with a view to increasing the ex-emptions to more realistic levels. Senate Report No. 95-989 Subsection (a) of this section defines two terms: "dependent" includes the debtor's spouse, whether or not actually dependent; and "value" means fair market value as of the date of the filing of the petition [see the 1984 amendment to subsec. (a)(2) of this section]. Subsection (b) tracks current law. It permits a debtor the exemptions to which he is entitled under other Federal law and the law of the State of his domicile. Some of the items that may be exempted under Federal laws other than title 11 include: Foreign Service Retirement and Disability payments, 22 U.S.C. 1104 [replaced by 22 U.S.C. 4060(c)]; Social security payments, 42 U.S.C. 407; Injury or death compensation payments from war risk hazards, 42 U.S.C. 1717; Wages of fishermen, seamen, and apprentices, 46 U.S.C. 601 [Replaced by 46 U.S.C. 11108, 11109]; Civil service retirement benefits, 5 U.S.C. 729, 2265 [replaced by 5 U.S.C. 8346]; Longshoremen's and Harbor Workers' Compensation Act death and disability benefits, 33 U.S.C. 916; Railroad Retirement Act annuities and pensions, 45 U.S.C. 228(L) [replaced by 45 U.S.C. 231m];

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Veterans benefits, 45 U.S.C. 352(E) [Railroad unemployment benefits are covered by 45 U.S.C. 352(e)]; Special pensions paid to winners of the Congressional Medal of Honor, 38 U.S.C. 3101 [Veterans benefits generally are covered by 38 U.S.C. 3101]; and Federal homestead lands on debts contracted before issuance of the patent, 43 U.S.C. 175. He may also exempt an interest in property in which the debtor had an interest as a tenant by the entirety or joint tenant to the extent that interest would have been exempt from process under appli-cable nonbankruptcy law. Under proposed section 541, all property of the debtor becomes property of the estate, but the debtor is permitted to exempt certain property from property of the estate under this section. Prop-erty may be exempted even if it is subject to a lien, but only the unencumbered portion of the prop-erty is to be counted in computing the "value" of the property for the purposes of exemption. As under current law, the debtor will be permitted to convert nonexempt property into exempt property before filing a bankruptcy petition. The practice is not fraudulent as to creditors, and per-mits the debtor to make full use of the exemptions to which he is entitled under the law. Subsection (c) insulates exempt property from prepetition claims other than tax claims (whether or not dischargeable), and other than alimony, maintenance, or support claims that are excepted from discharge. The bankruptcy discharge does not prevent enforcement of valid liens. The rule of Long v. Bullard, 117 U.S. 617 (1886), is accepted with respect to the enforcement of valid liens on nonexempt property as well as on exempt property. Cf. Louisville Joint Stock Land Bank v. Rad-ford, 295 U.S. 555, 583 (1935). Subsection (c)(3) [probably a reference to subsec (c)(2) of this section] permits the collection of dischargeable taxes from exempt assets. Only assets exempted from levy under Section 6334 of the Internal Revenue Code [title 26] or under applicable state or local tax law cannot be applied to sat-isfy these tax claims. This rule applies to prepetition tax claims against the debtor regardless of whether the claims do or do not receive priority and whether they are dischargeable or nondis-chargeable. Thus, even if a tax is dischargeable vis-a-vis the debtor's after-acquired assets, it may nevertheless be collectible from exempt property held by the estate. (Taxes incurred by the debtor's estate which are collectible as first priority administrative expenses are not collectible from the debtor's estate which are collectible as first priority administrative expenses are not collectible from the debtor's exempt assets.) Subsection (d) [subsec. (e) of this section] protects the debtor's exemptions, either Federal or State, by making unenforceable in a bankruptcy case a waiver of exemptions or a waiver of the debtor's avoiding powers under the following subsections. Subsection (e) [subsec. (f) of this section] protects the debtor's exemptions, his discharge, and thus his fresh start by permitting him to avoid certain liens on exempt property. The debtor may avoid a judicial lien on any property to the extent that the property could have been exempted in the absence of the lien, and may similarly avoid a nonpurchase-money security interest in certain household and personal goods. The avoiding power is independent of any waiver of exemptions. Subsection (f) [subsec. (g) of this section] gives the debtor the ability to exempt property that the trustee recovers under one of the trustee's avoiding powers if the property was involuntarily trans-ferred away from the debtor (such as by the fixing of a judicial lien) and if the debtor did not con-ceal the property. The debtor is also permitted to exempt property that the trustee recovers as the result of the avoiding of the fixing of certain security interests to the extent that the debtor could otherwise have exempted the property.

Page 11 11 USCS § 522

Subsection (g) [subsec. (h) of this section] provides that if the trustee does not exercise an avoid-ing power to recover a transfer of property that would be exempt, the debtor may exercise it and ex-empt the property, if the transfer was involuntary and the debtor did not conceal the property. If the debtor wishes to preserve his right to pursue any action under this provision, then he must intervene in any action brought by the trustee based on the same cause of action. It is not intended that the debtor be given an additional opportunity to avoid a transfer or that the transferee should have to defend the same action twice. Rather, the section is primarily designed to give the debtor the rights the trustee could have, but has not, pursued. The debtor is given no greater rights under this provi-sion than the trustee, and thus, the debtor's avoiding powers under proposed sections 544, 545, 547, and 548, are subject to proposed 546, as are the trustee's powers. These subsections are cumulative. The debtor is not required to choose which he will use to gain an exemption. Instead, he may use more than one in any particular instance, just as the trustee's avoiding powers are cumulative. Subsection (h) [subsec. (i) of this section] permits recovery by the debtor of property transferred by an avoided transfer from either the initial or subsequent transferees. It also permits preserving a transfer for the benefit of the debtor. In either event, the debtor may exempt the property recovered or preserved. Subsection (i) [subsec. (j) of this section] makes clear that the debtor may exempt property under the avoiding subsections (f) and (h) only to the extent he has exempted less property than allowed under subsection (b). Subsection (j) [subsec. (k) of this section] makes clear that the liability of the debtor's exempt property is limited to the debtor's aliquot share of the costs and expenses recovery of property that the trustee recovers and the debtor later exempts, and any costs and expenses of avoiding a transfer by the debtor that the debtor has not already paid. Subsection (k) [subsec. (l) of this section] requires the debtor to file a list of property that he claims as exempt from property of the estate. Absent an objection to the list, the property is ex-empted. A dependent of the debtor may file it and thus be protected if the debtor fails to file the list. Subsection (l) [subsec. (m) of this section] provides the rule for a joint case. House Report No. 95-595 Subsection (a) of this section defines two terms: "dependent" includes the debtor's spouse, whether or not actually dependent; and "value" means fair market value as of the date of the filing of the petition. Subsection (b), the operative subsection of this section, is a significant departure from present law. It permits an individual debtor in a bankruptcy case a choice between exemption systems. The debtor may choose the Federal exemptions prescribed in subsection (d), or he may choose the ex-emptions to which he is entitled under other Federal law and the law of the State of his domicile. If the debtor chooses the latter, some of the items that may be exempted under other Federal laws in-clude: --Foreign Service Retirement and Disability payments, 22 U.S.C. 1104 [replaced by 22 U.S.C. 4060(c)]; --Social security payments, 42 U.S.C. 407; --Injury or death compensation payments from war risk hazards, 42 U.S.C. 1717; --Wages of fishermen, seamen, and apprentices, 46 U.S.C. 601 [Replaced by 46 U.S.C. 11108, 11109]; --Civil service retirement benefits, 5 U.S.C. 729, 2265 [replaced by 5 U.S.C. 8346];

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--Longshoremen's and Harbor Workers' Compensation Act death and disability benefits, 33 U.S.C. 916; --Railroad Retirement Act annuities and pensions, 45 U.S.C. 228(l) [replaced by 45 U.S.C. 231m]; --Veterans benefits, 45 U.S.C. 352(E) [railroad unemployment benefits are covered by 45 U.S.C. 352(e)]; --Special pensions paid to winners of the Congressional Medal of Honor, 38 U.S.C. 3101 [veter-ans benefits generally are covered by 38 U.S.C. 3101]; and --Federal homestead lands on debts contracted before issuance of the patent, 43 U.S.C. 175. He may also exempt an interest in property in which the debtor had an interest as a tenant by the entirety or joint tenant to the extent that interest would have been exempt from process under appli-cable nonbankruptcy law. The Rules will provide for the situation where the debtor's choice of ex-emption, Federal or State, was improvident and should be changed, for example, where the court has ruled against the debtor with respect to a major exemption. Under proposed 11 U.S.C. 541, all property of the debtor becomes property of the estate, but the debtor is permitted to exempt certain property from property of the estate under this section. Prop-erty may be exempted even if it is subject to a lien, but only the unencumbered portion of the prop-erty is to be counted in computing the "value" of the property for the purposes of exemption. Thus, for example, a residence worth $ 30,000 with a mortgage of $ 25,000 will be exemptable to the ex-tent of $ 5,000. This follows current law. The remaining value of the property will be dealt with in the bankruptcy case as is any interest in property that is subject to a lien. As under current law, the debtor will be permitted to convert nonexempt property into exempt property before filing a bankruptcy petition. See Hearings, pt. 3, at 1355-58. The practice is not fraudulent as to creditors and permits the debtor to make full use of the exemptions to which he is entitled under the law. Subsection (c) insulates exempt property from prepetition claims, except tax and alimony, main-tenance, or support claims that are excepted from discharge. The bankruptcy discharge will not pre-vent enforcement of valid liens. The rule of Long v. Bullard, 117 U.S. 617 (1886) [6 S.Ct. 917, 29 L.Ed. 1004], is accepted with respect to the enforcement of valid liens on nonexempt property as well as on exempt property. Cf. Louisville Joint Stock Land Bank v. Radford, 295 U.S. 555, 583 (1935) [55 S.Ct. 854]. Subsection (d) specifies the Federal exemptions to which the debtor is entitled. They are derived in large part from the Uniform Exemptions Act, promulgated by the Commissioners of Uniform State Laws in August, 1976. Eleven categories of property are exempted. First is a homestead to the extent of $ 10,000 [now $ 18,450], which may be claimed in real or personal property that the debtor or a dependent of the debtor uses as a residence. Second, the debtor may exempt a motor ve-hicle to the extent of $ 1500 [now $ 2,950]. Third, the debtor may exempt household goods, furnish-ings, clothing, and similar household items, held primarily for the personal, family, or household use of the debtor or a dependent of the debtor. "Animals" includes all animals, such as pets, live-stock, poultry, and fish, if they are held primarily for personal, family or household use. The limita-tion for third category items is $ 300 [now $ 475] on any particular item. The debtor may also ex-empt up to $ 750 [now $ 1,225] of personal jewelry. Paragraph (5) permits the exemption of $ 500 [now $ 975], plus [up to $ 9,250 of] any unused amount of the homestead exemption, in any property, in order not to discriminate against the non-homeowner. Paragraph (6) grants the debtor up to $ 1000 [now $ 1,850] in implements, professional books, or tools, of the trade of the debtor or a dependent. Paragraph (7) exempts a life insurance contract, other than a credit life insurance contract, owned by the debtor. This paragraph refers to

Page 13 11 USCS § 522

the life insurance contract itself. It does not encompass any other rights under the contract, such as the right to borrow out the loan value. Because of this provision, the trustee may not surrender a life insurance contract, which remains property of the debtor if he chooses the Federal exemptions. Paragraph (8) permits the debtor to exempt up to $ 5000 [now $ 9,850] in loan value in a life insur-ance policy owned by the debtor under which the debtor or an individual of whom the debtor is a dependent is the insured. The exemption provided by this paragraph and paragraph (7) will also in-clude the debtor's rights in a group insurance certificate under which the insured is an individual of whom the debtor is a dependent (assuming the debtor has rights in the policy that could be ex-empted) or the debtor. A trustee is authorized to collect the entire loan value on every life insurance policy owned by the debtor as property of the estate. First, however, the debtor will choose which policy or policies under which the loan value will be exempted. The $ 5000 figure [now $ 4000] is reduced by the amount of any automatic premium loan authorized after the date of the filing of the petition under section 542(d). Paragraph (9) exempts professionally prescribed health aids. Paragraph (10) exempts certain benefits that are akin to future earnings of the debtor. These in-clude social security, unemployment compensation, or public assistance benefits, veteran's benefits, disability, illness, or unemployment benefits, alimony, support, or separate maintenance (but only to the extent reasonably necessary for the support of the debtor and any dependents of the debtor), and benefits under a certain stock bonus, pension, profitsharing, annuity or similar plan based on illness, disability, death, age or length of service. Paragraph (11) allows the debtor to exempt certain com-pensation for losses. These include crime victim's reparation benefits, wrongful death benefits (with a reasonably necessary for support limitation), life insurance proceeds (same limitation), compensa-tion for bodily injury, not including pain and suffering ($ 10,000 limitation [now $ 7,500]), and loss of future earnings payments (support limitation). This provision in subparagraph (D)(11) is de-signed to cover payments in compensation of actual bodily injury, such as the loss of a limb, and is not intended to include the attendant costs that accompany such a loss, such as medical payments, pain and suffering, or loss of earnings. Those items are handled separately by the bill. Subsection (e) protects the debtor's exemptions, either Federal or State, by making unenforceable in a bankruptcy case a waiver of exemptions or a waiver of the debtor's avoiding powers under the following subsections. Subsection (f) protects the debtor's exemptions, his discharge, and thus his fresh start by permit-ting him to avoid certain liens on exempt property. The debtor may avoid a judicial lien on any property to the extent that the property could have been exempted in the absence of the lien, and may similarly avoid a nonpurchase-money security interest in certain household and personal goods. The avoiding power is independent of any waiver of exemptions. Subsection (g) gives the debtor the ability to exempt property that the trustee recovers under one of the trustee's avoiding powers if the property was involuntarily transferred away from the debtor (such as by the fixing of a judicial lien) and if the debtor did not conceal the property. The debtor is also permitted to exempt property that the trustee recovers as the result of the avoiding of the fixing of certain security interests to the extent that the debtor could otherwise have exempted the prop-erty. If the trustee does not pursue an avoiding power to recover a transfer of property that would be exempt, the debtor may pursue it and exempt the property, if the transfer was involuntary and the debtor did not conceal the property. If the debtor wishes to preserve his right to pursue an action under this provision, then he must intervene in any action brought by the trustee based on the same cause of action. It is not intended that the debtor be given an additional opportunity to avoid a trans-fer or that the transferee have to defend the same action twice. Rather, the section is primarily de-

Page 14 11 USCS § 522

signed to give the debtor the rights the trustee could have pursued if the trustee chooses not to pur-sue them. The debtor is given no greater rights under this provision than the trustee, and thus the debtor's avoiding powers under proposed 11 U.S.C. 544, 545, 547, and 548, are subject to proposed 11 U.S.C. 546, as are the trustee's powers. These subsections are cumulative. The debtor is not required to choose which he will use to gain an exemption. Instead, he may use more than one in any particular instance, just as the trustee's avoiding powers are cumulative. Subsection (i) permits recovery by the debtor of property transferred in an avoided transfer from either the initial or subsequent transferees. It also permits preserving a transfer for the benefit of the debtor. Under either case the debtor may exempt the property recovered or preserved. Subsection (k) makes clear that the debtor's aliquot share of the costs and expenses [for] recovery of property that the trustee recovers and the debtor later exempts, and any costs and expenses of avoiding a transfer by the debtor that the debtor has not already paid. Subsection (l) requires the debtor to file a list of property that he claims as exempt from property of the estate. Absent an objection to the list, the property is exempted. A dependent of the debtor may file it and thus be protected if the debtor fails to file the list. Subsection (m) [this subsec. does not exist; as to subsec. (m), see below] requires the clerk of the bankruptcy court to give notice of any exemptions claimed under subsection (l), in order that parties in interest may have an opportunity to object to the claim. Subsection (n) [subsec. (m) of this section] provides the rule for a joint case: each debtor is enti-tled to the Federal exemptions provided under this section or to the State exemptions, whichever the debtor chooses. Effective date of section: This section became effective on October 1, 1979, pursuant to § 402(a) of Act Nov. 6, 1978, P.L. 95-598, which appears as a note preceding 11 USCS § 101. Amendments: 1984. Act July 10, 1984 (applicable to cases filed 90 days after enactment as provided by § 522(a) of such Act, which appears as 11 USCS § 101 note), in subsec. (a), in para. (2), inserted "or, with respect to property that becomes property of the estate after such date, as of the date such property becomes property of the estate"; in subsec. (b), substituted the introductory matter for one which read: "Notwithstanding section 541 of this title, an individual debtor may exempt from property of the estate either--"; and substituted subsec. (c) for one which read: "(c) Unless the case is dismissed, property exempted under this section is not liable during or after the case for any debt of the debtor that arose, or that is determined under section 502 of this title as if such claim had arisen before the commencement of the case, except-- "(1) a debt of a kind specified in section 523(a)(1) or section 523(a)(5) of this title; or "(2) a lien that is-- "(A) not avoided under section 544, 545, 547, 548, 549, or 724(a) of this title;

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"(B) not voided under section 506(d) of this title; or "(C) (i) a tax lien, notice of which is properly filed; and "(ii) avoided under section 545(2) of this title.". Such Act further (effective as above), in subsec. (d), in para. (3), inserted "or $ 4,000 in aggregate value" and substituted para. (5) for one which read: "The debtor's aggregate interest, not to exceed in value $ 400 plus any unused amount of the exemption provided under paragraph (1) of this sub-section, in any property."; in subsec. (e), substituted "an exemption" for "exemptions"; and substi-tuted subsec. (m) for one which read: "This section shall apply separately with respect to each debtor in a joint case.". 1986. Act Oct. 27, 1986 (effective 30 days after enactment on 10/27/86, and applicable as provided by § 302 of such Act, which appears as 28 USCS § 581 note), in subsec. (h)(1), substituted "title" for "tittle" following "section 553 of this"; and in subsec. (i)(2), substituted "this" for "his" follow-ing "subsection (g) of". 1990. Act Nov. 29, 1990, in subsec. (c), in para. (1), deleted "or" following the semicolon, in para. (2)(B), substituted "; or" for the concluding period, and added para. (3). 1994. Act Oct. 22, 1994 (effective on enactment and inapplicable with respect to cases commenced prior to enactment, as provided by § 702 of such Act, which appears as 11 USCS § 101 note), in subsec. (b), substituted "Federal Rules of Bankruptcy Procedure" for "Bankruptcy Rules"; in sub-sec. (d), in para. (1), substituted "$ 15,000" for "$ 7,500", in para. (2), substituted "$ 2,400" for "$ 1,200", in para. (3), substituted "$ 400" for "$ 200", and "$ 8,000" for "$ 4,000", in para. (4), substi-tuted "$ 1,000" for "$ 500", in para. (5), substituted "$ 800" for "$ 400", and "$ 7,500" for "$ 3,750", in para. (6), substituted "$ 1,500" for "$ 750", in para. (8), substituted "$ 8,000" for "$ 4,000", in para. (10)(E)(iii), substituted "or 408" for "408, or 409" and substituted "Internal Revenue Code of 1986" for "Internal Revenue Code of 1954 (26 U.S.C. 401(a), 403(a), 403(b), 408, or 409)", and in para. (11)(D), substituted "$ 15,000" for "$ 7,500"; and in subsec. (f), in para. (2), re-designated subparas. (A)-(C) as cls. (i)-(iii), respectively, redesignated paras. (1) and (2) as sub-paras. (A) and (B), respectively, redesignated the introductory matter as para. (1), added a new para. (2), in para. (1), in the introductory matter, as so redesignated, inserted "but subject to paragraph (3)", in para. (1)(A), inserted ", other than a judicial lien that secures a debt--" and cls. (i) and (ii), and added para. (3). 1998. Effective April 1, 1998, and applicable to cases commenced on or after such date, as provided by 11 USCS § 104(b), the dollar amounts in subsec. (d) were automatically adjusted by substituting "$ 16,150" for "$ 15,000" in para. (1), by substituting "$ 2,575" for "$ 2,400" in para. (2), by substi-tuting "$ 425" for "$ 400" and "$ 8,625" for "$ 8,000" in para. (3), by substituting "$ 1,075" for "$ 1,000" in para. (4), by substituting "$ 850" for "$ 800" and "$ 8,075" for "$ 7,500" in para. (5), by substituting "$ 1,625" for "$ 1,500" in para. (6), by substituting "$ 8,625" for "$ 8,000" in para. (8), and by substituting "$ 16,150" for "$ 15,000" in para. (11)(D).

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2000. Act Nov. 1, 2000, in subsec. (c), in para. (2)(B), deleted "or" following the concluding semi-colon; in para. (3), substituted "; or" for a concluding period, and added para. (4). 2001. Effective April 1, 2001, and applicable to cases commenced on or after such date, as provided by 11 USCS § 104(b), the dollar amounts in subsec. (d) were automatically adjusted by substituting "$ 17,425" for "$ 16,150" in para. (1), by substituting "$ 2,775" for "$ 2,575" in para. (2), by substi-tuting "$ 450" for "$ 425" and "$ 9,300" for "$ 8,625" in para. (3), by substituting "$ 1,150" for "$ 1,075" in para. (4), by substituting "$ 925" for "$ 850" and "$ 8,725" for "$ 8,075" in para. (5), by substituting "$ 1,750" for "$ 1,625" in para. (6), by substituting "$ 9,300" for "$ 8,625" in para. (8), and by substituting "$ 17,425" for "$ 16,150" in para. (11)(D). 2004. Effective April 1, 2004, and applicable to cases commenced on or after such date, as provided by 11 USCS § 104(b), the dollar amounts in subsec. (d) were automatically adjusted by substituting "$ 18,450" for "$ 17,425" in para. (1), by substituting "$ 2,950" for "$ 2,775" in para. (2), by substi-tuting "$ 475" for "$ 450" and "$ 9,850" for "$ 9,300" in para. (3), by substituting "$ 1,225" for "$ 1,150" in para. (4), by substituting "$ 975" for "$ 925" and "$ 9,250" for "$ 8,725" in para. (5), by substituting "$ 1,850" for "$ 1,750" in para. (6), by substituting "$ 9,850" for "$ 9,300" in para. (8), and by substituting "$ 18,450" for "$ 17,425" in para. (11)(D). 2005. Act April 20, 2005 (effective 180 days after enactment and inapplicable to cases commenced before the effective date, as provided by § 1501 of such Act, which appears as 11 USCS § 101 note), in subsec. (b), inserted the paragraph designator "(1)" preceding "Notwithstanding" and, in such paragraph as so designated, substituted "paragraph (3)" for "paragraph (2)" wherever appear-ing, substituted "paragraph (2)" for "paragraph (1)" wherever appearing, and deleted "Such property is--" following "where the case is filed.", redesignated former paras. (1) and (2) as paras. (2) and (3), respectively, and, in para. (2) as redesignated, substituted the text for text which read: "property that is specified under subsection (d) of this section, unless the State law that is applicable to the debtor under paragraph (2)(A) of this subsection specifically does not so authorize; or, in the alter-native,", in para. (3) as redesignated, substituted "Property listed in this paragraph is-- "(A) Any property" for "(A) any property" and, in subpara. (A), substituted "730 days" for "180 days", substituted "or if the debtor's domicile has not been located at a single State for such 730-day period, the place in which the debtor's domicile was located for 180 days immediately preceding the 730-day period or for a longer portion of such 180-day period than in any other place" for ", or for a longer portion of such 180-day period than in any other place", and deleted "and" following the concluding semico-lon, in subpara. (B), substituted "; and" for a concluding period, added subpara. (C), and added the concluding matter, and added para. (4); in subsec. (c), substituted para. (1) for one which read: "(1) a debt of a kind specified in section 523(a)(1) or 523(a)(5) of this title;"; in subsec. (d), in the intro-ductory matter, substituted "subsection (b)(2)" for "subsection (b)(1)", and added para. (12); in sub-sec. (f), in para. (1)(A), substituted "of a kind that is specified in section 523(a)(5); or" for a dash and cls. (i) and (ii), which read:

Page 17 11 USCS § 522

"(i) to a spouse, former spouse, or child of the debtor, for alimony to, maintenance for, or sup-port of such spouse or child, in connection with a separation agreement, divorce decree or other or-der of a court of record, determination made in accordance with State or territorial law by a gov-ernmental unit, or property settlement agreement; and "(ii) to the extent that such debt-- "(I) is not assigned to another entity, voluntarily, by operation of law, or otherwise; and "(II) includes a liability designated as alimony, maintenance, or support, unless such liability is actually in the nature of alimony, maintenance or support;", and added para. (4); in subsec. (g)(2), substituted "subsection (f)(1)(B)" for "subsection (f)(2)"; and added subsec. (n). Such Act further (applicable to cases commenced under Title 11, USCS, on or after the date of enactment, as provided by § 1501(b)(2) of such Act, which appears as 11 USCS § 101 note), in sub-sec. (b)(3)(A), inserted "subject to subsections (o) and (p); added subsecs. (o)-(q). 2007. Effective April 1, 2007, and applicable to cases commenced on or after such date, as provided by 11 USCS § 104(b), the dollar amounts in this section were automatically adjusted, in subsec. (d), by substituting "$ 20,200" for "$ 18,450" in para. (1), by substituting "$ 3,225" for "$ 2,950" in para. (2), by substituting "$ 525" for "$ 475" and "$ 10,775" for "$ 9,850" in para. (3), by substitut-ing "$ 1,350" for "$ 1,225" in para. (4), by substituting "$ 1,075" for "$ 975" and "$ 10,125" for "$ 9,250" in para. (5), by substituting "$ 2,025" for "$ 1,850" in para. (6), by substituting "$ 10,775" for "$ 9,850" in para. (8), and by substituting "$ 20,200" for "$ 18,450" in para. (11)(D); in subsec. (f), by substituting "$ 5,475" for "$ 5,000" in para. (3), and by substituting "$ 550" for "$ 500" wherever appearing in para. (4); in subsec. (n), by substituting "$ 1,095,000" for "$ 1,000,000"; and in subsecs. (p) and (q), by substituting "$ 136,875" for "$ 125,000". NOTES: Related Statutes & Rules: Allowance of claims or interests, 11 USCS § 502. Administrative expenses payable out of nonexempt estate, 11 USCS § 503. Exception to discharge for tax or customs duty, 11 USCS § 523(a)(1). Exception to discharge for alimony or support obligations, 11 USCS § 523(a)(5). Property of the estate, 11 USCS § 541. Automatic transfer in good faith under life insurance contract, 11 USCS § 542(d). Trustee as lien creditor and successor to certain creditors and purchasers, 11 USCS § 544. Treatment of statutory liens, 11 USCS § 545. Avoidance of preferences, 11 USCS § 547. Avoidance of fraudulent transfers and obligations, 11 USCS § 548. Avoidance of certain postpetition transactions, 11 USCS § 549. Liability of transferee of avoided transfer, 11 USCS § 550. Automatic preservation of avoided transfer, 11 USCS § 551. Setoff, 11 USCS § 553. Treatment of liens not avoided under other sections, 11 USCS § 724. Denial of discharge for debtor's failure to perform duties, 11 USCS § 727. Exemptions, USCS Federal Rules of Bankruptcy Procedure, Rule 4003.

Page 18 11 USCS § 522

This section is referred to in 11 USCS §§ 101, 104, 106, 110, 349, 502, 542, 551, 552, 722, 1123; 26 USCS §§ 1017, 1398; 28 USCS § 3014; 29 USCS § 1405. Research Guide: Federal Procedure: 29 Moore's Federal Practice (Matthew Bender 3d ed.), ch 705, Admiralty Arrest and Attachment § 705.07. 5 Fed Proc L Ed, Bankruptcy §§ 9:259, 301, 329, 535, 549, 550, 685. 5A Fed Proc L Ed, Bankruptcy §§ 9:851, 853, 854, 858, 860-864, 866, 867, 871, 873, 880-882, 884, 886, 889-908, 910-922, 936, 937, 957, 959, 1046, 1047, 1222, 1251, 1252, 1408, 1448, 1494, 1502, 1509, 1512. 11 Fed Proc L Ed, Enforcement of Judgments § 31:82. Am Jur: 9 Am Jur 2d, Bankruptcy §§ 1, 15, 34, 114, 134-136, 140, 145, 294, 565, 614, 681. 9A Am Jur 2d, Bankruptcy §§ 935, 948, 949, 1080, 1250, 1251, 1261, 1269, 1285, 1303, 1334, 1395-1398, 1400, 1403, 1404, 1407, 1410, 1412-1418, 1420, 1421, 1425, 1427, 1430, 1435, 1437, 1438, 1440, 1446-1449, 1452-1454, 1456, 1458, 1462, 1463, 1465, 1467-1470, 1472, 1479, 1480, 1482-1501, 1503-1507; 1509, 1511-1521, 1523, 1526, 1528, 1530-1532, 1534, 1536, 1539, 1540, 1542, 1543, 1545-1548, 1551-1553, 1557, 1561, 1562, 1586, 1588, 1593. 9B Am Jur 2d, Bankruptcy §§ 1674, 1701, 1702, 1994, 1996, 2004, 2028, 2100, 2171, 2175. 9C Am Jur 2d, Bankruptcy §§ 2218, 2262, 2267, 2324, 2325, 2591, 2649, 2658, 2677, 2792, 2796, 2817, 2827, 2832. 9D Am Jur 2d, Bankruptcy §§ 3008, 3254, 3322, 3529, 3533, 3549, 3562. 9E Am Jur 2d, Bankruptcy §§ 3761-3764. 31 Am Jur 2d, Exemptions § 5. 60A Am Jur 2d, Pensions and Retirement Funds § 737. Am Jur Trials: 105 Am Jur Trials, Arbitration and Mediation of Bankruptcy Disputes, p. 125. Am Jur Proof of Facts: 104 Am Jur Proof of Facts 3d, Proof Under the Fair Debt Collection Practices Act, p. 1. 107 Am Jur Proof of Facts 3d, Proof of Contempt for Violation of Bankruptcy Discharge Injunc-tion (11 U.S.C.A. § 524(a)(2) [11 USCS § 524(a)(2)]) by Individual Debtor, p. 97.

Page 19 11 USCS § 522

Forms: 3 Bender's Federal Practice Forms, Form 8(IX):122, Federal Rules of Civil Procedure. 14 Bender's Federal Practice Forms, Forms 4575, 4576, Admiralty--Bankruptcy Forms. 5 Collier Forms Manual (3d ed. rev), Forms CS14.12, Discharge. 5 Collier Forms Manual (3d ed. rev), Forms CS15.04, Discrimination. 5 Collier Forms Manual (3d ed. rev), Forms CS17.02, CS17.03, CS17.13-CS17.15, CS17.22-CS17.26, CS17.32, CS17.33, Exemptions and Lien Avoidance. 4A Fed Procedural Forms L Ed, Bankruptcy (2004) §§ 9:796-807. 4A Am Jur Pl & Pr Forms (2004), Bankruptcy, §§ 134, 135, 295, 296, 298, 302-306. 10A Am Jur Pl & Pr Forms (2005), Exemptions, §§ 24-26. Commercial Law: 1 Debtor-Creditor Law (Matthew Bender), ch 8, Fair Debt Collection § 8.07. 1 Debtor-Creditor Law (Matthew Bender), ch 9, Garnishment and Exemptions § 9.09. 1 Debtor-Creditor Law (Matthew Bender), ch 10, Repossessions § 10.02. 1 Debtor-Creditor Law (Matthew Bender), ch 13, Foreclosure Defense §§ 13.13, 13.14. 2B Debtor-Creditor Law (Matthew Bender), ch 24, Secured Transactions §§ 24.06, 24.09. 3 Debtor-Creditor Law (Matthew Bender), ch 27, Enforcements of Money Judgments: Objectives and Restrictions § 27.03. 3 Debtor-Creditor Law (Matthew Bender), ch 31, Income Garnishment § 31.06. 3A Debtor-Creditor Law (Matthew Bender), ch 33, Bankruptcy Law § 33.05. 3A Debtor-Creditor Law (Matthew Bender), ch 34, Consumer Bankruptcy §§ 34.10, 34.11, 34.14. 3B Debtor-Creditor Law (Matthew Bender), ch 35, Assignments for the Benefit of Creditors § 35.07. 4 Debtor-Creditor Law (Matthew Bender), ch 39, Spendthrift Trusts and Their Functional Substi-tutes § 39.04. Bankruptcy: 1 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 1, Overview of Bankruptcy Law PP 1.02, 1.03. 1 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 3, Jurisdiction and Powers of District Courts and Bankruptcy Courts P 3.01. 1 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 4, Venue of Cases and Proceedings P 4.02. 2 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 101, Definitions PP 101.32, 101.36, 101.53. 2 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 104, Adjustment of Dollar Amounts PP 104.01, 104.03. 2 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 105, Power of Court P 105.04. 2 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 109, Who May Be a Debtor P 109.02.

Page 20 11 USCS § 522

2 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 110, Bankruptcy Petition Preparers P 110.LH. 2 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 302, Joint Cases PP 302.05, 302.07. 3 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 348, Effect of Conversion P 348.07. 3 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 362, Automatic Stay PP 362.03, 362.05, 362.06, 362.LH. 4 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 502, Allowance of Claims or Interests PP 502.03, 502.05, 502.06, 502.09, 502.LH. 4 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 506, Determination of Secured Status P 506.03. 4 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 521, Debtor's Duties PP 521.04, 521.10. 4 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 522, Exemptions PP 522.01 et seq. 4 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 523, Exceptions to Discharge PP 523.07, 523.11. 4 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 524, Effect of Discharge PP 524.02, 524.03. 4 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 527, Disclosures P 527.04. 5 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 541, Property of the Estate PP 541.04, 541.05, 541.07, 541.10, 541.11, 541.16, 541.22C. 5 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 546, Limitations on Avoiding Powers P 546.02. 5 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 547, Preferences PP 547.03, 547.04. 5 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 550, Liability of Transferee of Avoided Transfer P 550.01. 5 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 551, Automatic Preservation of Avoided Transfer P 551.01. 5 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 553, Setoff P 553.03. 5 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 554, Abandonment of Property of the Estate P 554.02. 6 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 700, General Analysis of Chapter 7 P 700.04. 6 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 704, Duties of Trustee P 704.02. 6 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 722, Redemption P 722.02. 6 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 724, Treatment of Certain Liens P 724.02. 6 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 726, Distribution of Property of the Estate P 726.03. 6 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 727, Discharge P 727.02. 7 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 1107, Rights, Powers and Duties of Debtor in Possession P 1107.02. 8 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 1141, Effect of Confirmation P 1141.05. 8 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 1300, General Analysis of Chapter 13 PP 1300.12, 1300.68, 1300.81, 1300.93, 1300.94, 1300.LH.

Page 21 11 USCS § 522

8 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 1303, Rights and Powers of Debtors P 1303.04. 8 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 1322, Contents of Plan PP 1322.06, 1322.14, 1322.19. 8 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 1325, Confirmation of Plan PP 1325.05, 1325.06, 1325.08. 8 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 1328, Discharge P 1328.09. 9 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 1007, Lists, Schedules and State-ments; Time Limits PP 1007.03, 1007.11. 9 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 1015, Consolidation or Joint Admini-stration of Cases Pending in Same Court PP 1015.04, 1015.RH. 9 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 1019, Conversion of a Chapter 11 Re-organization Case, Chapter 12 Family Farmer's Debt Adjustment Case, or Chapter 13 Individual's Debt Adjustment Case to a Chapter 7 Liquidation Case P 1019.10. 9 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 4003, Exemptions PP 4003.02-4003.05, 4003.RH. 9 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 4004, Grant or Denial of Discharge P 4004.05. 10 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 7001, Scope of Rules of Part VII P 7001.03. 10 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 7008, General Rules of Pleading P 7008.07. 10 Collier on Bankruptcy (Matthew Bender 15th ed. rev), ch 7017, Parties Plaintiff and Defen-dant; Capacity; Public Officers P 7017.03. 1 Collier Bankruptcy Practice Guide, ch 1, Initial Client Contact PP 1.03, 1.04, 1.09, 1.50. 1 Collier Bankruptcy Practice Guide, ch 4, Issues for Consideration Prior to Filing P 4.03. 1 Collier Bankruptcy Practice Guide, ch 15, Preparation of Lists, Schedules and Statements PP 15.03, 15.04. 1 Collier Bankruptcy Practice Guide, ch 17, Venue P 17.03. 1 Collier Bankruptcy Practice Guide, ch 18, Consolidation and Joint Administration P 18.07. 2 Collier Bankruptcy Practice Guide, ch 26, Duties of a Chapter 7 Trustee P 26.03. 2 Collier Bankruptcy Practice Guide, ch 36, Examinations PP 36.51, 36.53. 2 Collier Bankruptcy Practice Guide, ch 37, Conversion and Dismissal PP 37.03, 37.06, 37.10, 37.17. 3 Collier Bankruptcy Practice Guide, ch 53, Validity of Liens PP 53.01, 53.03. 3 Collier Bankruptcy Practice Guide, ch 62, Turnover of Property P 62.12. 4 Collier Bankruptcy Practice Guide, ch 64, Preferences P 64.02. 4 Collier Bankruptcy Practice Guide, ch 66, Setoffs P 66.07. 4 Collier Bankruptcy Practice Guide, ch 74, Exemptions PP 74.01-74.04, 74.06, 74.08-74.12, 74.14, 74.50, 74.52-74.54, 74.59, 74.61-74.67. 4 Collier Bankruptcy Practice Guide, ch 75, Discharge and Objections to Discharge PP 75.02, 75.26. 6 Collier Bankruptcy Practice Guide, ch 93, Taxes P 93.05. 6 Collier Bankruptcy Practice Guide, ch 100, Adjustment of Debts of a Family Farmer or Fisher-man with Regular Annual Income P 100.61.

Page 22 11 USCS § 522

6 Collier Bankruptcy Practice Guide, ch 101, Administration of the Chapter 13 Case and the Chapter 13 Plan (Appointment and Qualification of Chapter 13 Trustee; Duties of Chapter 13 Trus-tee; Proposal of Plan; Objections to Plan; Confirmation of Plan; Payout Under Plan; Discharge and Objections To Discharge) PP 101.06, 101.08, 101.09, 101.64B. 6 Collier Bankruptcy Practice Guide, ch 123, Post-Closing (Chapter 7) and Postconfirmation (Chapter 11) Problems PP 123.01, 123.05, 123.62a. 1 Collier Bankruptcy Manual, ch 1, Overview of Bankruptcy Law PP 1.02, 1.03. 1 Collier Bankruptcy Manual, ch 3, Jurisdiction and Powers of District Courts and Bankruptcy Courts P 3.01. 1 Collier Bankruptcy Manual, ch 4, Venue of Cases and Proceedings P 4.02. 1 Collier Bankruptcy Manual, ch 101, Definitions PP 101.32, 101.36, 101.53. 1 Collier Bankruptcy Manual, ch 104, Adjustment of Dollar Amounts PP 104.01, 104.03. 1 Collier Bankruptcy Manual, ch 109, Who May Be a Debtor P 109.02. 1 Collier Bankruptcy Manual, ch 302, Joint Cases PP 302.05, 302.07. 1 Collier Bankruptcy Manual, ch 348, Effect of Conversion P 348.07. 1 Collier Bankruptcy Manual, ch 362, Automatic Stay PP 362.03, 362.05, 362.06. 2 Collier Bankruptcy Manual, ch 502, Allowance of Claims or Interests PP 502.03, 502.09. 2 Collier Bankruptcy Manual, ch 506, Determination of Secured Status P 506.03. 2 Collier Bankruptcy Manual, ch 521, Debtor's Duties P 521.08. 2 Collier Bankruptcy Manual, ch 522, Exemptions PP 522.01 et seq. 2 Collier Bankruptcy Manual, ch 523, Exceptions to Discharge PP 523.06, 523.10. 2 Collier Bankruptcy Manual, ch 524, Effect of Discharge PP 524.02, 524.03. 2 Collier Bankruptcy Manual, ch 527, Disclosures P 527.04. 2 Collier Bankruptcy Manual, ch 541, Property of the Estate PP 541.04, 541.17, 541.23C. 2 Collier Bankruptcy Manual, ch 547, Preferences P 547.10. 2 Collier Bankruptcy Manual, ch 550, Liability of Transferee of Avoided Transfer P 550.01. 2 Collier Bankruptcy Manual, ch 551, Automatic Preservation of Avoided Transfer P 551.01. 2 Collier Bankruptcy Manual, ch 553, Setoff P 553.02. 2 Collier Bankruptcy Manual, ch 554, Abandonment of Property of the Estate P 554.02. 2 Collier Bankruptcy Manual, ch 700, General Analysis of Chapter 7 P 700.04. 2 Collier Bankruptcy Manual, ch 704, Duties of Trustee P 704.02. 2 Collier Bankruptcy Manual, ch 722, Redemption P 722.02. 2 Collier Bankruptcy Manual, ch 724, Treatment of Certain Liens P 724.02. 2 Collier Bankruptcy Manual, ch 726, Distribution of Property of the Estate P 726.03. 2 Collier Bankruptcy Manual, ch 727, Discharge P 727.02. 3 Collier Bankruptcy Manual, ch 1141, Effect of Confirmation P 1141.05. 3 Collier Bankruptcy Manual, ch 1300, General Analysis of Chapter 13 P 1300.03. 3 Collier Bankruptcy Manual, ch 1303, Rights and Powers of Debtors P 1303.04. 3 Collier Bankruptcy Manual, ch 1322, Contents of Plan PP 1322.06, 1322.14, 1322.19. 3 Collier Bankruptcy Manual, ch 1325, Confirmation of Plan PP 1325.05, 1325.06, 1325.08. 3 Collier Bankruptcy Manual, ch 1328, Discharge P 1328.09. Annotations:

Page 23 11 USCS § 522

What property is exempt from individual debtor's bankruptcy estate under § 522 of Bankruptcy Code of 1978 (11 USCS § 522), as amended, and similar predecessor provisions--Supreme Court cases. 161 L Ed 2d 1259. Authority of Congress under bankruptcy provision ("bankruptcy clause") in Federal Constitu-tion's Art. I, § 8, cl. 4, to legislate on subject of bankruptcies--Supreme Court cases. 163 L Ed 2d 1241. Avoidance Under § 522(f)(1) of Bankruptcy Code (11 U.S.C.A. § 522(f)(1) [11 USCS § 522(f)(1)]) of Judicial Lien on Debtor's Exempt Real Property. 14 ALR Fed 2d 593. Reopening Bankruptcy Case, Pursuant to § 350(b) of the Bankruptcy Code (11 U.S.C.A. § 350(b) [11 USCS § 350(b)]), to Add or Properly Schedule Omitted Creditor or Debt in "No Asset" Case in Which Deadline Was Not Set for Filing Proof of Claim. 25 ALR Fed 2d 1. Construction and Application of 11 U.S.C.A. § 541(a)(5)(A) [11 USCS § 541(a)(5)(A)], and Predecessor Statute, Respecting Property Vesting in Bankrupt after Bankruptcy by Bequest, Devise, or Inheritance. 38 ALR Fed 2d 11. Wife's claim to alimony or other allowances in divorce or separation suit as passing, or exempt from passing, to trustee in wife's bankruptcy, under § 70(a) of Bankruptcy Act, ([former] 11 USCS § 110(a)). 10 ALR Fed 881. Construction and application of proviso to § 70(a)(5) of Bankruptcy Act ([former] 11 USCS § 110(a)(5)) permitting bankrupt to hold insurance policy free from creditors' claims if he pays cash surrender value to trustee. 20 ALR Fed 861. Avoidance under 11 USCS § 522(f)(2) of the Bankruptcy Code of 1978 of nonpossessory, non-purchase-money security interest in debtor's exempt personal property. 55 ALR Fed 353. Avoidance under § 522(f)(1) of Bankruptcy Code of 1978 (11 USCS § 522(f)(1)) of judicial lien on debtor's exempt personal property. 124 ALR Fed 465. Individual retirement accounts as exempt property in bankruptcy. 133 ALR Fed 1. Validity of Legal Claim Predicated on Nonmarital Same-Sex Relationship. 8 ALR6th 339. Assumption of Mortgage on Real Property as Consideration for Conveyance That Is Attacked as Fraudulent. 15 ALR6th 241. Matters Constituting Unauthorized Practice of Law in Bankruptcy Proceedings. 32 ALR6th 531. Endowment policy as life insurance within exemption law. 30 ALR2d 751. What state exemption law, in point of time, governs bankrupt's exemption rights. 61 ALR2d 748. Sufficiency of scheduling of creditor's residence or address in bankruptcy proceeding, and pre-sumptions and burden of proof in connection therewith. 68 ALR2d 955. Validity of contractual stipulation or provision waiving debtor's exemption. 94 ALR2d 967. Texts: 10 Banking Law (Matthew Bender), ch 175, Loan Repayment § 175.08. 3B Benedict on Admiralty, Debtor's Exemptions § 14. 3B Benedict on Admiralty, Operation of the Estate by the Debtor in Possession or the Trustee § 21. Cohen's Handbook of Federal Indian Law (Matthew Bender), ch 7, Civil Jurisdiction § 7.07.

Page 24 11 USCS § 522

Law Review Articles: Braucher. A Guide to Interpretation of the 2005 Bankruptcy Law. 16 Am Bankr Inst L Rev 349, Winter 2008. Sobel; Eggertsen; Bernstein. Pension-Related Claims in Bankruptcy. 56 Am Bankr L J 155, Spring 1982. Hertz. Bankruptcy Code Exemptions: Notes on the Effect of States Law. 54 Am Bankr LJ 339, Fall 1980. Scuchman; Whorer. Personal Bankruptcy Data for Opt-Out Hearings and Other Purposes. 56 Am Bankr LJ 1, Winter 1982. Brown. Taking Exception to a Debtor's Discharge: The 2005 Bankruptcy Amendments Make It Easier. 79 Am Bankr LJ 419, Spring 2005. Waldron; Berman. Principled Principles of Statutory Interpretation: A Judicial Perspective after Two Years of BAPCPA. 81 Am Bankr LJ 195, Summer 2007. Ahart. The Liability of Property Exempted in Bankruptcy for Pre-Petition Domestic Support Ob-ligations after BAPCPA: Debtors Beware. 81 Am Bankr LJ 233, Summer 2007. Rao. Bankruptcy 2.0(05): Chapters, Changes, and Challenges: Testing the Limits of Statutory Construction Doctrines: Deconstructing the 2005 Bankruptcy Act. 55 Am U L Rev 1427, June 2006. Rao. Testing the Limits of Statutory Construction Doctrines: Deconstructing the 2005 Bankruptcy Act. 55 Am UL Rev 1427, June 2006. Haines. Section 522's Opt-Out Clause: Debtor's Bankruptcy Exemptions in a Sorry State. 1983 Ariz St L J 1, 1983. Fox. Section 522(b)(1): An Examination and Evaluation of the Opt-Out Proviso. 1983 Ariz St L J 395, 1983. Samole; Rosendorf. Homestead Exemption No Longer "Debtors' Paradise". 24-10 ABIJ 6, De-cember 2005. Fagone. Involuntary Individual Chapter 11 Post-BAPCPA as a Collection Device? 25-10 ABIJ 28, December 2006. Mitrani. A Year Older, a Year Wiser: The Evolution of BAPCPA and Florida's Homestead Ex-emption. 26-2 ABIJ 10, March 2007. Moratzka. Tipping the Cap: § 522(p) and the Ch. 7 Debtor. 26-3 ABIJ 14, April 2007. Bartell. The Peripatetic Debtor: Choice Of Law And Choice Of Exemptions. 22 Bank Dev J 401, Spring 2006. Evans; Lewis. An Empirical Economic Analysis of the 2005 Bankruptcy Reforms. 24 Bank Dev J 327, 2008. Vukowich. Bankruptcy Commission's Proposal Regarding Bankrupts' Exemption Rights. 63 Cal L Rev 1439, December 1975. Protection of a Debtor's "Fresh Start" Under the New Bankruptcy Code. 29 Catholic U L Rev 843, Summer 1980. Eisenberg. Denial of Exemptions in Bankruptcy Proceedings. 81 Com L J 510, December 1976. Resnick; Finkel. Tenant by the Entirety in Liquidation Under the Bankruptcy Code: When a House may not be a Home. 86 Com LJ 286, August/September 1981. Hughes. Code Exemptions: Far-Reaching Achievement. 28 DePaul L Rev 1025, Summer 1979. Wolf. Divorce, bankruptcy, and metaphysics: avoidance of marital liens under § 522(f) of the Bankruptcy Code, 31 Fam L Q 513, Fall 1997.

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Peterson. Protecting the former spouse's property settlement under the Bankruptcy Reform Act of 1994. 69 Fla BJ 52, December 1995. Abrams. Recreation Rental Arising From Nonpayment Will Prevail Over Buyer's Homestead Rights. 7 Fla St U L Rev 709, 1979. Lien Avoidance Under Section 522(f) of the Bankruptcy Code: Is Retrospective Application Con-stitutional? 49 Fordham L Rev 615, March 1981. Cushman; Miller. Effect of the New Bankruptcy Law on Traditional Surety Rights. 16 Forum 1011, Summer 1981. Dobbs; Anderson. Bankruptcy Law Changes Will Affect Business Cases Too: The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. 11 Ga Bar J 32, October 2005. Vukowich. Debtors' Exemption Rights. 62 Geo L J 779, February 1974. Constitutionality of Retroactive Lien Avoidance Under Bankruptcy Code Section 522(f). 94 Harv L Rev 1616, May 1981. Waxman; Rucki. Chapter 7 Bankruptcy Abuse: Means Testing is Presumptive, but "Totality" is Determinative. 45 Hous L Rev 901, Summer 2008. The New Bankruptcy Code: A Comparison of Texas and Federal Exemptions. 17 Houston L Rev 373, January 1980. Bankruptcy Code of 1978 and its Effect Upon Tenancies by the Entireties. 13 Ind L Rev 761, April 1980. Determining Constitutionality of the Bankruptcy Code "Opt-Out" Provisions; A Critical Look at In Re Sullivan [680 F2d 1131]. 15 Ind L Rev 849, Fall 1982. Hiatt. Bankruptcy: Avoidance of Non-Possessory Non-Purchase Money Liens Perfected Between Enactment of the Reform Act and Commencement of the Procedure. 50 J Kan BA 275, Winter 1981. Mapother. Federal Exemptions Under The Bankruptcy Code. 44 Ky Bench & B 12, January 1980. The Transformation Rule Under Section 522 of the Bankruptcy Code of 1978. 84 Michigan L Rev 109, October 1985. Bankruptcy--Loss of Exemptions in Bankruptcy--the Section 6 Proviso. 41 Mo L Rev 84, Winter 1976. Dickerson. Race Matters in Bankruptcy Reform. 71 Mo L Rev 919, Fall 2006. Bukowich. Debtor's Exemption Rights Under the Bankruptcy Reform Act. 58 N C L Rev 667, April 1980. Bennett. Bankruptcy and Matrimonial Assets. 132 New LJ 991, October 21, 1982. Resnick. House May Not be a Home: Liquidation Under the Bankruptcy Act. 53 NYS B J 272, 1981. Olidge. Divorce liens under Section 522(f) of the federal Bankruptcy Code: resolving tensions be-tween family and bankruptcy law. 67 NYU L Rev 879, October 1992. Woodward. Exemptions, Option Out, and Bankruptcy Reform. 43 Ohio St LJ 335. Hill. Lien Avoidance Under Section 522(f); can it be Utilized by the Debtor after the Closing of his Bankruptcy Case. 38 Pers Finance L Q Rep 7, Winter 1984. Waterman. A Primer for the General Practitioner: Consumer Bankruptcies. 77 PA Bar Assn. Quarterly 93, July 2006. DeWitt. Application of the New Bankruptcy Code to Real Estate Financing. 14 Real Prop Prob & Tr J 410, Summer 1979. Countryman. For a New Exemption Policy in Bankruptcy. 14 Rutgers L Rev 678, 1960.

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Resnick. Prudent Planning or Fraudulent Transfer? The Use of Nonexempt Assets to Purchase or Improve Exempt Property on the Wave Of Bankruptcy. 31 Rutgers L Rev 615, 1978. Stern. State Exemption Law In Bankruptcy: The Excepted Creditor as a Medium for Appraising Aspects of Bankruptcy Reform. 33 Rutgers L Rev 70, Fall 1980. Fitzgerald. We All Live in a Yellow Submarine: BAPCPA's Impact on Family Law Matters. 31 S Ill U LJ 563, Spring 2007. Dunham. Tracing the Proceeds of Exempt Assets in Bankruptcy and Non-Bankruptcy Cases. 1978 S Illinois U L J 317. Pedlar. Community Property and the Bankruptcy Reform Act of 1978. 11 St Mary's L J 349, 1979. Teofan; Creel. The Trustee's Avoiding Powers Under the Bankruptcy Act and the New Code: A Comparative Analysis. 11 St Mary's LJ 311, 1979. Hynes. Personal Bankruptcy in the 21st Century: Emerging Trends and New Challenges: Credit Markets, Exemptions, and Households With Nothing to Exempt. 7 Theoretical Inq L 493, July 2006. Section 522(f): A Proposal for the Survival of Purchase Money Security Interest Following Refi-nancing. 18 Tulsa L J 280, Winter 1982. Landry. Individual Chapter 11 Reorganizations: Big Problems with the New "Big" Chapter 13. 29 U Ark Little Rock L Rev 251, Winter 2007. The General Exemption of Section 522(d)(5) of the 1978 Bankruptcy Code. 49 U Chi L Rev 564, Spring 1982. Tabb. The Top Twenty Issues in the History of Consumer Bankruptcy. 2007 U Ill L Rev 9, 2007. Wedoff. Major Consumer Bankruptcy Effects of BAPCPA. 2007 U Ill L Rev 31, 2007. Braucher. The Challenge to the Bench and Bar Presented by the 2005 Bankruptcy Act: Resistance Need Not be Futile. 2007 U Ill L Rev 93, 2007. Estates by the Entirety in Bankruptcy. 15 U Mich J L Ref 399, Winter 1982. Avoiding Liens Under the New Bankruptcy Code: Construction and Application of Section 522(f). 15 U Mich J L Ref 577, Spring 1982. Hemmings. Bankruptcy Exemptions; State Law or Federal Policy? 35 U Pitt L Rev 630, Spring 1974. Controversy Surrounding Exemption Uniformity: The Opt-Out Provision of Section 522 of the New Bankruptcy Code. 13 U Tol L Rev 1111, Spring 1982. Clark. Preferences Under the Old and New Bankruptcy Acts. 12 Uniform Commercial Code L J 154, Fall 1979. Austin. California Evidence Code--Federal Rules of Evidence: The Bankruptcy Clause and the Eleventh Amendment: An Uncertain Boundary Between Federalism and State Sovereignty. 42 USF L Rev 383, Fall 2007. Plumb. The Recommendations of the Commission on the Bankruptcy Laws--Exempt and Immune Property. 61 Va L Rev 1, February 1975. Ferris. Bankruptcy law--avoidance of divorce liens under section 522(f)(1) of the Bankruptcy Code: all's fair in love and divorce. 14 W New England L Rev 221, 1992. Gilles. The Judgment-Proof Society. 63 Wash & Lee L Rev 603, Spring 2006. Moringiello. A tale of two codes: examining § 522(f) of the Bankruptcy Code, § 9-103 of the Uni-form Commercial Code and the proper role of state law in bankruptcy. 79 Wash U LQ 863, Fall 2001.

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Bankruptcy Reform Act of 1978: An Exemption Windfall for Joint Debtors? 18 Western L Rev 80, Fall 1981. Moringiello. Has Congress Slimmed Down the Hogs?: A Look at the BAPCPA Approach to Pre-Bankruptcy Planning. 15 Widener LJ 615, 2006. Price; Dalton. From Downhill to Slalom: An Empirical Analysis of the Effectiveness of BAPCPA (and Some Unintended Consequences). 26 Yale L & Pol'y Rev 135, Fall 2007. Emerging Issues Analysis

1. Collier on New Chapter 13 Discharge Requirements Under Section 1328(f), (g) and (h) of the Code

Section 1328 of the Bankruptcy Code provides for a discharge after the debtor has fully com-plied with his or her chapter 13 plan, and also for a hardship discharge in cases in which the debtor cannot complete payments under the plan due to circumstances for which the debtor should not be held accountable. This Emerging Issues Analysis covers the new chapter 13 discharge requirements under section 1328(f), (g), and (h) of the Code.

2. Collier on Standing and Authority to Pursue Preference Recoveries

This Emerging Issues Analysis covers standing and authority to pursue preference recoveries, including the authority to pursue the avoidance of preferential transfers in "the trustee" under Bank-ruptcy Code section 547; examiners in chapter 11 proceedings; postconfirmation appointed repre-sentatives; secured lenders and other purported assignees; and the ability of creditors' committees in interest to pursue preference actions derivatively.

3. Collier on Limitations on State Homestead Exemption Claims

In order to prevent abuse by some debtors, section 522 of the Bankruptcy Code added two sub-sections that limit the use of state homestead exemptions. This Emerging Issues Analysis explains the monetary limit when the property was acquired within 1,215 days prior to the filing of the bank-ruptcy case.

4. Collier on Discharge of Debts in a Chapter 11 Case

This Emerging Issues Analysis covers the discharge of debts in a chapter 11 case, including top-ics such as discharge of the debts of a debtor that is not an individual, discharge of the debts of an individual debtor, enjoining the collection of nondischargeable debt, discharge in a liquidating chapter 11 case, waiver of discharge, and the reaffirmation of debts.

5. Collier on Denial of Discharge Based on Previous Discharge in a Chapter 7 Case

Debtors beware: if you have previously been granted a discharge in a Chapter 7 case, you can be denied a discharge in your current case if it is filed too soon after your previous discharge. What are the relevant time periods that prevent successive discharges? The following article explains the applicability of different time periods as they apply to Chapter 7, 11 and 12 cases.

6. Collier on the Definition of "Insolvent" Under the Bankruptcy Code

Under the Bankruptcy Code, there is no requirement that a debtor be insolvent to obtain relief under title 11. Section 109(d) states "only a person that may be a debtor under chapter 7 may be a debtor under chapter 11." No requirement of insolvency is enunciated for filing under either chap-ter. This Emerging Issues Analysis discusses the definition of "insolvent" under the Code.

Page 28 11 USCS § 522

7. Collier on Overview of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005: Consumer Bankruptcy

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ended seven years of congressional silence on bankruptcy laws. This Emerging Issues Analysis addresses issues pertain-ing to consumer bankruptcy, including consumer credit counseling and briefing, the ability to dis-miss Chapter 7 cases for abuse, filing obligations and sanctions for failure to comply with the rules, the scope of an automatic stay, and exemptions.

8. Collier on Succession of Trustee to Rights to Unsecured Creditor under Section 544(b)

Bankruptcy Code subsection 544(b) gives the trustee the right to avoid any transfer of the debtor or any obligation incurred by the debtor that is voidable under applicable law by a creditor holding an unsecured claim that is allowable under the Bankruptcy Code or by a creditor holding an unse-cured claim for reimbursement or contribution that is not allowable only because of section 502(e). Interpretive Notes and Decisions: I.IN GENERAL 1. Generally 2. Constitutionality 3. Purpose 4. Construction 5.--Particular lan-guage 6. Relationship with other laws 7.--Right of setoff § 523 8.--Other particular Bankruptcy Code sections 9. Applicability to Chapter 11, 12 and 13 cases

II.APPLICABILITY OF STATE LAW EXEMPTIONS

A.In General 10. Generally 11. Applicable law 12. Uniformity not required 13. Amendment of state exemption laws 14. Election of federal or state exemptions 15. Domicile of debtor as determin-ing applicable state law 16.--Under particular circumstances 17. State court jurisdiction of claims against exempt property 18. Miscellaneous

B.Constitutionality of State Exemption Laws 19. Generally 20. Homestead statutes 21. Stat-utes restricting lien avoidance

C.Opt-Out by States

1.In General 22. Generally 23. Claim of "other federal exemptions" 24. Preemption of state statutes exempting ERISA plans 25. Opt-out of particular states

2.Application of Other Provisions of § 522 26. Generally 27. Separate application of exemp-tions to joint debtors 28. Lien avoidance 29.--Dependence on entitlement to exemption under state law 30.--Particular applications

III.ENTITLEMENT TO EXEMPTIONS

A.In General 31. Generally 32. Head of household or family 33. Partner 34. Miscellaneous

B.Spouses 35. Generally 36. Stacking of exemptions 37.--Federal and state exemptions 38.--State exemptions

IV.CLAIM AND ALLOWANCE OF EXEMPTIONS

A.In General 39. Generally 40. Necessity of claiming exemptions 41. Compliance with filing requirements 42. Combination of federal and state exemptions 43. Effect of claiming exemption 44. Title to exempt property 45. Res judicata 46. Miscellaneous

Page 29 11 USCS § 522

B.Time Exemptions are Determined 47. Generally 48. Filing of petition 49.--Under particular circumstances 50. Converted cases

C.Amendment of Claimed Exemptions 51. Generally 52. Timeliness 53. Payment of fees 54. Particular amendments

D.Objections

1.Generally 55. Generally 56. Standing to object 57. Sufficiency of objection 58. Procedure to object 59. Notice 60. Burden of proof 61. Miscellaneous

2.Time Limits for Objections

a.In General 62. Generally 63. Former Rule 403 time limits 64. Unclear claim of exemptions 65. Amended exemptions 66. Particular objections

b.Effect of Failure to File Timely Objection 67. Generally 68. Absolute right to exemption 69. Effect on avoiding liens

E.Fraudulent Conduct as Bar to Exemption

1.In General 70. Generally 71. Under particular circumstances

2.Conversion of Nonexempt Assets Into Exempt Assets 72. Generally 73. Homestead exemp-tion 74. Life insurance exemption 75. Annuity exemption 76. Other particular exemptions

F.Valuation of Exempt Property 77. Generally 78. Deduction for transaction costs 79. Hear-ing 80. Under particular circumstances

V.COLLECTION OF PREPETITION DEBT FROM EXEMPT PROPERTY 81. Gener-ally 82. Tax debt or liens

VI.KINDS OF PROPERTY EXEMPT

A.In General 83. Generally 84. Debtor's "interest" as equity in property 85. "Wild card" and spillover exemptions 86.--Use for specific property

B.Entireties and Joint Property Exempt From Process

1.In General 87. Generally 88. Under particular circumstances

2.Nonbankruptcy Law as Determining Exempt Status 89. Generally 90. Under particular circumstances

C.Homestead

1.In General 91. Generally 92. Qualifications for exemption 93. Marshaling 94. Appreciation since filing date 95. Residency 96. Ownership 97. Divorce or property settlements 98. Determina-tion of exemption 99. Miscellaneous

2.Proceeds of Sale of Homestead 100. Generally 101. Foreclosure sales 102. Particular pro-ceeds of other sales

3.Use or Occupancy 103. Generally 104. Dependents 105. Property inherited postpetition 106. Unimproved property 107. Rental of property 108. Debtor's move or sale postpetition 109. Aban-donment 110. Absence due to marital difficulties 111. Absence due to extreme circumstances 112. Other particular circumstances

Page 30 11 USCS § 522

4.Particular Homestead Property 113. Adjacent or appurtenant property 114. Burial plot 115. Cooperative 116. Farmland 117. Houseboat 118. Mobile home 119. Miscellaneous

5.Particular Homestead Exemptions 120. Federal homestead exemption 121. California 122. Florida 123. Iowa 124. Kentucky 125. Massachusetts 126. Minnesota 127. Mississippi 128. New York 129. Ohio 130. Oklahoma 131. Texas 132.--Business homestead exemption 133. Vermont 134. Virginia 135. Wyoming 136. Miscellaneous

D.Household Goods 137. Generally 138. Construction 139. Furniture 140. Flatware, china or glassware 141. Guns 142. Motor vehicles 143. Television, VCR or stereo 144. Miscellaneous

E.Tools of the Trade or Profession 145. Generally 146. Animals and livestock 147. Farm tools, machinery or equipment 148.--Particular items 149. Motor vehicles 150. Miscellaneous

F.Life Insurance 151. Generally 152. Unmatured life insurance contract 153. Cash surrender value 154. Proceeds on life of person on whom debtor was dependent 155. Miscellaneous

G.Benefit Payments 156. Generally 157. Social security 158. Veteran's benefits 159. Disability benefits 160. Worker's compensation 161. Other payments

H.Stock Bonus, Pension, Profit-Sharing, Annuity or Similar Plans

1.In General 162. Generally 163. Extent reasonably necessary for support

2.ERISA Qualified Plans 164. Generally 165. Exempt under "other federal law" under § 522(b)(2)(A) 166. Exempt under § 522(d)(10)(E)

3.Other Plans 167. Annuities 168.--Resulting from lawsuit settlement 169.--Lottery winnings 170. Debtor's participation interest in retirement system 171. Contributions to pension or retirement plan 172. Individual Retirement Accounts 173.--Deference to IRS determinations 174.--Particular accounts 175. Keogh plans 176. Pension or profit-sharing plans 177.--Particular plans and payments 178. Savings and investment plans 179. Simplified Employee Pension plans 180. Miscellaneous

I.Other Property 181. Generally 182. Animals and livestock 183. Art 184. Causes of action 185.--Personal injury actions and awards 186.----Multiple causes of action 187.----Particular causes of action 188.--Other particular actions and awards 189. Damages and restitution 190. Equipment 191. Income tax refunds 192.--Based upon earned income tax credit 193. Inheritances 194. Insur-ance proceeds from loss of exempt property 195. Licenses 196. Money or accounts 197. Motor ve-hicles 198. Spousal support 199. Tax credits 200. Wages 201.--What constitutes exemptable wages 202.--Independent contractor earnings 203. Wearing apparel and jewelry 204. Miscellaneous

VII.WAIVER OF EXEMPTIONS 205. Generally 206. Validity of particular waivers

VIII.AVOIDANCE OF LIENS ON EXEMPT PROPERTY

A.In General 207. Generally 208. Constitutionality of lien avoidance 209.--Fifth Amendment 210.--Tenth Amendment 211. Purpose 212. Relationship with other laws 213. Application to Chap-ter 12 214. Application to Chapter 13 215. Applicable law 216. Discretion of court 217. Sovereign immunity 218. Effect of lien avoidance

B.Determination of Impairment of Exemptions

1.In General 219. Generally 220. Formal requirements 221. Ownership requirement 222. Debtor's interest in property

Page 31 11 USCS § 522

223. Equity as prerequisite 224. Entitlement to exemption as prerequisite 225.--Lien-encumbered property as non-exempt 226. Requirement exemption be claimed 227. Claim of federal or state exemption 228. Failure to object to exemption 229. Ability to challenge validity of exemption for lien avoidance purposes 230. Application of "wildcard" or spillover exemptions 231. Effect of abandonment 232. Effect of exemption stacking 233. Effect of waiver of exemption 234. Fraud as a defense to lien avoidance 235. Miscellaneous

2.Impairment of Exemption as Limiting Extent of Avoidance 236. Generally 237. Determination of value 238.--Particular determinations 239. Calculation of amount avoided

C.Practice and Procedure 240. Generally 241. Standing 242. Time limitations 243.--Subsequent to discharge 244.--Reopened case 245.--Under other particular circumstances 246. Burden of proof 247. Res judicata 248. Miscellaneous

D.Retroactive Application of Lien Avoidance Provisions

1.In General 249. Generally 250. Particular liens 251.--Security interests

2.Constitutionality 252. Generally 253. Due process 254. Taking without just compensation 255. Liens created prior to enactment date 256.--Security interests 257.----Particular applications 258.--Judicial liens 259.--Liens held by United States 260. Liens created during "gap period" between enactment and effective dates 261.--Security interests

Page 32 11 USCS § 522

262.--Particular applications 263.--Judicial liens 264.--Other liens

E.Particular Liens

1.In General 265. Generally 266. Statutory liens 267.--Tax liens 268. Mechanics' liens 269. Equitable liens 270. Consensual or voluntary liens 271.--Mortgage liens 272.--Consensual liens subsequent to avoidable liens 273. Miscellaneous

2.Judicial Liens

a.In General 274. Generally 275. Formal requirements 276. What constitutes judicial lien 277.--Liens arising from divorce 278.--Confessions of judgment 279.--Attorney liens 280.--Garnishment liens 281.--Equitable liens 282.--Other particular liens 283. Unenforceable or unattached judicial liens 284. Fixing of lien on debtor's interest 285. Effect of discharge or dischargeability of underlying debt 286. Miscellaneous

b.Avoidance of Particular Judicial Liens 287. Liens securing debt to spouse, former spouse or child 288. Liens on entireties or jointly owned property 289. Liens on garnished funds of debtor 290. Other particular liens avoided 291. Other particular liens partially avoided 292. Other particular liens not avoided

3.Security Interests

a.In General 293. Generally 294. Purchase money security interests 295.--Effect of renewal or refinancing 296.--Effect of consolidation 297.--Effect of other modifications

Page 33 11 USCS § 522

298. Nonpossessory, nonpurchase money security interests 299. Miscellaneous

b.Impairment of Particular Exempt Property

(1).Household Goods 300. Generally 301. What constitutes "household goods" 302. Animals and livestock 303. Furniture or appliances 304. Guns 305. Money or accounts 306. Motor vehicles 307. Recreational items 308. Television, VCR or stereo 309. Miscellaneous

(2).Tools of the Trade or Profession 310. Generally 311. Farm tools, machinery, equipment or animals 312.--Farmer or farming requirement 313. Motor vehicles 314. Equipment 315. Other particular property

IX.DEBTOR'S POWER TO EXEMPT TRANSFERRED PROPERTY

A.In General 316. Generally 317. Avoidance by trustee 318. Avoidance by debtor 319. Standing of Chapter 11, 12 and 13 debtors 320. Sufficiency of complaint and its effect 321. Creditor opposition 322. Transfer avoidable by debtor under § 522(f) 323. Transfer avoidable by debtor under § 544 324. Transfer or property reserved for debtor's benefit 325. Miscellaneous

B.Involuntary Transfers

1.In General 326. Generally 327. Concealment of property

2.Particular Transfers 328. Preferences 329. Security interests 330. Setoffs 331. Tax sales or liens

Page 34 11 USCS § 522

332. Water or sewer liens 333. Wage assignments 334. Miscellaneous

C.Particular Property 335. Real property 336. Motor vehicles 337. Wages of debtor 338. Insurance proceeds 339. Miscellaneous

I.IN GENERAL 1. Generally

Bankruptcy court did not err by holding that trustees of Chapter 7 estates could transfer their avoidance powers under 11 USCS § 544 and 11 USCS § 522. Duckor Spradling & Metzger v Baum Trust (In re P.R.T.C., Inc.) (1999, CA9 Cal) 177 F3d 774, 99 CDOS 3665, 99 Daily Journal DAR 4734, 34 BCD 480, 42 CBC2d 269.

Fresh start guaranteed by bankruptcy, and supported by exemption scheme, does not entitle debtor to maintain lifestyle to which he was accustomed in better times. Sheehan v Morehead (In re Morehead) (2002, CA4 W Va) 283 F3d 199, CCH Bankr L Rptr P 78614.

If debtor needs property for fresh start or necessities of life, debtor must follow exemption proc-ess under 11 USCS § 522. In re Guerrero (1983, ND Ind) 30 BR 463.

Congress has exclusive jurisdiction to determine precisely what exemptions debtor may claim and, under Bankruptcy Code, intended that, in joint case, each debtor be entitled to exemptions. In re Thompson (1980, BC ED Va) 2 BR 380, 5 BCD 1302, 1 CBC2d 467.

Although, under prior law, bankrupt was able to claim as exempt property which was allowable as exempt by federal law or state law, Bankruptcy Code takes different approach, and contains own exemption provisions, in 11 USCS § 522, but gives debtor option of electing to take federal exemp-tions or exemptions provided under federal non-bankruptcy law and state law. In re Meyers (1980, BC ED Mich) 2 BR 603, 5 BCD 1306, 1 CBC2d 470.

Bankruptcy courts have jurisdiction over exempt property to enforce mandates of 11 USCS § 522, and court has power to determine which exemption statutes are applicable. In re Volk (1983, BC DC SD) 26 BR 457, 9 BCD 1382, 7 CBC2d 1096.

Debtor's exercise of right under 11 USCS § 522(b) to exempt certain property operates to re-move exempted property from estate and return it to debtor for his fresh start. In re Berkovics (1985, BC ED Va) 50 BR 223.

Even exempt property under 11 USCS § 522 must initially be regarded as property of estate un-der 11 USCS § 541 and then claimed and distributed as exempt. In re Poynor (1987, BC ND Tex) 68 BR 919.

Exemption may be defined as right given by law to debtor to retain portion of his personal prop-erty free from seizure and sale by his creditors under judicial process; its grant or withdrawal is to-tally dependent on will of state, and is normally enacted on grounds of public policy for humane or generous purpose. In re Komet (1989, BC WD Tex) 104 BR 799.

Page 35 11 USCS § 522

Exemption is interest of debtor in property that is withdrawn from bankruptcy estate, and placed outside reach of creditors. In re Cohen (2001, BC DC NJ) 263 BR 724.

11 USCS § 522(f) applies only when lien impairs exemption. In re Poppe (2004, BC DC Neb) 52 CBC2d 394.

Debtor in bankruptcy is entitled to exempt certain assets from bankruptcy estate under 11 USCS §§ 522, 541. Sticka v Casserino (In re Casserino) (2003, BAP9) 290 BR 735, 2003 CDOS 2193, 2003 Daily Journal DAR 2799, affd (2004, CA9) 379 F3d 1069, CCH Bankr L Rptr P 80147.

2. Constitutionality

Opt-out section of 11 USCS § 522(b)(1) does not violate constitutional provision that empowers Congress "to establish uniform laws on the subject of bankruptcies"; Supreme Court applied con-cept of geographical uniformity in upholding Bankruptcy Act of 1898, and the Court has upheld validity of 45 USCS §§ 701-794 on geographical uniformity rule as well as cited cases for proposi-tion that "Congress can give effect to allowance of exemptions prescribed by state law without vio-lating uniformity requirement"; arguments posed by debtors regarding the correctness of geographi-cal uniformity rule are not persuasive. In re Sullivan (1982, CA7 Ill) 680 F2d 1131, 9 BCD 140, 6 CBC2d 972, CCH Bankr L Rptr P 68700, cert den (1982) 459 US 992, 74 L Ed 2d 388, 103 S Ct 349.

11 USCS § 552(b)(1), which authorizes state to opt out of federal exemption scheme and allows states to elect differing exemption structures, is exercise of legislative prerogative to establish "uni-form law" under Article 1 § 8 Clause 4 of United States Constitution and therefore falls within scope of bankruptcy authority provided to Congress. Rhodes v Stewart (1983, CA6 Tenn) 705 F2d 159, 10 BCD 596, 8 CBC2d 451, CCH Bankr L Rptr P 69140, cert den (1983) 464 US 983, 78 L Ed 2d 361, 104 S Ct 427 and (criticized in In re Cross (2000, BC ND Ind) 255 BR 25).

11 USCS § 522 (b)(1) and (b)(2)(A) are not violative of Article I, § 8, clause 4 of Constitution; further, § 522(b)(1) is not unconstitutional delegation of congressional legislative power but rather it's recognition of concurrent legislative power of state legislatures to enact laws governing bank-ruptcy exemption. In re Lausch (1981, MD Fla) 16 BR 162, 6 CBC2d 59.

Congress did not improperly delegate its authority in permitting states to opt out of federal ex-emption scheme under 11 USCS § 522(b)(1). In re Lausch (1981, BC MD Fla) 12 BR 55, affd (1981, MD Fla) 16 BR 162, 6 CBC2d 59.

11 USCS § 522(b) is not unconstitutional on grounds that it creates dual system of exemptions which varies from state to state in violation of Bankruptcy Clause of United States Constitution, re-quiring uniform laws on subject of bankruptcies. In re Thompson (1988, BC WD Wis) 82 BR 985, 19 CBC2d 297.

Delegation of power by Congress creating "opt-out" provision of 11 USCS § 522(b)(2) is not in-appropriate delegation of federal power, but, rather, enactment of § 522(b)(2) was nothing more than long-standing recognition by Congress of existing exemption laws of states; provision does nothing more than authorize states to determine extent of exemptions available to its citizens, and retention of power by state is certainly acceptable division of power between state and federal gov-ernments. In re Snape (1994, BC MD Fla) 172 BR 361, 31 CBC2d 1565, 8 FLW Fed B 182.

"Opt-out" provision of 11 USCS § 522(b) did not violate creditors' due process rights and did not constitute "taking," since it was rationally related to fresh start made available to debtors under

Page 36 11 USCS § 522

Bankruptcy Code, enacted in recognition of impossibility of enacting federal legislation that could take into account various circumstances and conditions existing from state-to-state, and was rational means of addressing that difficulty. In re Butcher (1995, BC DC Md) 189 BR 357, 8 Fourth Cir & Dist Col Bankr Ct Rep 238, CCH Bankr L Rptr P 76824, affd (1997, CA4 Md) 125 F3d 238, 9 Fourth Cir & Dist Col Bankr Ct Rep 467, CCH Bankr L Rptr P 77501.

11 USCS § 522(f) does not violate Takings Clause of Fifth Amendment where lien being avoided does not antedate, but rather was created after enactment of and subject to, § 522(f). In re Snyder (1999, BC DC Mass) 231 BR 437, affd in part and mod in part on other grounds (2000, BAP1) 249 BR 40, affd (2001, CA1) 248 F3d 1127, reported in full (2001, CA1) 2 Fed Appx 46.

11 USCS § 522(b)(3), as amended by Bankruptcy Abuse and Prevention and Consumer Protec-tion Act of 2005, Pub. L. 109-8, 119 Stat. 23, does not violate uniformity requirement found in U.S. Const. art. 1, § 8, Cl. 4, because it applies uniformly throughout U.S. to all debtors who sought pro-tection under Bankruptcy Code within 730 days of moving from one state to another. In re Urban (2007, BC DC Mont) 361 BR 910.

Georgia's opt out statute, O.C.G.A. § 44-13-100(b), does not violate Uniformity Clause of United States Constitution, U.S. Const. art. I, § 8, cl. 4, merely because it restricts its application to those that are currently domiciled in Georgia as opposed to those who are currently domiciled in another state. In re Chandler (2007, BC ND W Va) 362 BR 723.

Deadline for filing objections to exemptions did not bar Chapter 7 Trustee's enforcing 11 USCS § 522(g) prohibition on exemption of property recovered under 11 USCS §§ 549 and 550. In re Villegas (2007, BC DC NM) 364 BR 781.

11 USCS § 522(b)(3)(A) does not violate due process or equal protection under Fifth Amend-ment. In re Varanasi (2008, BC SD Ohio) 59 CBC2d 935.

Trustee's argument that 11 USCS § 522(b)(3)(A) was unconstitutional taking failed because un-secured creditors did not have property interest that was protected under Takings Clause of Fifth Amendment. In re Varanasi (2008, BC SD Ohio) 59 CBC2d 935.

11 USCS § 522(b)(3)(A) does not violate Uniformity Clause of U.S. Constitution. In re Varanasi (2008, BC SD Ohio) 59 CBC2d 935.

Law at issue in this case was federal law not state law since 11 USCS § 522(b)(3)(A) merely in-corporated state law into application of federal law; thus, trustee's Contract Clause challenge failed because there was no state law at issue in this case. 11 USCS § 522(b)(3)(A) does not violate Con-tract Clause. In re Varanasi (2008, BC SD Ohio) 59 CBC2d 935.

Provision under 11 USCS § 522(b)(1) which authorizes state to "opt out" of federal exemption scheme is constitutional, notwithstanding objections based on uniformity, legislative intent, federal pre-emption, and congressional delegation of authority. In re Stinson (1984, BAP9) 36 BR 946.

3. Purpose

Fresh start guaranteed by bankruptcy, and supported by exemption scheme, does not entitle debtor to maintain lifestyle to which he was accustomed in better times. Sheehan v Morehead (In re Morehead) (2002, CA4 W Va) 283 F3d 199, CCH Bankr L Rptr P 78614.

Page 37 11 USCS § 522

Congress did not intend 11 USCS § 522(f)(2)(C) as exception to otherwise avoidable liens. Banknorth, N.A. v Hart (In re Hart) (2003, CA1) 328 F3d 45, 41 BCD 79, CCH Bankr L Rptr P 78845.

Clear intent of 11 USCS § 522(f)(1) is to give debtors fresh start. Unifund C.C.R. Partners v Sheckard (In re Sheckard) (2008, ED Pa) 394 BR 56.

Federal exemption scheme reflects Federal interest in seeing that debtor who petitions bank-ruptcy court for relief comes out with adequate possessions to begin fresh start; alternative to home-stead exemption, in 11 USCS § 522(d)(5) permitting exemption in value of $ 400 plus unused amount of homestead exemption, is reflection of Congressional intention not to discriminate against nonhomeowner, or homeowner with little or no equity. In re Upright (1979, BC ND NY) 1 BR 694, 5 BCD 1124, 1 CBC2d 229.

Exemption laws have 5 basic purposes: to provide debtor enough money to survive, to protect debtor's dignity and cultural and religious identity, to afford means of financial rehabilitation, to protect family unit from impoverishment, and to spread burden of debtor's support from society to his creditors. In re Hahn (1980, BC SD Iowa) 5 BR 242, 2 CBC2d 761.

Purpose of 11 USCS § 522(b)(2)(B) is to give debtors benefit of any immunity from execution process they may have under state law. In re Hovatter (1982, BC DC Del) 25 BR 123.

Intent of 11 USCS § 522(f) is to assist debtor in his rehabilitation at expense of judicial lien creditors and creditors holding consensual nonpurchase money liens on consumer goods of kind specified and fact that liens would be effective under state law is immaterial and is no more related to right to avoid liens under 11 USCS § 522(f) than it is to right granted under 11 USCS § 544. In re Velasquez (1984, BC DC Idaho) 44 BR 1021.

Purpose of 11 USCS § 522 is to remove exempt property from debtor's estate and, after dis-charge, from claims of unsecured creditors. In re Duss (1987, BC WD Wis) 79 BR 821.

Enactment of and legislative history to 11 USCS § 522(f)(1) suggest that Congress intended that otherwise unsecured creditor not receive more by virtue of its judgment than it could otherwise ob-tain, and fact that bankruptcy followed in close proximity to particular creditor's obtaining judgment against debtor does not give that creditor special status under Bankruptcy Code. In re March (1988, BC ED Pa) 83 BR 270 (criticized in Lilley v United States (In re Lilley) (1995, BC ED Pa) 181 BR 809, CCH Bankr L Rptr P 76534, 75 AFTR 2d 2166, 95 TNT 100-27).

11 USCS § 522 was enacted to ensure that debtors come out of bankruptcy with adequate pos-sessions to obtain fresh start. In re Cohen (2001, BC DC NJ) 263 BR 724.

11 USCS § 522(p) is not designed to deal with fraudulent conversions of property at all; it is simply cap to be applied in cases in which debtor happens to have acquired interest in homestead within three years and four months prior to filing bankruptcy. In re Rasmussen (2006, BC MD Fla) 349 BR 747, 19 FLW Fed B 395.

Where Department of Housing and Urban Development, which violated automatic stay under circumstances where there was no evidence it did so willfully, sought retroactive relief by annul-ment of stay, annulment would have thwarted intent of both Congress and state in providing statu-tory mechanisms for equality of creditor treatment (11 USCS § 362) and debtor's fresh start, Va. Code Ann. § 34-4, 11 USCS § 522(b), (c); therefore, equities of case did not favor annulment of stay. Moore v United States HUD (In re Moore) (2006, BC WD Va) 350 BR 650.

Page 38 11 USCS § 522

4. Construction

State's "opt-out" exemption statute must be liberally construed in order to give full effect to leg-islative intent of providing fresh start. In re Keyworth (1985, DC Colo) 47 BR 966, 12 BCD 1137, CCH Bankr L Rptr P 70314.

Courts must not substantially depart from express language of exemption statutes in interpreting them and where state exemptions statute uses term without limitation, qualification, or definition, with intent to avoid constantly recurring questions as to whether or not particular item of personal property came within meaning of term, Bankruptcy Court will follow policy of state Supreme Court in construing exemptions liberally in favor of debtors. In re Hahn (1980, BC SD Iowa) 5 BR 242, 2 CBC2d 761.

Exemptions under state law should be given broad reading when it furthers congressional pur-pose of fresh start, is appropriate for type of property, and is consistent with literal reading of state law. In re Smith (1982, BC DC Md) 23 BR 708.

11 USCS § 522(f) is meant to be strictly construed; mere inconvenience is not enough to allow debtor to avoid lien. In re Meany (1982, BC DC Kan) 35 BR 3.

Exemption laws are to be construed liberally in favor of debtor. In re Burchard (1983, BC ED Mo) 2 BAMSL 604.

Exemption statute is entitled to construction liberal to debtor absent intent to delay, hinder, or defraud creditors of payments made thereunder. In re Worthington (1983, BC WD Ky) 28 BR 736.

Exemption statutes are to be liberally construed. In re Cycyk (1983, BC ND Ohio) 29 BR 722, 6 Ohio BR 511.

Bankruptcy Court will look to similar state and Bankruptcy Code exemption statutes for guid-ance in interpreting Missouri's statute exempting pensions where there are no Missouri cases inter-preting statutory exemption, but language is identical to federal exemption in 11 USCS § 522(d)(10)(E) and to many state exemption statutes. In re Bartlett (1986, BC WD Mo) 67 BR 455.

State and federal exemption statutes are to be liberally construed for benefit of debtor. In re Stanhope (1987, BC DC Mont) 76 BR 165.

Bankruptcy exemptions under 11 USCS § 522 are to be construed liberally in favor of debtor. In re Shaffer (1987, BC DC SC) 78 BR 783, 16 BCD 807.

11 USCS § 522(b)(2)(A) must be interpreted as was its predecessor, Bankruptcy Act § 6, to be neutral with respect to nature and extent of exemptions arising under other federal laws, regardless of source or purpose. In re Komet (1989, BC WD Tex) 104 BR 799.

In construing 11 USCS § 522(d)(10)(E), it must be remembered that exemption statutes are to be construed liberally in favor of debtor. In re Cilek (1990, BC WD Wis) 115 BR 974, 11 UCCRS2d 937.

Exemption statutes shall be liberally construed in favor of debtor, pursuant to 11 USCS § 522. In re Staniforth (1990, BC WD Wis) 116 BR 127, 20 BCD 962 (criticized in Hartje Lumber v Brach (In re Brach) (1995, BC WD Wis) 195 BR 897) and (criticized in Hartje Lumber v Boshardy (In re Boshardy) (1995, BC WD Wis) 1995 Bankr LEXIS 2043).

Page 39 11 USCS § 522

Exemptions in bankruptcy are provided for under 11 USCS § 522 and those exemptions that may be claimed are provided for in 11 USCS § 522(d) (the federal bankruptcy exemptions) or under 11 USCS § 522(b)(2), (nonbankruptcy exemptions), and under 11 USCS § 522(b)(1), unless state has opted out of federal bankruptcy exemptions, in which case only those exemptions allowable un-der 11 USCS § 522(b)(2) are available. In re Zaidi (2002, BC ED Va) 293 BR 861.

Benefits awarded as compensation for lost future earnings can qualify for broader exemption permitted under 11 USCS § 522(d)(10)(C) without being precluded from less generous exemption allowed under 11 USCS § 522(d)(11)(E) when 11 USCS § 522(d)(10)(C) exemption is unavailable. In re Sanchez (2007, BC WD Mich) 362 BR 342.

No bankruptcy law shall be construed to eliminate property rights which existed before law was enacted in absence of explicit command from Congress, thus, state court would not give retroactive effect to federal exemption that had no state counterpart. Savitz v Ciccotelli (1985) 342 Pa Super 399, 493 A2d 81. Unpublished Opinions

Unpublished: 11 USCS § 522(f)(2)(B) excludes only those liens that have already been avoided--that is, those which are no longer liens; it does not instruct courts to exclude junior unavoidable liens and that does not appear to have been for lack of attention to detail; further, 11 USCS § 522(f)(2)(B) does not refer to priority position of liens under state law; rather, that subsection sim-ply states that when liens have already been avoided, they should not be considered in impairment calculation. Cadle Co. v Taras (In re Taras) (2005, CA11 Ga) 131 Fed Appx 167, reported at (2005, CA11 Ga) 143 Fed Appx 308.

5.--Particular language

In determining whether state law exempts property from bankruptcy estate, court's task is to dis-cern will of state legislature: what was exemption scheme that legislature wished to make available to state's residents as alternative to federal exemptions set forth in Bankruptcy Code; while state courts frequently refer to statutes which prohibit only certain forms of judicial process as "exemp-tion" statutes, term "exemption" conventionally connotes protection against all forms of process, and therefore it is appropriate to give word "exemption" its common meaning in absence of any leg-islative indication to contrary. In re Geise (1993, CA7 Wis) 992 F2d 651, CCH Bankr L Rptr P 75226.

There is no sufficient basis for concluding that literal application of term "all other liens" in statutory formula under 11 USCS § 522(f)(2)(A) produces result demonstrably at odds with inten-tions of its drafters; therefore, court's task is simply to apply 11 USCS § 522(f)(2)(A) as Congress wrote it. Kolich v Antioch Laurel Veterinary Hosp. (In re Kolich) (2003, CA8 Mo) 328 F3d 406, 41 BCD 75, 49 CBC2d 1896, CCH Bankr L Rptr P 78840.

Where appellee debtor acquired title to Texas property prior to marriage and prior to statutory period of 11 USCS § 522(p)(1)(D), contrary to argument of appellant creditor, she was entitled to her full homestead exemption notwithstanding divorce decree's later awarding it to her; "interest" in § 522 consistently referred to some vested economic interest in property, such as in § 522(b)(3)(B), which characterized interest as tenant by entirety or joint tenant as "interest in property," and § 522(d)(1), which stated that debtor could exempt her "aggregate interest," not to exceed certain value, in real property that debtor used as residence, and § 522(p)(2)(B), which stated that "any

Page 40 11 USCS § 522

amount of interest" did not include any interest transferred from debtor's previous principal resi-dence that was acquired outside statutory period. Wallace v Rogers (In re Rogers) (2008, CA5 Tex) 513 F3d 212, CCH Bankr L Rptr P 81081.

Wording of 11 USCS § 522(b)(2)(B), "exempt from process under applicable nonbankruptcy law," includes common law immunity as well as statutory exemption from process. Ray v Dawson (1981, ED Tenn) 14 BR 822, 8 BCD 273, 5 CBC2d 404, CCH Bankr L Rptr P 68422.

Phrase "any property" in 11 USCS § 522(d)(5) means just that; property need not be of kind oth-erwise exempt under various provisions in subsection (d). In re Upright (1979, BC ND NY) 1 BR 694, 5 BCD 1124, 1 CBC2d 229.

Phrase "any property" is unambiguous and in interpreting it court need not look to Uniform Ex-emption Act or Bankruptcy Commission Report; only qualification for "any property" is that it be property of estate and therefore unused portion of $ 7,500 allowance of 11 USCS § 522(d)(1) may be applied to any property of estate, without limitations, under 11 USCS § 522(d)(5) since in enact-ing 11 USCS § 522(d)(5) Congress intended that nonhomeowner could use $ 7,500 homestead ex-emption for any other property. In re Brock (1981, BC WD Mich) 10 BR 67, 4 CBC2d 436, CCH Bankr L Rptr P 67925.

Spouse of farmer may avoid lien on farm equipment pursuant to 11 USCS § 522(f)(2)(B); defini-tion of "dependent" contained in § 522(a)(1) includes spouse, whether or not actually dependent. In re Decker (1983, BC ND Ind) 34 BR 640, CCH Bankr L Rptr P 69496.

Phrase "debtor's interest" in 11 USCS § 522(d), which outlines federal exemption, does not mean only debtor's equity. In re Lillard (1984, BC WD Ark) 38 BR 433.

Language in 11 USCS § 522(a), which provides that "dependent" may include spouse whether or not actually dependent, does not apply to Ohio homestead exemption which requires occupancy of residence by debtor or debtor's dependent because language of § 522 does not appear to contem-plate that definition will be employed in interpretation of state exemption statutes, particularly in light of fact that Ohio has opted out of federal scheme. In re Shinners (1986, BC ND Ohio) 60 BR 139.

"Agriculture" as used in Virginia exemption statute is not confined solely to raising of crops; even if it were, fact that Chapter 7 debtors, who cultivated 500 acres of land, derived greater part of income from sale and transportation of livestock does not take them outside definition of "one en-gaged in the business of agriculture." In re Newsome (1986, BC ED Va) 60 BR 169.

Words "to the extent that" in 11 USCS § 522(f)(1), (f)(2), and (f)(3) are words of limitation meaning "by the amount that" and not "if;" § 522(f)(3) is not limitation on dollar amount of prop-erty that may be claimed as exempt before lien avoidance is prohibited, but is instead limitation on amount of avoidance provided to debtors in §§ 522(f)(1) and (f)(2), measured by difference between value of exempt property and $ 5,000. In re Duvall (1998, BC WD Tex) 218 BR 1008.

In 11 USCS § 522(f)(1)(B)(ii), phrase "of the trade" modifies implements, professional books, and tools. In re Thompson (2001, BC WD Okla) 263 BR 134.

Chapter 7 trustee's and debtor's former spouse's objection to debtor's claim of exemption in her residence was sustained, where debtor voluntarily granted her mother second mortgage within pref-erence period, and within two weeks of filing of objections, mother discharged mortgage; interpret-ing 11 USCS § 522(g)'s language, "property that trustee recovers," to require actual recovery by

Page 41 11 USCS § 522

trustee would produce result demonstrably at odds with intentions of drafters, where trustee indi-cated intention to take action to recover, but had not actually recovered, property under 11 USCS §§ 550, 551. In re Ringham (2003, BC DC Mass) 294 BR 204.

11 USCS § 522(h) does not contemplate full avoidance of transfer, but rather only permits debtor to exercise trustee's avoiding powers "to extent that debtor could have exempted such prop-erty." Osting v Blockberger (In re Osting) (2005, BC ND Ohio) 337 BR 297.

In context of 11 USCS § 522(p)(1), "amount of interest that was acquired" by debtors was equity resulting from rollover of equity derived from sale of prior homestead; while appreciation did occur, it did not occur due to any act of debtors and accordingly it was not interest "acquired by debtor" during 1,215-day period; fact that homestead may have appreciated substantially in value during 1,215-day period did not constitute acquisition of interest in debtors' homestead for purposes of § 522(p). In re Rasmussen (2006, BC MD Fla) 349 BR 747, 19 FLW Fed B 395.

In context of 11 USCS § 522(p)(1), addition of clause "by debtor" after "acquires" implies more than passive acquisition, such as by appreciation; it implies active acquisition of equity such as by affirmative act of down payment or mortgage pay down. In re Rasmussen (2006, BC MD Fla) 349 BR 747, 19 FLW Fed B 395.

In context of 11 USCS § 522(p)(1), use of phrase "in aggregate" implies that successive acquisi-tions of equity by debtor are to be aggregated; if aggregate amount of these acquisitions during 1,215-day period exceeds in value $ 125,000, excess will not be exempt. In re Rasmussen (2006, BC MD Fla) 349 BR 747, 19 FLW Fed B 395.

"Owes," as it is used in 11 USCS § 522(q)(1)(B), means that debt was owed on date of petition without regard to any payments on debt that were made post-petition. In re Presto (2007, BC SD Tex) 376 BR 554.

In 11 USCS § 522, Congress uses "paragraph" to refer to numbered portions of statute which fall under subsections; specifically, panel found that (1) 11 USCS § 522(f) is subsection; (2) 11 USCS § 522(f)(2) is paragraph; and (3) 11 USCS § 522(f)(2)(C) is subparagraph. Peoples Heritage Bank, N.A. v Hart (In re Hart) (2002, BAP1) 282 BR 70, 49 CBC2d 74.

Meaning of "the date of filing of petition" is clear and unambiguous and does not distinguish be-tween voluntary and involuntary debtors. Tanzi v Comerica Bank-California (In re Tanzi) (2003, BAP9) 297 BR 607, 2003 CDOS 7643, 41 BCD 212. Unpublished Opinions

Unpublished: 11 USCS 522(f)(2)(A)(ii) states that computation of impairment shall include "all other liens on property;" United States Court of Appeals for Eighth Circuit interprets term "all other liens on property" to include junior liens and § 522(f)(2) does not distinguish between senior liens and junior liens, between those having greater and lesser priority under state law. Cadle Co. v Taras (In re Taras) (2005, CA11 Ga) 131 Fed Appx 167, reported at (2005, CA11 Ga) 143 Fed Appx 308.

6. Relationship with other laws

Under Mandatory Victims Restitution Act, codified in relevant part at 18 USCS § 3613, gov-ernment, in effect, possessed tax lien against debtor's property, triggering one of explicit exceptions to Bankruptcy Code's protection afforded to homestead exemption, pursuant to 11 USCS § 522(c)(2)(B). United States v Hyde (2007, CA1 Mass) 497 F3d 103.

Page 42 11 USCS § 522

Bankruptcy court properly decided that postpetition sale of debtor's home, for which he had ob-tained homestead exemption under Mass. Gen. Laws ch. 188, § 1, did not cause sale proceeds to lose their exempt status and become subject to pre-petition debt because such would be at odds with immunizing effect of 11 USCS § 522(c); despite creditor's arguments that result was unfair because debtor allegedly acted dishonestly, in deciding which pre-petition debts could be satisfied from oth-erwise exempt property, U.S. Congress did not list nondischargeable debts pursuant to 11 USCS § 523(a) among those itemized in 11 USCS § 522(c)(1)-(3). Pasquina v Cunningham (In re Cunning-ham) (2008, CA1 Mass) 513 F3d 318, CCH Bankr L Rptr P 81093.

In light of policy underlying enactment of 11 USCS §§ 522 and 547, Md. Code Ann., Cts. & Jud. Proc. § 11-504(e) permitted debtor, who filed petition for relief under Chapter 7 of U.S. Bank-ruptcy Code, to recover money that was withheld from his wages, pursuant to writ of garnishment, during 90-day period that preceded date he filed his petition. Bank of Am. v Stine (2003) 379 Md 76, 839 A2d 727.

Bankruptcy court ruling approving IRS' set-off under 26 USCS § 6402 of refund of debtor's taxes against accrued pre-petition tax liability was affirmed because, since her right to refund was extinguished when IRS exercised its set-off option, there was no asset for debtor to claim as exemp-tion under 11 USCS § 522(b). Beaucage v United States IRS (2006, DC Mass) 342 BR 408.

Entire employee investment program funds earned or accrued by Chapter 7 debtor prepetition are property of estate because Bankruptcy Code prevails over ERISA and because debtor's right of access departs from traditional state spendthrift exception, although debtor is permitted to exempt $ 100 from proceeds delivered to trustee under Indiana intangible personal property exemption. In re Pulley (1989, BC ND Ind) 111 BR 715, 11 EBC 2288, CCH Bankr L Rptr P 73268.

Massachusetts homestead statute making exemption inapplicable to debts incurred prior to re-cording of homestead declaration is preempted by 11 USCS § 522(c) to extent that Massachusetts statute permits exempt property to be liable for debts other than those expressly enumerated in § 522(c)(1)-(3) since exempt property, whether exempted under state or federal law, can only be li-able for types of debts set forth in § 522(c). In re Whalen-Griffin (1997, BC DC Mass) 206 BR 277 (criticized in In re Fracasso (1997, BC DC Mass) 210 BR 221).

Based upon Bankruptcy Code and Federal Rules of Bankruptcy Procedure, bankruptcy court found that various Chapter 7 trustees' objections to creditors' claims should be overruled where these objections failed to invoke any statutory support for denial of claim. In re Taylor (2003, BC ND Ind) 289 BR 379.

Debtor's 11 USCS § 542 turnover action failed where debtor claimed 11 USCS § 522 exemption in entire amount, and that exemption was allowed because no timely objection was raised; as con-sequence debtor's tax refund was of no value or benefit to debtor's estate. Nase v GNC Cmty. Fed. Credit Union (In re Nase) (2003, BC WD Pa) 297 BR 12, 41 BCD 185, 50 CBC2d 1242, 92 AFTR 2d 5944.

Bankruptcy court held that determination as to lien priority was required to be made under state law; court rejected lienholder's position and found that 11 USCS § 522(f) provided no basis for de-termination of relative priorities of competing liens without regard to their type or nature, but in-stead provided basis for avoidance of certain liens that depended on their type or nature. Zampatti v Scenery Hill Dev., Inc. (In re Zampatti) (2003, BC WD Pa) 300 BR 415.

Page 43 11 USCS § 522

Language of D.C. Code Ann. § 15-501(a)(11)(D) did not create any cognizable exemption; court could give no effect to D.C. Code Ann. § 15-501(11)(D) because legislature failed to specify source of payment that was to be exempted. In re Lewis (2004, BC DC Dist Col) 305 BR 610.

In context of 11 USCS § 522(g), trustee need not take formal action to "recover" property for benefit of estate; under 11 USCS § 544, if creditor has security interest, but its lien is not perfected, trustee automatically steps into position having priority over creditor. In re Hicks (2006, BC WD Mo) 342 BR 596.

11 USCS § 522(m) does not create any rights under state laws that do not otherwise exist; § 522(m)'s reference to "this section" makes clear that it applies to new § 522(p), provision limiting homestead exemption. In re Rasmussen (2006, BC MD Fla) 349 BR 747, 19 FLW Fed B 395.

If thrift savings plan (TSP) account (more formally known as thrift savings fund account) ac-count were property of bankruptcy estate such that exemptibility of account became issue, 26 USCS § 7701(j)(1) appeared to supply basis for treating debtor's TSP account as exemptible. In re Gill (2007, BC DC Dist Col) 100 AFTR 2d 6356.

Although 11 USCS § 522(b)(3) had been amended to require debtor to reside for 730 days in state before using that state's homestead exemption, venue provisions of 28 USCS § 1408 had not been similarly revised and bankruptcy petition was appropriate in court located where debtor had resided for 180 days. In re Jevne (2008, BC SD Fla) 387 BR 301, 21 FLW Fed B 282.

If property is excluded from bankruptcy estate at time of bankruptcy filing, subsequent change in its form does not bring it into estate unless another statutory provision would capture it as post-petition asset. Cisneros v Kim (In re Kim) (2000, BAP9) 257 BR 680, 2001 CDOS 750, 2001 Daily Journal DAR 1087, 37 BCD 80, 25 EBC 2121, CCH Bankr L Rptr P 78365, affd (2002, CA9) 35 Fed Appx 592.

Bankruptcy appellate panel adopted majority rule and held that where Chapter 13 debtors lacked standing to bring lien avoidance proceeding, pursuant to 11 USCS § 544, and bankruptcy court was without subject matter jurisdiction to determine complaint. Hansen v Hansen (In re Hansen) (2005, BAP10) 332 BR 8.

Debtors claimed that interpreting "benefits" under Mont. Code Ann. § 25-13-608(1)(f) to include stock proceeds at issue would have been consistent with exemptions such as those in 11 USCS § 522(d)(10)(E), but court disagreed; agreement, guarantee, and promissory note contained no direc-tion or indication that monthly payments one debtor received from sale of stock, which then paid for debtor's end-of-life medical care and medications, were intended as benefits that qualified under specific sections of 26 USCS §§ 401(a), 403(a), (b), 408, and federal exemptions, which in any event did not apply in opt-out state like Montana, provided no support for debtors' claim that ex-emption they claimed was reasonable. In re Archer (2006) 2006 MT 82, 332 Mont 1, 136 P3d 563.

7.--Right of setoff § 523

Where debtor properly exempted her 1995 federal income tax refund, and 1990 and 1991 tax debts for which IRS intercepted her refund were dischargeable debts, setoff against those debts was impermissible under 11 USCS § 522(c), since IRS's right of setoff under § 553(a) must yield to Debtor's right to exempt and protect assets under § 522(c). United States v Jones (In re Jones) (1999, MD Ala) 230 BR 875, 41 CBC2d 1270, 99-1 USTC P 50366, 83 AFTR 2d 1893 (criticized in In re Martinez (2000, BC WD Tex) 258 BR 364, 87 AFTR 2d 303) and (criticized in In re Bourne

Page 44 11 USCS § 522

(2001, BC ED Tenn) 262 BR 745) and (criticized in Junio v Astoria Fed. Savs. (2002, ED NY) 2002 US Dist LEXIS 25735).

11 USCS § 522(c) stating that exempt property shall not be held liable for debtor's prepetition debts takes precedence over 11 USCS § 553 right of setoff so that income tax refund would not be set off against prior year's unpaid tax liability where IRS had not filed prepetition lien. Commis-sioner v Alexander (In re Alexander) (1999, WD Ky) 245 BR 280, 99-2 USTC P 50903, 84 AFTR 2d 6543.

Reading 11 USCS § 522(c) as paramount to 11 USCS § 553 in many instances completely de-stroys offset right of creditor, and therefore would render applicability of § 553 contradictory to its plain language; thus, bankruptcy court erred in allowing 11 USCS § 522(c) to modify rights pro-vided for in 11 USCS § 553 to extent that 11 USCS § 522(c) functioned to limit IRS's setoff right to amount of their priority tax claim against debtors. United States v White (2007, MD Pa) 365 BR 457, 99 AFTR 2d 1479.

By virtue of 11 USCS § 522(c)(1), exempt status of Chapter 13 debtor's claim for tax refund does not shield it from IRS's right of setoff. In re Munson (1999, BC CD Ill) 241 BR 410, 42 CBC2d 1818, 84 AFTR 2d 6010, revd, remanded (2000, CD Ill) 248 BR 343, 43 CBC2d 1883, 2000-1 USTC P 50456, 85 AFTR 2d 1912 (criticized in In re Ronnie Dowdy, Inc. (2004, BC ED Ark) 314 BR 182, 94 AFTR 2d 5562).

Creditor's right to setoff under 11 USCS § 553 must yield to debtor's right to exempt and protect assets under 11 USCS § 522. In re Pace (2000, BC WD Mo) 257 BR 918, 45 CBC2d 948 (criticized in In re Bourne (2001, BC ED Tenn) 262 BR 745) and (criticized in In re Allen (2001, BC ND Iowa) 266 BR 713, 47 CBC2d 218).

Because creditor's right to setoff under 11 USCS § 553 yields to debtor's right to exempt and protect assets under 11 USCS § 522, "security" provided in 11 USCS § 506, which is based on setoff rights under 11 USCS § 553, must likewise yield; thus, creditor is only secured to extent that setoff is not limited by debtor's exemptions. In re Pace (2000, BC WD Mo) 257 BR 918, 45 CBC2d 948 (criticized in In re Bourne (2001, BC ED Tenn) 262 BR 745) and (criticized in In re Allen (2001, BC ND Iowa) 266 BR 713, 47 CBC2d 218).

Creditor's right of setoff under 11 USCS § 553 does not yield to debtor's right to exempt and protect assets under 11 USCS § 522. In re Martinez (2000, BC WD Tex) 258 BR 364, 87 AFTR 2d 303.

11 USCS § 522(c) does not prevent offset (11 USCS § 553) against exempt property. In re Allen (2001, BC ND Iowa) 266 BR 713, 47 CBC2d 218 (criticized in Dollar Bank, FSB v Tarbuck (In re Tarbuck) (2004, BC WD Pa) 318 BR 78).

Chapter 7 debtor's claim to exemption for portion of money in his bank account was allowed; bank could not claim money as setoff to deficiency owed to bank as result of foreclosure of debtor's mortgage because debtor's right to exemption was superior to creditor's right to set off what was owed it. Dollar Bank, FSB v Tarbuck (In re Tarbuck) (2004, BC WD Pa) 318 BR 78.

Exempt property under 11 USCS § 522 is not subject to setoff under 11 USCS § 553. Dollar Bank, FSB v Tarbuck (In re Tarbuck) (2004, BC WD Pa) 318 BR 78.

Where bankruptcy debtor's mortgagee, federal agency, set off debtor's federal income tax refund against debtor's foreclosure deficiency obligation, fact that debtor claimed exemption in portion of

Page 45 11 USCS § 522

refund did not preclude setoff because debtor only had right to refund after setoff and thus refund never became property of debtor's estate. In re Baucom (2006, BC WD Mo) 339 BR 504, 97 AFTR 2d 1679.

Chapter 7 debtor was not entitled to turnover of federal income tax refund, which had been off-set pre-petition from debt owed by debtor on defaulted mortgage with federal government agency, because, although debtor claimed refund as exempt under 11 USCS § 522, refund never became property of estate, having been properly offset under 11 USCS § 553 prior to filing of debtor's peti-tion. Houchens v U.S. Dep't of Agri. Dev. (In re Houchens) (2008, BC WD Ky) 384 BR 472.

8.--Other particular Bankruptcy Code sections

By defining application of 11 USCS § 522, Congress intended to allow debtor electing exemp-tions not to be obstructed by 11 USCS § 541 so that for purposes of exemption under § 522, deter-mination of what is property of debtor's estate under § 541 may be disregarded and § 541 does not bind debtor from making election of state or federal exemptions; thus, even though property held by debtor as tenant by entirety is property of estate pursuant to § 541 and even though trustee has power to sell both real and personal property as part of debtor's estate, debtor may elect protection of state law by statutory exemption and immunity from process for entireties property when only one spouse is debtor and this election is only affirmative act necessary for debtor to exempt entire-ties property from bankruptcy. In re Barsotti (1980, BC WD Pa) 7 BR 205, 6 BCD 1295, 3 CBC2d 306, CCH Bankr L Rptr P 67931.

11 USCS § 1325(a)(5)(B) and 11 USCS § 522(f) are not inconsistent because lien is claimed only to extent of creditor's interest in estate property and since exempt property is not property of estate, these lien creditors would be unsecured creditors except to extent that value of assets exceed allowable exemptions applicable thereto. In re Berrong (1985, BC DC Colo) 53 BR 640, 13 CBC2d 669, CCH Bankr L Rptr P 70760.

Definition of farmer in 11 USCS § 101(17) does not apply in determining exemptions and lien avoidance issues in opt-out state. In re Smith (1987, BC SD Iowa) 78 BR 922.

Chapter 7 trustee may not utilize 11 USCS § 548(a)(1) and § 550 to set aside debtor's homestead exemption after deadline for filing an objection has expired pursuant to § 522(l) and F.R.B.P. 4003. Ezrol v Lane (In re Lane) (1995, BC SD Fla) 190 BR 125, 9 FLW Fed B 251 (criticized in In re Tabone (2000, BC MD Fla) 247 BR 541, 35 BCD 279, 13 FLW Fed B 148).

Clear language of § 522(c) protects exempt property, regardless of form, from prepetition debts, and to include exempt property within confines of § 1325's definition of disposal income directly conflicts with § 522(c). In re Kerr (1996, BC ND Ill) 199 BR 370.

Trustee was entitled to subtract $ 10,000 in damages incurred for contempt from debtors' ex-empt portion of proceeds of sale of their residence; damages were not administrative expenses within meaning of 11 USCS § 503(b)(1)(A), since they were not necessary, or § 522(k), at least as between estate and debtors. In re Swanson (1997, BC DC NJ) 207 BR 76, CCH Bankr L Rptr P 77340.

There is no conflict between 11 USCS § 363 and 11 USCS § 522(f), and creditor's argument that debtor has no equity in property and should not be allowed to avoid creditor's judgment lien because creditor will foreclose on property anyway is not persuasive. In re Plott (1998, BC ND Ohio) 220 BR 596.

Page 46 11 USCS § 522

Chapter 13 debtor could amend schedules to claim exemption for unliquidated claim for per-sonal injury arising out of post confirmation automobile accident since case was still open, but claim not be exempted because it was not property of estate since 11 USCS § 1327 vests property of estate in debtor upon confirmation. In re Brown (2001, BC MD Ga) 260 BR 311.

When sums garnished from Chapter 7 debtor's wages during 90 days prior to bankruptcy were restored to estate by reason of preference litigation, such cash was entitled to same exempt status that it would have enjoyed had no preference occurred so that garnishing creditor could not argue that debtor lacked standing to recover preference under 11 USCS § 522(h) and (i) on grounds that asset in question was no longer cash. Price v Mfrs. & Traders Trust Co. (In re Price) (2001, BC WD NY) 260 BR 653, 46 CBC2d 76.

Bankruptcy court properly granted relief from stay to allow bank to foreclose, where debtors provided no valid basis for objecting to bank's stay motion, since equity in property is not "good cause" for debtor to contest stay motion in Chapter 7 case, 11 USCS § 506(d) does not confer avoid-ing power on Chapter 7 no-asset debtor with regard to consensual junior lien in situation where sen-ior lien(s) exceed(s) value of property, and 11 USCS § 522(f) does not permit debtor to avoid con-sensual lien. In re Davenport (2001, BC WD Ky) 266 BR 787, 38 BCD 114, 47 CBC2d 75 (criti-cized in Talbert v City Mortg. Servs. (2002, WD Mich) 2002 US Dist LEXIS 10464).

Creditor's tax lien survived debtor's discharge under 11 USCS § 522(c), and although it appeared that creditor's renewal of tax lien was to gain lien on debtor's postpetition property, no violation of bankruptcy discharge injunction of 11 USCS § 524(a) could be found because it was debtor's burden under 11 USCS § 523(c) and Fed. R. Bankr. P. 4007(c) to initiate dischargeability action with re-spect to tax obligation and no determination of dischargeability had been requested or made, thus, debtor's complaint under 11 USCS § 524 was dismissed without prejudice. Jarrett v Ohio (In re Jarrett) (2002, BC ND Ohio) 293 BR 127.

Bankruptcy court concluded that state court final order directing return of money to debtor's cli-ents was not void as violation of automatic stay of 11 USCS § 362 where it did not implicate prop-erty of debtor's estate under 11 USCS § 541; debtor was entitled to claim $ 5,000 as exempt prop-erty, pursuant to 11 USCS § 522; Del. Code Ann. tit. 10, § 4914. In re Hull (2003, BC DC Del) 41 BCD 218.

Where debtor filed bankruptcy prior to entry of judgment of divorce, automatic stay did not ap-ply to wife's state court action for equitable distribution of debtor's property that was not property of bankruptcy estate, e.g. exempt property, postpetition earnings, property abandoned by trustee, or debtor surplus, but wife's motion for relief from stay as to estate property was denied because Chap-ter 7 Trustee, as hypothetical lien judgment creditor, had superior interest to that of wife. In re Howell (2004, BC DC NJ) 311 BR 173, 52 CBC2d 786.

Non-debtor ex-wife's pre-petition equitable distribution right to in kind relief constituted prop-erty interest (and likely pre-petition claim), and that survived bankruptcy; neither bankruptcy trustee via 11 USCS § 544(a) nor debtor via 11 USCS §§ 544(a), 522(h), could henceforth avoid property interest and court could not conceive of another method by which property interest could be avoided. Verner v Verner (In re Verner) (2005, BC WD Pa) 318 BR 778.

There is no independent statutory directive akin to 11 USCS § 522(c) that protects property that has vested pursuant to 11 USCS § 1327(b); accordingly, there is no conflict between recapture pro-

Page 47 11 USCS § 522

visions of 11 USCS § 348 as applied to property that has vested in debtor under 11 USCS § 1327(b). In re Fonke (2005, BC SD Tex) 321 BR 199.

Language of 11 USCS § 522(c) controls over 11 USCS § 348(f) based on their legislative his-tory, inconsistent structure of 11 USCS § 348(f), and specificity of 11 USCS § 522(c). In re Fonke (2005, BC SD Tex) 321 BR 199.

Debtor elected to use federal exemptions provided by 11 USCS § 522(d) rather than applicable state or local exemptions; consequently, she was not subject to 11 USCS § 522(q)(1) and, by exten-sion, 11 USCS § 727(a)(12), and debtor's landlord's request that court bar entry of discharge pursu-ant to that same provision failed. In re Jacobs (2006, BC DC Dist Col) 342 BR 114.

In order to sustain objection that debtors' claimed exemption of homestead property that was ob-tained from transfer of non-exempt property shortly before debtors filed bankruptcy, so that prop-erty could not be considered exempt, pursuant to 11 USCS § 522(o), trustee needed to provide evi-dence of debtors' intent to actually hinder, delay, or defraud creditors, in same manner that such showings were required under 11 USCS § 548 and 11 USCS § 727. In re Agnew (2006, BC DC Kan) 355 BR 276.

Impact of so-called "hanging paragraph" referencing paragraph 5 of 11 USCS § 1325(a) on se-cured creditor's rights when vehicle is surrendered is significantly different from impact of 11 USCS § 522(f) because liens affected by "hanging paragraph" are not destroyed but rather are protected to extent of value of collateral; in contrast, if lien impairs debtor's exemption claim, § 522(f) permits debtor to destroy lien thereon, relegating claim to unsecured status. Americredit Fin. Servs. v Lanier (In re Lanier) (2007, BC MD Pa) 372 BR 727.

Bankruptcy court denied Chapter 13 debtors' motion seeking order allowing them to strip off judgment lien bank held on their principal residence, pursuant to 11 USCS § 522(f); although mort-gage company and another bank held senior recorded mortgages on debtors' residence, when those amounts were subtracted from fair market value of debtors' residence, debtors had equity in their residence to which judgment lien could and did attach; as such, judgment lien was not valueless and 11 USCS § 1322(b)(2) prohibited debtors from removing lien. In re Grimes (2007, BC WD Ky) 376 BR 811.

Special treatment afforded to some creditors holding purchase money security interests, pursu-ant to 11 USCS § 1325(a) potentially conflicts with policy considerations of 11 USCS § 522(f) of providing debtors with fresh starts, however, law as written by Congress needed to be applied. In re Matthews (2007, BC DC SC) 378 BR 481.

Even if bankruptcy court had discharged certain tax liabilities in personam, any property that be-longed to taxpayer when he filed his bankruptcy petition was still encumbered in rem under 11 USCS § 522(c)(2)(B) by tax lien for which notice had been filed pursuant to I.R.C. 6331(a). Woods v Comm'r (2006) TC Memo 2006-38, 91 CCH TCM 852.

Generally, only trustee may bring action to avoid prepetition transfer; however, pursuant to 11 USCS § 522(g) and (h), debtor has standing to avoid transfer if property transferred would have been exempt, property was not transferred voluntarily, and trustee has not sought to bring avoidance action. James v Planters Bank (In re James) (2001, BAP8) 257 BR 673, 37 BCD 76, 45 CBC2d 787.

9. Applicability to Chapter 11, 12 and 13 cases

Page 48 11 USCS § 522

Court agreed with bankruptcy court's finding that debtor could not claim exemption for earnings under 11 USCS § 522 by relying upon Vt. Stat. Ann. tit. 12, § 3170(b)(1) (Lexis Supp. 2001), be-cause statute was designed for purpose of restricting wage garnishment, and it was inapplicable to bankruptcy. Riendeau v Canney (In re Riendeau) (2002, DC Vt) 293 BR 832, affd (2003, CA2 Vt) 336 F3d 78.

11 USCS § 522 is applicable to Chapter 13 cases, as provided by 11 USCS § 103. In re Jordan (1980, BC DC NJ) 5 BR 59, 6 BCD 630, 2 CBC2d 635.

Despite the provision of 11 USCS § 103(a), that Chapters 1, 3, and 5 of the Bankruptcy Code are applicable in proceedings filed under Chapters 7, 11, and 13, exemption provisions of 11 USCS § 522 are not applicable in Chapter 13 proceedings, § 522 being inconsistent with Chapter 13 in that, as presently structured, property of debtor under Chapter 13 remains in debtor's possession while exemptions become important when debtor is permitted to keep only what is deemed to be exempt; therefore, no part of § 522 is available to Chapter 13 debtor. In re Morgan (1981, BC DC Del) 18 BR 17.

Although 11 USCS § 522(a)(1) is applicable to individual debtors in Chapter 11, exemptions have limited usage in Chapter 11 cases; exemptions must be considered in determining whether ob-jecting creditors are receiving more through Chapter 11 plan than they would under Chapter 7 liqui-dation, and individual debtor may claim exemptions in plan of liquidation proposed by his creditors; as long as spouse's needs are met and alimony rights are adequately protected, Chapter 11 debtor should be given reasonable time to select exemptions. In re Summerlin (1983, BC ED NC) 26 BR 875.

Debtor in Chapter 13 case may avoid, under 11 USCS § 522(f), creditor's judgment lien to extent it impairs his exemptions, regardless of whether creditor had properly levied on that judgment. In re Tash (1987, BC DC NJ) 80 BR 304.

11 USCS § 522(h) limits benefit which individual debtor may derive from trustee's avoiding powers in Chapter 13 case to exemptions available under 11 USCS § 522(b). In re Tash (1987, BC DC NJ) 80 BR 304.

Debtor's right to retain exempt properties under 11 USCS § 522 was unaffected by absolute pri-ority rule of 11 USCS § 1129(b)(2)(C)(ii) because creditors could not subject debtor's exempt prop-erty to involuntary liquidation. In re Henderson (2005, BC MD Fla) 18 FLW Fed B 139, corrected (2005, BC MD Fla) 321 BR 550, 18 FLW Fed B 143.

Proceeds from settlement of pre-petition lawsuit that were received post-petition were dispos-able income under 11 USCS § 1325(b)(1) where there was no evidence that they were reasonably necessary for maintenance or support of debtors or their dependents and under plain reading of § 1325(b), disposable income was not expressly limited by 11 USCS § 522(c); instead, disposable in-come was only limited by that which was reasonably necessary for debtors' (or their dependents') maintenance or support. In re Launza (2005, BC ND Tex) 54 CBC2d 318.

Where bankruptcy debtor leased and operated restaurant in hotel and debtor's bank claimed se-curity interest in post-petition receivables owed to debtor by hotel for room service charges col-lected by hotel, bank failed to produce any evidence demonstrating that any portion of guest charges could be identified as proceeds of inventory on which bank had lien on petition date. Timothy Dean's, Inc. v White (In re Timothy Dean Rest. & Bar) (2006, BC DC Dist Col) 342 BR 1.

Page 49 11 USCS § 522

Debtor's transmutation of his community property, marital home, to joint tenancy did not forfeit his homestead rights under Cal. Code Civ. Proc. § 704.720(a) and interest did not fall within bar of 11 USCS § 522(g) because there was little equity in property and there was nothing for trustee to recover by avoiding fraudulent transfer; therefore, debtor's proposed Chapter 13 plan met require-ments of 11 USCS § 1325(a)(4) and was confirmed over objection of creditor with unliquidated claim. In re Osborn (2006, BC ND Cal) 346 BR 204.

Debtor's transmutation of his community property, marital home, to joint tenancy did not forfeit his homestead rights under Cal. Code Civ. Proc. § 704.720(a) and interest did not fall within bar of 11 USCS § 522(g) because there was little equity in property and there was nothing for trustee to recover by avoiding fraudulent transfer; therefore, debtor's proposed Chapter 13 plan met require-ments of 11 USCS § 1325(a)(4) and was confirmed over objection of creditor with unliquidated claim. In re Osborn (2006, BC ND Cal) 346 BR 204.

II.APPLICABILITY OF STATE LAW EXEMPTIONS

A.In General 10. Generally

Nothing in 11 USCS § 522(b) limits state's power to restrict scope of its exemptions; indeed, state could theoretically accord no exemptions at all. Owen v Owen (1991) 500 US 305, 114 L Ed 2d 350, 111 S Ct 1833, 91 CDOS 3710, 91 Daily Journal DAR 6043, 21 BCD 1164, 24 CBC2d 850, CCH Bankr L Rptr P 73963 (superseded by statute as stated in In re Parrish (1995, BC WD Wis) 186 BR 246, CCH Bankr L Rptr P 76786).

Nothing in 11 USCS § 522 suggests that state cannot determine exemptions according to date debts were incurred, and allow different amounts for exemptions fixed at date of debts, if that is state law at time petition is filed. First Nat'l Bank v Norris (1983, CA11 Ala) 701 F2d 902, 10 BCD 473, 8 CBC2d 1078 (criticized in In re Betz (2002, BC DC Mass) 273 BR 313).

When Chapter 7 debtor elects to claim exemption under state law pursuant to 11 USCS § 522, he is required to comply with state law in effect at time of filing his petition in bankruptcy; state ex-emptions which debtor may elect to claim may be more or less generous than federal exemptions, and they need not be identical or even comparable to exemptions established under federal law. In re Golden (1986, CA9 Cal) 789 F2d 698, CCH Bankr L Rptr P 71125.

Debtors sometimes may exempt property that states protect from civil execution pursuant to 11 USCS § 522(b)(2)(A); they may use exemption for implements, professional books, or tools, of trade under 11 USCS § 522(f)(2)(B) despite existence of security interests in those items. In re Erickson (1987, CA7 Wis) 815 F2d 1090, CCH Bankr L Rptr P 71725.

Bankruptcy Appellate Panel was correct in determining that debtor's claim of special exemp-tions under Cal. Civ. Proc. Code § 703.140 after filing for bankruptcy was not precluded by her pre-bankruptcy exemption filing under California statutory law; debtor's attempt at consecutive exemp-tion use under different state statutes and fact situations did not violate California's election of remedies doctrine. Little v Reaves (In re Reaves) (2002, CA9) 285 F3d 1152, 2002 CDOS 3019, 2002 Daily Journal DAR 3679, CCH Bankr L Rptr P 78632.

State may not create exemption which conflicts with federal bankruptcy law. In re Love (1985, ED NC) 54 BR 947.

Federal exemptions are not applicable where state has specifically vetoed exemptions under op-tion given by 11 USCS § 522 to each state, and under such circumstances issue of whether property

Page 50 11 USCS § 522

is exempt homestead is to be decided under state law; value and status of exempt property in bank-ruptcy is determined as of date petition is filed, and where debtors arrange to retain possession of homestead until day after bankruptcy petition was filed, at which time they moved into leased prem-ises, under applicable state homestead exemption, state court case holding that property remains homestead exemption until sale is closed, is dispositive. In re Crump (1980, BC SD Fla) 2 BR 222, 5 BCD 1235, 1 CBC2d 378, CCH Bankr L Rptr P 67444.

It is not role of bankruptcy court to determine whether state exemption statutes are imprudent nor that authority granted by Congress to state legislators is too broadly granted. In re Worthington (1983, BC WD Ky) 28 BR 736.

For nonbankruptcy exemption to qualify as exemption under 11 USCS § 522(b)(2)(A), nonbank-ruptcy law is sufficient if it provides an exemption from process and need not specify that exemp-tion be available in bankruptcy. In re Stewart (1983, BC DC Utah) 32 BR 132, 11 BCD 27, CCH Bankr L Rptr P 69342.

While right to exemptions is determined as of date petition is filed, this rule is subject to qualifi-cation and interpretation, e.g., where state has opted out, 11 USCS § 522(b)(2)(A) refers to state or local law that is applicable on date of filing of petition and state has considerable freedom in creat-ing exemptions and eligibility requirements for those exemptions; if applicable state law contem-plates examination into debtor's past or future, court is not precluded from making appropriate in-quiries where circumstances warrant. In re Kolsch (1986, BC DC Nev) 58 BR 67.

11 USCS § 522(b)(2), which incorporates state law on exemptions into Bankruptcy Code, con-fers on individual Chapter 7 debtors same rights to exempt property from creditors' claims in bank-ruptcy as exist under applicable state law but may not be construed so as to afford debtors greater rights vis-a-vis creditors in bankruptcy than they are entitled to outside of bankruptcy. In re McConchie (1988, BC DC Mass) 94 BR 245, CCH Bankr L Rptr P 72560.

Federal law places no limits on generosity or lack thereon with which states may define exemp-tion, and therefore when state has opted out of federal exemption scheme of 11 USCS § 522(d), court must look to state law to determine source and scope of debtor's exemptions. In re Rawn (1996, BC ED Cal) 199 BR 733.

Once debtor filed for relief under Bankruptcy Code, its provisions pre-empted exceptions to Massachusetts homestead exemption. Haemonetics Corp. v Dupre (In re Dupre) (1997, BC DC Mass) 208 BR 609, CCH Bankr L Rptr P 77418, vacated, remanded on other grounds (1999, DC Mass) 238 BR 224, 42 CBC2d 1773, affd (2000, CA1 Mass) 229 F3d 1133, reported in full (2000, CA1 Mass) 2000 US App LEXIS 20898.

States may not create exemptions that apply only in bankruptcy proceedings; doing so changes distribution of assets between debtors and creditors, and therefore, frustrates full effectiveness of federal law by changing balance between debtors and creditors that Congress created in Bankruptcy Code. In re Cross (2000, BC ND Ind) 255 BR 25.

By preponderance of evidence bankruptcy court found that despite ownership of asset exempted under state law, debtor lacked sufficient resources and income to pay her student loans without un-due hardship; debtor met three-part Brunner test and requirements of 11 USCS § 523(a)(8), and court determined that debtor's student loans were fully dischargeable. Armesto v N.Y. State Higher Educ. Servs. Corp. (In re Armesto) (2003, BC WD NY) 298 BR 45.

Page 51 11 USCS § 522

Trustee's objection to debtor's claimed exemptions, pursuant to 11 USCS § 522(b), for three in-surance policies was sustained as state statutory exemptions that debtor claimed under Mass. Gen. Laws ch. 175, §§ 125 and 126 did not apply to protect debtor's interests in insurance policies. In re Chevalier (2005, BC DC Mass) 330 BR 21.

11. Applicable law

Although state law controls what property is exempt, federal law determines availability of lien avoidance under 11 USCS § 522(f)--debtor with state-created exemptions is entitled to § 522(f) pro-tection. In re Robinson (1990, DC Colo) 114 BR 716.

State law which governs exemption of property is that law which is in effect on date bankruptcy petition is filed, and debtors may claim federal exemption notwithstanding state statute prohibiting debtor from utilizing federal exemptions, where debtors filed petition prior to effective date of such state law. In re Boozer (1980, BC ND Ga) 4 BR 524, 6 BCD 529, 2 CBC2d 435, CCH Bankr L Rptr P 67572.

Debtor's right to exemptions provided by state law must be determined solely with reference to state law. In re Barnes (1980, BC MD Fla) 4 BR 600, CCH Bankr L Rptr P 67676.

State and not federal law determines nature and extent of debtor's interest in property in pro-ceeding under Bankruptcy Code, since property interests are created and defined by state law; under law of Pennsylvania, each spouse is seized of whole and not of any fraction of property, and debtor's interest in premises was entire value of property. In re Hackett (1982, BC ED Pa) 23 BR 710.

Where state opts out of exemption provisions of 11 USCS § 522(d), determination of exemption is matter of application of state law. In re Moore (1983, BC DC Md) 30 BR 197.

Bankruptcy Court must look to state law in determining scope of state created exemption. In re Love (1984, BC ED NC) 42 BR 317, affd (1985, ED NC) 54 BR 947.

While right to exemptions is determined as of date petition is filed, this rule is subject to qualifi-cation and interpretation, e.g., where state has opted out, 11 USCS § 522(b)(2)(A) refers to state or local law that is applicable on date of filing of petition and state has considerable freedom in creat-ing exemptions and eligibility requirements for those exemptions; if applicable state law contem-plates examination into debtor's past or future, court is not precluded from making appropriate in-quiries where circumstances warrant. In re Kolsch (1986, BC DC Nev) 58 BR 67.

In determining scope of exemptions under state opt-out provisions, Bankruptcy Court must look to state law. In re Shaffer (1987, BC DC SC) 78 BR 783, 16 BCD 807.

In bankruptcy actions, federal courts decide merits of state exemptions, but validity of claimed state exemption is controlled by applicable state law. In re Knudsen (1987, BC CD Cal) 80 BR 193.

Where Chapter 7 debtors have claimed exemptions under state law, Bankruptcy Court must look to state law to determine whether or not items claimed as collateral by creditor may be exempted by debtors under 11 USCS § 522(d). In re Griffiths (1988, BC WD Wash) 86 BR 639.

In states have that opted out of federal exemption scheme under 11 USCS § 522(d), what prop-erty is exempt is determined by state law, but federal law determines what liens may be avoided. In re Eveland (1988, BC ED Cal) 87 BR 117, CCH Bankr L Rptr P 72345.

Page 52 11 USCS § 522

Determination of whether exemption is available to Chapter 13 debtor under 11 USCS § 522 is question of federal law, not state law. In re Hoffman (1988, BC WD Pa) 96 BR 46.

While the scope of exemptions in bankruptcy can be determined by laws of the various states pursuant to 11 USCS § 522(b), states may not legislatively determine exclusions, as such statutes are preempted by federal law; thus, a state statute declaring that a debtor's individual retirement ac-count is not part of the bankruptcy estate is preempted by federal law. In re Van Nostrand (1995, BC DC NJ) 183 BR 82, 33 CBC2d 1673.

Cash value of life insurance policies could not be fully exempted under state's insurance code but had to be included within $ 60,000 limitation under its property code. In re Scott (1996, BC ND Tex) 193 BR 805.

Bankruptcy court held that determination of whether particular benefit fell within scope of "pub-lic assistance" exemption of 735 Ill. Comp. Stat. 5/12-1001(g)(1) entailed examination of purposes of legislation that provided benefit, not in purpose that benefit may serve once it was in hands of given debtor. In re Koch (2003, BC CD Ill) 299 BR 523, CCH Bankr L Rptr P 78944, 92 AFTR 2d 6410.

Bankruptcy court in Tennessee entered orders transferring Chapter 7 and Chapter 13 cases to other districts after finding that residents of Arkansas and Mississippi had filed cases in improper venue where (1) convenience of debtors was not valid concern; (2) bank accounts in Tennessee were not principal assets; (3) debtor's salaried workplaces in Tennessee were not places of business under 28 USCS § 1408; (4) postpetition assets were not considered in venue analysis; (5) court was unable to apply equity while overlooking 28 USCS § 1408; and (6) exemptions claimed were not governed by Tennessee law under 11 USCS § 522(b)(2)(A). In re Ross (2004, BC WD Tenn) 312 BR 879.

Formula for determining debtor's exemptions contained in 11 USCS § 522 (b)(3)(A) incorpo-rated New Hampshire exemption law as applicable state law in this case because debtors had not lived in Ohio for two years prior to filing this case, but they did live in New Hampshire for six months prior to that two year period; therefore, debtors' election to use New Hampshire's homestead exemption was not impermissible extraterritorial application of state law. In re Varanasi (2008, BC SD Ohio) 59 CBC2d 935.

In bankruptcy actions, validity and scope of claimed state exemption is controlled by applicable state law and state's rules of construction. Shelley v Kendall (In re Shelley) (1995, BAP9 Cal) 184 BR 356, 95 CDOS 5654, 95 Daily Journal DAR 9605, adopted, affd (1997, CA9) 110 F3d 68, re-ported at (1997, CA9) 109 F3d 639, 97 CDOS 2162, 97 Daily Journal DAR 4007.

Minn. Stat. § 550.37, subd. 24, exempted funds in Individual Retirement Account or Individual Retirement Annuity, each as defined in I.R.C. § 408, whether or not debtor had unlimited access to account balance; IRA, as defined by I.R.C. § 408, was exempt property under Minn. Stat. § 550.37, subd. 24, as limited by terms of Minn. Stat. § 550.37, subd. 24(a), to indexed present value and sums reasonably necessary for support of debtor and debtor's spouse or dependents, as Minnesota Legislature clearly intended that IRAs generally be exempt by expressly listing them, in contrast to 11 USCS § 522(d)(10)(E), which did not mention them by name. Clark v Lindquist (2004, Minn) 683 NW2d 784.

12. Uniformity not required

Page 53 11 USCS § 522

11 USCS § 522(b) expressly grants states broad discretion and open-ended opportunity to de-termine what property may be exempt from bankruptcy estate, as long as state law does not conflict with property exempt under federal law other than "laundry list" of federal exemptions specified in 11 USCS § 522(d); significantly, section does not mandate that debtors be guaranteed right to ex-empt particular types of property; unambiguous language of 11 USCS § 522(b) implicitly indicates state may exempt same property included in federal laundry list, more property than that included in federal laundry list, or less property than that included in federal laundry list; states also may pre-scribe their own requirements for exemptions, which may either circumscribe or enlarge list of ex-empt property. In re McManus (1982, CA5 La) 681 F2d 353, 9 BCD 561, 6 CBC2d 1194, CCH Bankr L Rptr P 68925, reh den (1982, CA5 La) 689 F2d 190 and reh den (1982, CA5 La) 689 F2d 190 and (ovrld as stated in In re Durban (2004, BC ND Tex) 2004 Bankr LEXIS 2032).

States may enact statutory exemption provisions which are less beneficial to debtor than those permitted in federal exemption provisions; if Congress had intended to foreclose states from prom-ulgating more restrictive exemptions it could simply have enacted exemption scheme currently em-bodied in § 522(d) and not provided states with election to opt out and supremacy clause would have prevented states from promulgating more restrictive and, therefore, inconsistent bankruptcy exemptions. Rhodes v Stewart (1983, CA6 Tenn) 705 F2d 159, 10 BCD 596, 8 CBC2d 451, CCH Bankr L Rptr P 69140, cert den (1983) 464 US 983, 78 L Ed 2d 361, 104 S Ct 427 and (criticized in In re Cross (2000, BC ND Ind) 255 BR 25).

Where claimant of exemption in bankruptcy is established upon property for main purpose of engaging in certain business and uses portion for dwelling purposes only that he may be convenient to that business, property does not come within purpose of state statute allowing homestead exemp-tion; but where place is primarily home of family and some business is engaged in on premises in incidental way, conduct of such business does not deprive owner of right to homestead claim. In re Shepardson (1928, DC Cal) 28 F2d 353.

Congress gave states wide latitude to provide their citizens with scheme of exemptions not in-consistent with those of 11 USCS § 522 that will give debtors fresh start, and thus state statute need not be identical to federal scheme to pass constitutional muster. In re Keyworth (1985, DC Colo) 47 BR 966, 12 BCD 1137, CCH Bankr L Rptr P 70314.

There is no clear Congressional intent for national uniformity with respect to exemptions, in view of provision of 11 USCS § 522 allowing states to enact legislation prohibiting citizens of that state from electing federal exemptions, and in view of wide divergence among exemptions provided by individual states. In re Ford (1980, BC DC Md) 3 BR 559, 6 BCD 202, 1 CBC2d 840, CCH Bankr L Rptr P 67429, affd (1981, CA4 Md) 638 F2d 14, 3 CBC2d 549, CCH Bankr L Rptr P 67768 and (superseded by statute as stated in In re Bell-Breslin (2002, BC DC Md) 283 BR 834) and (criticized in In re Spears (2004, BC WD Mich) 308 BR 793).

Chapter 13 trustee's argument that exemption provisions of 11 USCS § 522(b)(3) violated uni-formity clause, U.S. Const. art. I, § 8, cl. 4, because it allowed Montana debtor to use California ex-emptions, failed, since similarly situated debtors received same treatment. Drummond v Urban (In re Urban) (2007, BAP9) 375 BR 882.

13. Amendment of state exemption laws

Under opt-out state's exemption law, amount of debtor's exemption is determined by date debt was incurred; where debt was incurred both before and after alteration in state exemption legisla-

Page 54 11 USCS § 522

tion, exemption will be apportioned. Goldsby v Stewart (1983, SD Ala) 46 BR 692, 12 CBC2d 1015.

Texas legislature's decision to permit retroactive application of 1983 homestead law amendment withstands due process challenge, because it was eminently rational for Texas legislature to con-clude that purposes of amendments, which were to increase protections afforded to all homestead claimants as result of inflation and increased market demands and to end different treatment of ur-ban and rural homesteads by basing both exemptions on acreage standards, could be more fully ef-fectuated if its provisions were applied retroactively. In re Starns (1985, SD Tex) 52 BR 405, 13 CBC2d 853.

1981 amendment to Washington homestead statute providing that homestead is automatically created in debtor's permanent residence from beginning of permanent occupancy should not be ap-plied retroactively to dislodge judgment lien because such result would have no remedial effect but would merely alter judgment creditor's status from secured to unsecured creditor; judgment credi-tors who obtained lien on Chapter 7 debtor's property prior to debtor's official declaration of home-stead, as required by pre-amendment statute, have interest in excess value of homestead property or its proceeds superior to trustee. In re Wenner (1985, WD Wash) 61 BR 634.

Applicable state exemption law is determined for purposes of applying 11 USCS § 522 as of date of order of relief under original petition, so that postpetition amendment of state exemption law, permitting any natural person rather than head of family to claim homestead exemption, which was effective prior to conversion of Chapter 11 to Chapter 7 does not affect debtor's right to claim exemption. In re Butcher (1987, ED Tenn) 75 BR 441, affd without op (1988, CA6 Tenn) 848 F2d 189 and affd without op (1988, CA6 Tenn) 848 F2d 189.

Amendment increasing Iowa opt-out exemption for farming equipment from $ 5,000 to $ 10,000 does not affect lien avoidance provisions under Bankruptcy Code for purposes of determining whether retroactive application of amendment violates contracts and takings clauses of Iowa and federal constitutions. In re Van Hove (1987, ND Iowa) 78 BR 917.

Right of bankrupt to exemption is governed by state law in existence when petition is filed, and where Wisconsin bankrupt had at least 6 debts owed prior to date upon which Wisconsin increased bankruptcy exemption from $ 10,000 to $ 25,000, trustee is entitled to take and administer for all creditors any funds obtained from homestead in excess of Wisconsin pre-amendment exemption, inasmuch as it is law in Wisconsin that increase in exemptions is not allowable to bankrupt who has incurred debts prior to effective date of such increase, and every bankrupt thereafter filing petition is presumed to have known of that limitation. In re Holsten (1979, BC WD Wis) 4 BCD 1127, 19 CBC 771.

Proper exemption allowed under former Bankruptcy Act where state increased amount of al-lowable exemption was to be determined in three steps: first, debtor was entitled to exemption amount in effect before increase in homestead exemption, next, trustee was entitled to amount equal to claim or claims as to which increase in exemption was ineffective because such claims predate exemption increase; third bankrupt was entitled to balance of increase in exemption. In re Pappas (1980, BC CD Cal) 2 BR 138.

Although state's increase in homestead exemption does not per se impair obligation of contracts in violation of USCS Constitution, Article 1, § 10, if it is reasonable and in furtherance of valid so-cial, economic, or protective functions of state, amendment made by state legislature increasing

Page 55 11 USCS § 522

value of exemption from $ 10,000 to $ 25,000, if applied retroactively, is violation of Constitution; trustee may reach, for benefit of general creditors, that portion of difference between original ex-emption value and new exemption value which would be subject to levy by actual creditors holding preamendment claims so that exemption, as to creditors existing prior to amendment date, would be preamendment exemption amount, and, as to creditors created after amendment date, exemption would be present amount. In re Echavarren (1980, BC DC Idaho) 2 BR 215, 5 BCD 1229.

Debtors have right to maximum exemption which they are entitled to as of date of filing peti-tion, but trustee has additional power to reach for benefit of creditors generally that portion of in-crease in exemption, as result of amendment of state exemption statute, which could be subjected to levy by actual creditors holding preamendment claims; debtors therefore are entitled to exemption as it exists on date of bankruptcy, less aggregate of claims predating amendment to exemption stat-ute, but with such aggregate limited to amount of increase in exemption. In re Murillo (1980, BC CD Cal) 4 BR 612 (criticized in In re Betz (2002, BC DC Mass) 273 BR 313).

Under Alabama law resident may claim property as exempt under statutes in effect at time debt was incurred, thus, where state law was amended effective May 19, 1980, under authority of 11 USCS § 522(d) to prohibit Alabama residents from claiming federal exemptions in bankruptcy and increasing state exemptions and most if not all of debtor's prepetition debts listed in petition exe-cuted on May 21, 1980 were incurred prior to May 19, 1980, debtor is limited to those exemptions allowed prior to that date. In re Browning (1981, BC SD Ala) 13 BR 6.

Amendment to Iowa exemption statute to include exemption for profit-sharing plan does not impair contractual relationship between debtor and debtor's former employer, who created pension plan and who was creditor of debtor, because federal law precludes enforcement against assets of plan qualifying under ERISA, 29 USCS § 1001, and because general creditor of debtor could not have reached benefits under plan outside of bankruptcy in any event. In re Pettit (1985, BC SD Iowa) 55 BR 394, affd (1985, SD Iowa) 57 BR 362.

Chapter 7 debtors' homestead rights are to be determined as of date of filing petition; thus, they are entitled to $ 15,000 joint exemption in mobile home pursuant to Illinois homestead statute in effect on date of filing rather than $ 10,000 which would have been allowed under statute in effect on date of agreement to purchase home; applying statute in effect at time of petition neither substan-tially impairs parties' contractual relationship nor is unreasonable or unnecessary for accomplish-ment of important public purpose and thus is not violation of contract clause of constitution. In re Hockinson (1986, BC ND Ill) 60 BR 250.

Although Chapter 7 debtors can now exempt from estate up to $ 20,000 in value of farm equip-ment under amended Minnesota exemption statute, debtors here can only avoid creditor's lien to ex-tent of $ 10,000 value in equipment because that was statutory limit at time security interest was created; to hold otherwise would result in use of later-enacted statute to deprive creditor of earlier, lawfully created, and sustained interest in property without compensation. In re Peters (1986, BC DC Minn) 60 BR 711 (criticized in In re Larson (2001, BC DC Colo) 260 BR 174, 2001 Colo J C A R 2723).

Bank is entitled to amounts in excess of $ 10,000 from debtor's spendthrift trust income which were seized prior to effective date of amendment to Louisiana statute which increased exemption from $ 10,000 to $ 20,000 per year; amounts less than $ 20,000 seized after effective date are ex-empt and are therefore property of debtor under 11 USCS § 541; trustee has right only to so much of

Page 56 11 USCS § 522

beneficial interest in trust as would ordinary creditor outside bankruptcy. In re Prejean (1986, BC WD La) 64 BR 71.

Chapter 7 debtor's right to claim property as his homestead is governed by amended Florida Constitution, which provides that all "natural persons" may claim exemption, rather than by pre-amendment constitution which allowed only heads of household to claim exemption, where, al-though at time title vested in debtor amendment was not in effect, it became effective prior to time when debtor filed his petition in bankruptcy. In re Owen (1986, BC MD Fla) 64 BR 258.

Amendment to Iowa farm machinery exemption increasing value of exemption from $ 5,000 to $ 10,000 does not constitute unconstitutional taking, even though it decreases value of each of se-cured creditor's liens which was created prior to amendment, because, given history of Iowa exemp-tion statutes, secured creditor should have anticipated possibility of further periodic adjustments to exemption statutes. In re Punke (1987, BC ND Iowa) 68 BR 936, 16 CBC2d 68.

Investment expectations of parties at time loan is made is prime consideration in determining whether there is unconstitutional taking by amendment of exemption statute to increase value of exemption subsequent to creation of security interest. In re Punke (1987, BC ND Iowa) 68 BR 936, 16 CBC2d 68.

In view of history of Iowa exemption regulation, whose purpose is support and protection of debtor and his family, secured creditor's reasonable expectations have not been substantially im-paired so as to violate federal contract clause by application of increased exemption for farm ma-chinery in effect at time of Chapter 7 filing, but not in effect at time security agreement was entered into; even if exemption law could be found to impair secured creditor's contractual interests with debtor, amendment to exemption statute was enacted in response to and is justified by legitimate public purpose and is not unreasonable or unnecessary exercise of state's police power. In re Punke (1987, BC ND Iowa) 68 BR 936, 16 CBC2d 68.

Fact that amendment to Iowa exemption statute raising farm machinery exemption from $ 5,000 to $ 10,000 effectively denies secured creditor $ 5,000 of value of each of its liens created prior to amendment of statute does not necessarily constitute illegal fifth amendment taking; rather, creditor must provide strong evidence that taking of this right effects substantial impairment of security. In re Punke (1987, BC ND Iowa) 68 BR 936, 16 CBC2d 68.

Application of amendment to Minnesota exemption statute increasing amount of rural home-stead from 80 to 160 acres to preexisting unsecured debt, which was not reduced to judgment, does not operate to impair substantially contractual relationship of Chapter 7 debtor and creditor; applica-tion of amendment would be valid even if it did substantially impair parties' contractual relationship since it is valid exercise of state's police power. In re Johnson (1987, BC DC Minn) 69 BR 988, CCH Bankr L Rptr P 71654.

Even if state exemption amendments are not applied retrospectively under state provisions, 11 USCS § 522(b) allows for application of exemption statute increasing tools of trade exemption for Chapter 7 debtor farmer if amendment is effective on date of filing. In re Towns (1987, BC SD Iowa) 74 BR 563.

Debtors are not entitled to claim exemptions as result of amendments to Virginia poor debtor's exemption statute which became effective after they filed Chapter 13 but before they converted to Chapter 7; exemption statute in effect on date of bankruptcy filing controls, and conversion from

Page 57 11 USCS § 522

Chapter 13 to Chapter 7 does not advance date of filing to date of conversion under 11 USCS § 348. In re Stroble (1991, BC WD Va) 127 BR 372, 3 Fourth Cir & Dist Col Bankr Ct Rep 418, CCH Bankr L Rptr P 73999.

Chapter 7 debtors, who filed their petitions during time that entitlement to exempt property was limited to state exemptions under Arkansas law may not amend their schedules to claim federal ex-emptions following amendment of Arkansas exemption statute which allows debtors to claim either state or federal exemptions where Arkansas statute was not intended to have retroactive effect; debtor's right to exemptions is generally determined as of date bankruptcy petition is filed, notwith-standing any postpetition modification or amendment to state exemption law, except when amend-ment to state statute is to be applied retroactively; Bankruptcy Rule 1009, which allows amendment at any time, does not provide basis for debtors to amend in this case because implicit in that rule is requirement that amendment be in compliance with applicable substantive law. In re Gardner (1991, BC ED Ark) 139 BR 460.

With respect to application prospectively only of newly enacted exemption, Bankruptcy Courts should administer exempt homestead assets and distribute to those eligible creditors holding prea-mendment claims nonexempt portion of homestead. In re Morzella (1994, BC DC Conn) 171 BR 485, 32 CBC2d 4, CCH Bankr L Rptr P 76138.

Virginia debtor was entitled to rely on that opt-out state's exemptions even against claim based on intentional tort so as to be nondischargeable under 11 USCS § 523(a)(6); even if Virginia home-stead and "poor debtor's" exemptions could not under state law be asserted against claim based on intentional tort, federal bankruptcy legislation was preemptive and creditor's claim did not fall within any of enumerated bankruptcy-law exceptions to assertion of exemptions. In re Scott (1996, BC ED Va) 199 BR 586, 8 Fourth Cir & Dist Col Bankr Ct Rep 749, CCH Bankr L Rptr P 77095 (criticized in McNeilly v Geremia (In re McNeilly) (2000, BAP1 RI) 249 BR 576).

Debtor could take advantage of state's expanded homestead exemption even though lien was filed prior to enactment of increase in homestead exemption from $ 10,000 to $ 50,000; accord-ingly, debtor could claim he $ 50,000 exemption and lien was avoided under 11 USCS § 522(f). In re Trudell (2008, BC WD NY) 381 BR 441.

14. Election of federal or state exemptions

Defendants' motion for summary judgment, in which they argued that plaintiff should be barred by doctrine of judicial estoppel from bringing his personal injury action against them, given that he failed to list potential claim as asset in his bankruptcy petition, was denied without prejudice be-cause while damages for pain and suffering and loss of future earnings were exempt under Md. Code Ann., Cts. & Jud. Proc. § 11-504(b)(2), damages for lost wages, prepetition medical expenses, injuries to property, and punitive damages were not exempt. Calafiore v Werner Enters. (2006, DC Md) 418 F Supp 2d 795.

Debtor may elect to take set of exemptions prescribed in 11 USCS § 522(d) or those created by state or local law and federal law other than subsection (d) so that debtor may choose from one set or alternatively from other set, but not from both. In re Martin (1980, BC CD Cal) 6 BR 827.

Debtor, who did not claim exemptions for residential and real property or burial plot at time he filed bankruptcy petition, may now exempt such property under 11 USCS § 522, where although state law does not now permit such exemptions, at time debtor filed his petition there was no state

Page 58 11 USCS § 522

law in existence prohibiting him from choosing to exempt property pursuant to § 522. In re Burn-ham (1981, BC ND Ga) 12 BR 286.

Individual debtor may exempt property under 11 USCS § 522(b)(1) or under 11 USCS § 522(b)(2), but not under both sections simultaneously. In re Lawson (1985, BC DC Vt) 45 BR 686, 12 BCD 818.

Unless state enacts legislation foreclosing 11 USCS § 522(d) as alternative list of exemptions, there exists election between those exemptions listed in 11 USCS § 522 and applicable state exemp-tions. In re Graham (1986, BC SD Tex) 64 BR 469.

Bankruptcy court found that because debtor had exempted all of equity in debtor's residence, pursuant to D.C. Code Ann. § 15-501(a)(14), there was not unused amount of exemption available from which debtor could claim as exempt. In re McDonald (2002, BC DC Dist Col) 279 BR 382.

Internet website bankruptcy petition preparer that advised debtor to let website choose between exemptions of 11 USCS § 522(b)(1), (b)(2), engaged in unauthorized practice of law and was fined and ordered to disgorge fees paid by debtor to access website. In re Pillot (2002, BC CD Cal) 286 BR 157.

Chapter 7 Trustee could not preemptively ask that bankruptcy court bar debtor from claiming homestead exemption under California law after bankruptcy court determined that exemption pur-suant to 11 USCS § 522(d)(1) did not apply because this request ran afoul of Fed. R. Bankr. P. 1009(a), which granted absolute right to debtor to amend Schedule C. In re Boward (2005, BC DC Mass) 334 BR 350.

Where bankruptcy debtor claimed exemption expressly under federal statute but added language invoking full faith and credit for state exemption, debtor properly elected federal exemption under 11 USCS § 522(b) since reference to state law was surplusage and pure argument, and not assertion of exemption claim under state law. Opel v Daly (In re Daly) (2005, BC MD Pa) 344 BR 304.

Where bankruptcy debtor leased and operated restaurant in hotel and debtor's bank claimed se-curity interest in post-petition receivables owed to debtor by hotel for room service charges col-lected by hotel, 11 USCS § 552(b)(2) did not allow bank to claim security interest in post-petition receivables simply because restaurant was located in hotel, and receivables were for food services rather than room occupancy. Timothy Dean's, Inc. v White (In re Timothy Dean Rest. & Bar) (2006, BC DC Dist Col) 342 BR 1.

Undesignated sentence at bottom of 11 USCS § 522(b)(3) provides that if effect of domiciliary requirement under § 522(b)(3)(A) is to render debtor ineligible for any exemption, debtor may elect to exempt property that is specified under § 522(d); this sentence modifies entirety of § 522(b)(3); since § 522(b)(3) relates to exemptions under state law, it makes most sense for undesignated sen-tence to apply to § 522(b)(3) as whole; thus, it means exactly what it says, if 730-day domiciliary requirement under § 522(b)(3)(A) renders debtor ineligible for any state exemptions, debtor may claim federal exemptions. In re Underwood (2006, BC ND Fla) 342 BR 358.

Since debtor could not claim Colorado exemptions because she was not Colorado resident, and since 730-day domiciliary requirement of 11 USCS § 522(b)(3)(A) rendered her ineligible to claim exemptions under any state's laws, debtor could claim federal exemptions. In re Underwood (2006, BC ND Fla) 342 BR 358.

Page 59 11 USCS § 522

Debtor was entitled to bankruptcy exemption, despite trustee's objection, where debtor's lien in certain real property occupied by debtor's dependent child and former spouse could be exempted from his bankruptcy estate because in Minnesota debtor could elect either federal or state exemp-tions. Keller v Johnson (In re Johnson) (2003, BAP8) 288 BR 130, CCH Bankr L Rptr P 78798, revd, remanded (2004, CA8 Minn) 375 F3d 668, CCH Bankr L Rptr P 80127.

Where debtor has elected Minnesota exemptions under 11 USCS § 522(b), then Minnesota law governs debtor's real property interest and debtor's lien on such real property occupied by another does not qualify for exemption under Minnesota's homestead exemption statute. Keller v Johnson (In re Johnson) (2003, BAP8) 288 BR 130, CCH Bankr L Rptr P 78798, revd, remanded (2004, CA8 Minn) 375 F3d 668, CCH Bankr L Rptr P 80127.

15. Domicile of debtor as determining applicable state law

Pursuant to 11 USCS § 522(b)(2)(A), property exemptions must be determined in regard to law of debtor's domiciliary state regardless of where property is situated. In re Wilson (1985, ED Tenn) 62 BR 43, 14 BCD 1144.

For purposes of determining where involuntary Chapter 7 debtor was domiciled for 180-day pe-riod immediately preceding filing of petition in order to determine applicable exemptions under 11 USCS § 522, bankruptcy judge must make factual finding based on evidence of debtor's intent and overt acts manifesting this intent; debtor's domicile is properly considered to be in Tennessee, even though he had leased condominium in Florida one year prior to filing of petition, where overt acts which would normally indicate intent, i.e., registering to vote, filing declaration of homestead and obtaining Florida driver's license, all occurred shortly before filing. In re Wilson (1985, ED Tenn) 62 BR 43, 14 BCD 1144.

Alabama Act providing that in cases instituted under provisions of Title 11 of Bankruptcy Code there shall be exempt from property of estate of individual debtor only that property and income which is exempt under laws of Alabama and under federal laws other than 11 USCS § 522 applies only to residents of Alabama and therefore non-resident who has instituted bankruptcy case in Ala-bama is entitled to exemptions allowed under 11 USCS § 522(d). In re Walley (1981, BC SD Ala) 9 BR 55.

Location of debtors' domicile during longer portion of 180 day period immediately preceding filing of petition governs determination of applicable state exemptions; where evidence is clear debtors were domiciliaries of South Dakota for greater portion of 180 days prior to filing of petition, South Dakota law will provide applicable exemptions. In re Volk (1983, BC DC SD) 26 BR 457, 9 BCD 1382, 7 CBC2d 1096.

Exemptions available to debtor in state which has "opted out" of federal bankruptcy exemptions provided in 11 USCS § 522(b)(2) are those of state of domicile; thus, law of Florida, where debtor lives, governs whether debtor's workers' compensation settlement is exempt property, rather than law of North Carolina, which is state where injury occurred and under laws of which benefits were paid. In re Green (1995, BC MD Fla) 178 BR 533.

If debtors have not resided for 730 days in state where they file, in order for them to be permit-ted to elect exemptions under state or local law of their former residence, that state or local law must still be "applicable" to them; in event that exemption law of that former residence requires that debtors actually reside within state at time of filing in order to claim exemptions, as is case with

Page 60 11 USCS § 522

Colorado law, that law is not "applicable" under 11 USCS § 522(b)(3)(A) and debtors cannot claim exemption of state of their former residence. In re Jewell (2006, BC WD NY) 347 BR 120, CCH Bankr L Rptr P 80678.

Debtors who had moved from Iowa to Arkansas but had not resided in latter state for 730 days required under 11 USCS § 522(b)(3)(A), were allowed to claim their Iowa homestead exemption and apply it to their Arkansas residence, as opt-out statute, Iowa Code § 627.10 (1998) did not spec-ify that debtor reside in Iowa. In re Williams (2007, BC WD Ark) 369 BR 470.

For purposes of calculating "the 730 days immediately preceding date of filing of petition" un-der 11 USCS § 522(b)(3)(A), U.S. Bankruptcy Court for Western District of Missouri adopts view of counting backward from petition date. In re Dufva (2008, BC WD Mo) 388 BR 911, CCH Bankr L Rptr P 81274.

16.--Under particular circumstances

Finding debtor was domiciled in Nevada was not clearly erroneous and bankruptcy court cor-rectly determined that Nevada law applied to determine whether debtor's beneficial interest in pen-sion plan was exempt from bankruptcy estate under 11 USCS § 522(b) where debtor was physically present in Nevada for majority of 180-day period leading up to petition date, debtor admitted being at Nevada residence for four months prior to petition date, debtor admitted being Nevada resident for over ninety days of 180-day period preceding petition date, debtor stated that he no longer had residence in Pennsylvania and intended to reside in Nevada for indefinite future, debtor transferred out of Pennsylvania all assets of pension plan, debtor admitted decision to leave Pennsylvania was influenced by outstanding bench and contempt warrants issued against him, and debtor testified he left Pennsylvania to get new start and get on with life. Lowenschuss v Selnick (In re Lowenschuss) (1999, CA9 Nev) 171 F3d 673, 41 CBC2d 1049, CCH Bankr L Rptr P 77919.

Where debtor's residence and domicile up to and including April 5, 1980 was in Texas, where she resided in Florida but maintained domicile in Texas from April 6, 1980 to May 25, 1980, and where debtor's residence and domicile was in Florida from May 25, 1980 to date of filing of peti-tion, pursuant to 28 USCS § 1472, venue of this matter is properly in Bankruptcy Court for Southern District of Florida and pursuant to 11 USCS § 522, debtor is entitled to exemptions under local law of Texas. In re Lockwood (1980, BC SD Fla) 6 BR 623.

Serviceman stationed in Virginia who was previously domiciled in Minnesota, pays Minnesota taxes, has Minnesota driver's license, and voted in Minnesota by absentee ballot in previous election may claim federal exemptions as allowed by Minnesota law despite fact that Virginia does not per-mit use of federal exemptions. In re Wellberg (1981, BC ED Va) 12 BR 48, 7 BCD 1030, 4 CBC2d 1007, CCH Bankr L Rptr P 68299.

Debtor is entitled to claim federal exemptions under 11 USCS § 522(b) where, although debtor resided in District of Columbia at time of filing petition for voluntary relief, she was required to file in Virginia since she had resided there for most of 180 days preceding filing date of petition, but debtor is not entitled to claim Virginia exemptions as she was no longer resident of Virginia. In re Hawkins (1981, BC ED Va) 15 BR 618, CCH Bankr L Rptr P 68461.

Debtors were domiciliaries of Virginia during the 180 days immediately preceding the filing of their petition in bankruptcy; thus, under § 522(b)(2)(A), their claim of homestead exemption for Kansas property will be governed by Virginia's homestead deed filing laws, although whether Kan-

Page 61 11 USCS § 522

sas property bought on installment sales contract is realty or personalty is governed by Kansas law. In re Calhoun (1985, BC ED Va) 47 BR 119.

Fact that Florida has opted out of federal exemptions is irrelevant where debtors were California residents on date of filing; thus Chapter 7 debtors' exemptions are governed by California law, which allows federal exemptions under 11 USCS § 522, despite fact that debtor's case is heard in Florida. In re Dondey (1985, BC SD Fla) 50 BR 12.

Where Chapter 7 debtor has been domiciled in Tennessee for 180 days prior to filing of involun-tary petition, Tennessee law governs his rights to homestead exemption and debtor is not entitled to homestead exemption under Florida law; debtor's wife may not assert, on debtor's behalf, home-stead exemption in Florida property. In re Butcher (1986, BC ED Tenn) 63 BR 30.

Chapter 7 debtor who currently resides in Wisconsin but who was required to file his petition in Florida, where he previously resided, pursuant to 28 USCS § 1408(1), cannot claim Florida exemp-tions because he is not Florida resident as required by Florida exemption statutes; debtor may, how-ever, avail himself of federal exemptions under 11 USCS § 522, because Florida opt-out statute only applies to Florida residents and does not apply to prevent nonresidents who, because of venue pro-visions of 28 USCS § 1408, are required to file in Florida, from claiming federal exemptions. In re Schulz (1989, BC ND Fla) 101 BR 301, CCH Bankr L Rptr P 72951.

Chapter 7 debtor wife was not domiciliary of Florida for requisite period of time under 11 USCS § 522(b)(2)(A) when she did not set foot in state until 2 days after 91st day preceding her petition; court will not apply principle that woman's domicile follows that of her husband, but rather woman's domicile must be established by her physical presence and intent to remain indefinitely. In re Ring (1992, BC ED Mo) 144 BR 446.

Chapter 7 debtors' tax refund, which was in possession of IRS on date of bankruptcy filing, is not exempt under Missouri opt-out statute which exempts property that is exempt from attachment and execution because statute allows debtor to exempt from property of estate only property that is exempt from attachment and execution under state or federal nonbankruptcy law but debtors' tax refund could have been levied upon by certain creditors, namely, state and federal agencies under 26 USCS § 6402; fact that debtors did not owe obligations to creditors who could levy on refunds does not change result. Davis v Robinson (1993, BC ED Mo) 152 BR 956.

Finding that debtor was not domiciled in Florida as of commencement of bankruptcy case does not in itself defeat debtor's right to assert under 11 USCS § 522(b)(2)(B) Florida's law protecting property held in tenancy by entirety from claims of at least certain of owners' creditors, since phrase "applicable nonbankruptcy law" is not limited to that of debtor's state of domicile. In re Cochrane (1995, BC DC Minn) 178 BR 1011.

Chapter 7 debtors did not possess requisite intent to be domiciled in Florida on 91st day prior to filing their petition, and thus did not meet 11 USCS § 522(b)(2)(A) requirement that they be domi-ciled in Florida for greater part of 180-day period preceding their bankruptcy filing, with result that they could not claim Florida exemptions where, inter alia, most of their real property transfers prior to petition date reflected New Jersey address for debtors as did banking and other financial records and debtors rarely stayed at Florida apartment which they had rented. Furr v Lordy (In re Lordy) (1997, BC SD Fla) 214 BR 650, 11 FLW Fed B 75.

Page 62 11 USCS § 522

Debtor was domiciled in Florida and entitled to take advantage of Florida exemption statute which included exempting all IRS funds, where prior to 1989 he was Florida resident, maintained residence in Florida for 15 years even though he was also present in Virginia, held Florida driver's license, left majority of personal belongings in Florida even when he was living in Virginia, re-turned to Florida whenever he had opportunity, and at no time asserted Virginia residence. In re Koons (1998, BC ED Va) 225 BR 121, 10 Fourth Cir & Dist Col Bankr Ct Rep 821.

Chapter 7 debtor/husband who lived apart from wife in Washington state but chose to file peti-tion jointly with his wife in Idaho where she lived and marital community's principal assets were located was limited to use of exemptions provided by law of Idaho which is opt-out state. In re An-drews (1998, BC DC Idaho) 225 BR 485.

Debtors who had bought condominium, obtained drivers licenses, and registered to vote in Flor-ida, but who had continued to reside and work in Missouri, were not entitled to claim, pursuant to 11 USCS § 522(b)(2)(A), benefits of Florida exemptions in their Chapter 7 bankruptcy. In re Young (2002, BC MD Fla) 276 BR 683, 15 FLW Fed B 171.

Bankruptcy court held that period for determining domicile related to claimed state exemptions was debtors' bankruptcy petition date, and filing of bankruptcy petition, either voluntary or involun-tary, determined applicable state exemption law. In re Tanzi (2002, BC WD Wash) 287 BR 557, affd, request den (2003, BAP9) 297 BR 607, 2003 CDOS 7643, 41 BCD 212.

Where debtor's testimony under oath was inherently contradictory and self-serving,in transpar-ent effort to establish residency in Florida after fact, denial of discharge pursuant to 11 USCS § 727(a)(2), (3), and (4) was warranted. Peninsula Bank v French (In re French) (2005, BC DC Md) 2005 Bankr LEXIS 3194, affd (2006, DC Md) 338 BR 668, vacated, remanded (2007, CA4 Md) CCH Bankr L Rptr P 81002.

Chapter 7 debtor who did not reside in Indiana on date of commencement of his case, as Ind. Code § 34-55-10-2(c) required, and who had not resided in Florida for 730 days preceding filing of bankruptcy petition was not eligible for Florida or Indiana exemptions; thus, trustee's objection to debtor's claimed federal exemption under 11 USCS § 522(d) was overruled. In re West (2006, BC MD Fla) 352 BR 905, 20 FLW Fed B 19.

Per capita distributions to debtor from revenue of tribal casino were not exempt under Potawa-tomi Tribal Code § 4-10-16 because debtors' domicile was not within boundaries of reservation; therefore, pursuant to 11 USCS § 522(b) and Kan. Stat. Ann. § 60-2312, their exemptions were lim-ited to those allowed under state law, which did not allow them to claim exemption in Tribal Code. In re McDonald (2006, BC DC Kan) 353 BR 287.

Chapter 7 debtor, former Georgia domiciliary who was domiciliary of West Virginia for more than 180 days, but less than 730 days preceding her bankruptcy petition, could use federal home-stead exemption, instead of Georgia exemption, O.C.G.A. § 44-13-100(b), because Georgia had not opted-out of federal exemptions for non-residents such as debtor. In re Chandler (2007, BC ND W Va) 362 BR 723.

Florida's homestead exemption did not apply under 11 USCS § 522(b)(3)(A) to bankruptcy debtors' property located in another state, even though debtors resided in Florida for greater part of 180-day period immediately preceding 730-day period before filing for bankruptcy; § 522(b)(3)(A) only allowed application of Florida exemption law and Florida law precluded claiming Florida

Page 63 11 USCS § 522

homestead exemption for property that was not located in Florida. In re Adams (2007, BC WD Mo) 375 BR 532.

Chapter 7 debtor was precluded from using Kansas homestead and personal property exemp-tions, even though Kansas was her domicile state under 11 USCS § 522(b), because debtor was no longer physically present in state and exemptions set forth in Kan. Stat. Ann. §§ 60-2301, 60-2304 did not have any extra-territorial force; because debtor was precluded from applying state law ex-emptions, debtor could claim exemptions pursuant to 11 USCS § 522(d). In re Nickerson (2007, BC WD Mo) 375 BR 869.

Debtors lived in New Hampshire for entire 180 day period preceding 2 year period before peti-tion date of this case; accordingly, pursuant to 11 USCS § 522(b)(3)(A), debtors had to look to New Hampshire law or federal law for purpose of determining exemptions and, therefore, debtors prop-erly claimed exemptions under New Hampshire law. In re Varanasi (2008, BC SD Ohio) 59 CBC2d 935.

Chapter 7 debtors who had resided in Rhode Island for 12 years before moving to Florida and who did not qualify for Florida homestead exemption because they had not lived in Florida for 730 days before filing for bankruptcy, as required for exemption under 11 USCS § 522(b)(3)(A), could take Rhode Island homestead exemption on their Florida residence because there was nothing in R.I. Gen. Laws § 9-26-4.1 that appeared to preclude its extra-territorial application. In re Jevne (2008, BC SD Fla) 387 BR 301, 21 FLW Fed B 282.

For purposes of calculating "the 730 days immediately preceding date of filing of petition" un-der 11 USCS § 522(b)(3)(A), natural, ordinary reading of "days" meant calendar days; the U.S. Bankruptcy Court for Western District of Missouri rejected approach taken in calculating time pe-riod for obtaining prepetition credit counseling required under 11 USCS § 109(h) where courts also took into account time of day, which in instant case, would have meant that debtors had not been domiciled in Missouri for full 730-day period and would have allowed them to use Nevada's exemp-tion laws. In re Dufva (2008, BC WD Mo) 388 BR 911, CCH Bankr L Rptr P 81274.

Although debtor argued that he intended Florida to be his domicile beginning in 1997, his self-serving statements of intent were not controlling, and events and circumstances during relevant time period were inconsistent with his statement of intent; objector introduced sufficient evidence to re-fute his self-serving assertion that he changed his domicile from Massachusetts to Florida in May 1997, and bankruptcy court did not err in weighing evidence, including his credibility (or lack thereof), in determining whether he intended to be domiciled in Florida during 180-day period prior to bankruptcy filing. Morad v Xifaras (In re Morad) (2005, BAP1) 323 BR 818. Unpublished Opinions

Unpublished: Chapter 7 debtor was entitled to use federal exemptions of 11 USCS § 522(d) be-cause, although Kansas exemption statutes applied pursuant to § 522(b)(3)(A), trustee had not proven that debtor, who was not living in Kansas on date of filing, could benefit from Kansas per-sonal property exemptions under Kan. Stat. Ann. § 60-2304 and § 60-2313. In re Fabert (2008, BC DC Kan) 2008 Bankr LEXIS 58.

17. State court jurisdiction of claims against exempt property

Page 64 11 USCS § 522

Under former law, as soon as Bankruptcy Court decided that bankrupt's interest in employees' pension system was exempt and set it apart, it disposed of all questions of ownership with which it could deal; and disputes over ownership of exempt fund were for state courts. Negin v Salomon (1945, CA2 NY) 151 F2d 112, 161 ALR 1005.

Under former law, creditors who were creditors prior to new exemption statute and had claims to property as to which increased exemption was allowed had to go to state court to enforce such claims. In re Wilcoxson (1977, BC ND Ga) 3 BCD 1220, 15 CBC 279.

Debtors' claim of $ 10,000 state homestead exemption can be dealt with in state foreclosure ac-tion when Bankruptcy Court lifts automatic stay for debtor's lack of equity and failure to provide adequate protection. In re Merrick (1984, BC SD Ohio) 44 BR 967.

Proper procedure for creditor to enforce obligation of individual debtor spouse against entirety property is to move for relief from stay, whereupon court will stay discharge and allow creditor to proceed to judgment in state court and enforce such judgment against entirety property; where court has granted discharge prior to ruling on motion for relief from stay, court may nevertheless grant motion, and modify discharge to protect rights of joint creditor pursuant to its equity power. In re Bonner (1986, BC ED Mo) 3 BAMSL 1825.

Once Bankruptcy Court has determined that certain property is subject to exemption, any claims against that property must be decided by state court under 11 USCS § 522. In re Albrecht (1988, BC DC Mont) 89 BR 859, 19 CBC2d 982.

18. Miscellaneous

Chapter 13 debtor appeal of Bankruptcy Court order granting IRS motions to dismiss and for summary judgment on portion of debtor's complaint, is denied, court finding debtor's right to set aside sale of land pursuant to 11 USCS § 548(a)(2) is conditioned upon debtor meeting elements set forth in 11 USCS § 522(h), and, since North Carolina has opted out of Bankruptcy Code exemption scheme, as permitted by 11 USCS § 522(b), state law governs determination of extent of debtor's exemptions. Hollar v United States (1995, MD NC) 188 BR 539, 76 AFTR 2d 6580, 95 TNT 192-34, affd without op (1996, CA4 NC) 92 F3d 1179, reported in full (1996, CA4 NC) 1996 US App LEXIS 19834.

District court affirmed bankruptcy court's denial of banks' objections to debtor's claimed exemp-tion to life insurance proceeds because state prohibited, pursuant to 735 Ill. Comp. Stat. 5/12-1201, residents of Illinois from using federal exemptions provided in 11 USCS § 522(d); therefore, all proceeds from life insurance policy that insured life of debtor's spouse were entirely exempt pursu-ant to 735 Ill. Comp. Stat. 5/12-1001(f). Tuscola Nat'l Bank v Stilwell (In re Stilwell) (2005, CD Ill) 321 BR 471, CCH Bankr L Rptr P 80250.

Because debtor's right to claim homestead exemption is generally fixed upon date Chapter 7 bankruptcy petition is filed, debtor's post-petition death does not affect his right to claim declared homestead exemption under state law. Indeed, U.S. District Court for Eastern District of California has held that claimed exemption (if valid under 11 USCS § 522(b) at time of filing) survives death of debtor, noting that statutory language, legislative history, and case law mandate conclusion that debtor who dies post-petition is entitled to claims of exemption as well as discharge. Ohanian v Ir-win (In re Irwin) (2006, ED Cal) 338 BR 839.

Page 65 11 USCS § 522

Debtor may claim exemptions, despite objection by creditor with personal injury judgment against debtor, even though Alabama statutes and case law interpreting those statutes deny debtor's exemptions from debts resulting from tort liability, because federal exemptions, although measured by state law under opt-out provision of 11 USCS § 522(b)(1), are exemptions of debtor from prop-erty of estate, as distinguished from exemptions from seizure under state law. In re Cooley (1986, BC ND Ala) 67 BR 229, affd (1987, ND Ala) 72 BR 54.

Pursuant 11 USCS § 522(b)(2)(A), exempt property in opt-out state is defined by state law ap-plicable on date of filing bankruptcy petition rather than on date of conversion. In re Weed (1998, BC DC Nev) 221 BR 256, 40 CBC2d 254.

State's ability to define its exemptions must yield to conflicting policies in Bankruptcy Code. In re Cross (2000, BC ND Ind) 255 BR 25.

Where bankruptcy court found that language of D.C. Code Ann. § 15-501(a)(11)(D) did not cre-ate any cognizable exemption, debtor could not be permitted to take language from federal statute and append it to District of Columbia statute in order to create favorable exemption and obtain "the best of both worlds." In re Lewis (2004, BC DC Dist Col) 305 BR 610.

Debtor who was Georgia resident and who had homestead in Georgia could not claim home-stead exemption under Fla. Const. art. 10, § 4; because debtor had already waived her ability to claim exemption under Georgia law, through earlier proceedings, debtor did not have valid home-stead exemption, pursuant to 11 USCS § 522(b)(2)(a), and trustee could proceed with sale of prop-erty. In re Dicks (2006, BC MD Fla) 341 BR 327.

State law governed scope of debtor's interest in homestead property located in state. In re Alex-ander (2006, BC MD Fla) 346 BR 546, 19 FLW Fed B 356.

Because annuity proceeds would have been exempt from scope of estate property in Chapter 7 liquidation (debtor's annuity met all of statutory qualifications set forth in Tex. Ins. Code Ann. § 1108.051), trustee's objection to confirmation of debtor's amended chapter 13 plan as result of debtor's purported failure to meet best interests test of 11 USCS § 1325(a)(4), had to be overruled. In re Foster (2006, BC ED Tex) 360 BR 210.

Pursuant to 11 USCS § 522(b), debtors who owned home in state could claim nonbankruptcy homestead exemption pursuant to Homestead Statute, Mass. Gen. Laws Ann. ch. 188, § 1. In re Me-lito (2007, BC DC Mass) 357 BR 684.

B.Constitutionality of State Exemption Laws 19. Generally

States retain power to enact bankruptcy laws so long as they do not conflict with federal bank-ruptcy legislation; there is no conflict between Illinois exemption provisions and 11 USCS § 522(d) because express language of 11 USCS § 522(b)(1) allows state to opt-out of federal scheme; where state is thus exercising its own power, no unconstitutional delegation of Congressional power can be found. In re Sullivan (1982, CA7 Ill) 680 F2d 1131, 9 BCD 140, 6 CBC2d 972, CCH Bankr L Rptr P 68700, cert den (1982) 459 US 992, 74 L Ed 2d 388, 103 S Ct 349.

Congress has power to permit states to set their own exemption levels; to say that state exemp-tion provisions providing less solace to debtors than federal exemptions of 11 USCS § 522(d) are in "conflict" with either language of bankruptcy code or expressions of Congressional intent underly-ing it, is simply inaccurate; Illinois exemption provisions are constitutional. In re Sullivan (1982,

Page 66 11 USCS § 522

CA7 Ill) 680 F2d 1131, 9 BCD 140, 6 CBC2d 972, CCH Bankr L Rptr P 68700, cert den (1982) 459 US 992, 74 L Ed 2d 388, 103 S Ct 349.

There being no dispute that Colorado debtor's claimed exemptions of United States Savings Bond, federal tax refund, and state tax refund fall under provision in 11 USCS § 522(d)(5), from which exemptions states may opt out according to 11 USCS § 522(b), as Colorado has, debtor does not have standing to challenge other portions of Colorado law which allegedly go beyond permissi-ble opt out and are therefore allegedly unconstitutional. Hinkson v Pfleiderer (1984, CA10 Colo) 729 F2d 697, 11 BCD 1034, CCH Bankr L Rptr P 69767.

California statute limiting married debtors filing joint bankruptcy petition to single set of ex-emptions but allowing similarly situated unmarried debtors to claim two sets of exemptions has ra-tional basis, and thus does not violate equal protection. In re Talmadge (1987, CA9 Cal) 832 F2d 1120, 17 CBC2d 1140, CCH Bankr L Rptr P 72106.

Oklahoma statute exempting Individual Retirement Accounts and Keogh plans is not unconsti-tutional on ground that it impairs creditors' ability to collect on their contracts, all of which were entered before effective date of statute, because any such impairment is justifiable exercise of Okla-homa's inherent police power. In re Walker (1992, CA10 Okla) 959 F2d 894, 22 BCD 1284, CCH Bankr L Rptr P 74528, 133 ALR Fed 577.

Oklahoma statute exempting retirement plans does not exceed scope of authority delegated to states under 11 USCS § 522 as statute is not inconsistent with alternate federal list in § 522. In re Walker (1992, CA10 Okla) 959 F2d 894, 22 BCD 1284, CCH Bankr L Rptr P 74528, 133 ALR Fed 577.

Even assuming that ERISA portion of Oklahoma annuity exemption statute is unconstitutional, non-ERISA portion of statute is severable. In re Walker (1992, CA10 Okla) 959 F2d 894, 22 BCD 1284, CCH Bankr L Rptr P 74528, 133 ALR Fed 577.

11 USCS § 522(b)(1) which authorizes states to opt-out of federal exemption scheme does not violate Fifth Amendment by denying citizens of Ohio due process of law and equal protection of laws. Storer v French (In re Storer) (1995, CA6 Ohio) 58 F3d 1125, CCH Bankr L Rptr P 76552, 1995 FED App 206P, cert den (1995) 516 US 990, 133 L Ed 2d 428, 116 S Ct 520.

Colorado opt out exemptions, pursuant to 11 USCS § 522(b)(1), providing total exemption of any claim for damages for personal injuries is constitutional and is not invalid for conflict with 11 USCS § 522(d)(11)(D) even though it is more generous than federal exemption. In re Keyworth (1985, DC Colo) 47 BR 966, 12 BCD 1137, CCH Bankr L Rptr P 70314.

Provisions of Ohio exemption statute, enacted under state right under 11 USCS § 522 to opt out of federal exemption scheme, which provide that certain exemptions are available to bankrupt debt-ors only, and not to nonbankrupt debtors, are reasonable and rationally related to state's legitimate purpose in providing bankrupt debtors with necessary fresh start, and are therefore both constitu-tional and in conformity with Bankruptcy Code. In re Bloom (1980, BC ND Ohio) 5 BR 451, 6 BCD 831, 2 CBC2d 838.

Illinois law which pursuant to 11 USCS § 522(b)(1) prohibits Illinois residents from using fed-eral exemptions provided for in 11 USCS § 522(d) does not deprive Illinois debtors of "fresh start" since it is for legislature rather than judiciary to determine what constitutes "fresh start" and Con-gress has power to fashion compromise between rigidly federal or rigidly state exemption law. In

Page 67 11 USCS § 522

re Sullivan (1981, BC CD Ill) 11 BR 432, 4 CBC2d 577, affd (1982, CA7 Ill) 680 F2d 1131, 9 BCD 140, 6 CBC2d 972, CCH Bankr L Rptr P 68700, cert den (1982) 459 US 992, 74 L Ed 2d 388, 103 S Ct 349.

Virginia statute which prohibits debtor from claiming federal exemptions under USCS § 522(d) is constitutional and specifically allowed by 11 USCS § 522(b)(1). In re White (1981, BC ED Va) 11 BR 775.

State statute which provides that any person who files voluntary petition in bankruptcy may set apart property before or on same day that he files his petition but not thereafter does not conflict with 11 USCS § 522 and is constitutional to extent that section affects rights of debtors in bank-ruptcy proceeding. In re Collins (1982, BC ED Va) 24 BR 485, 9 BCD 999.

Colorado opt out statute is constitutional even though it does not provide exemption for alimony and support, and statute does not deny federal nonbankruptcy exemptions to Colorado debtors. In re Ranes (1983, BC DC Colo) 31 BR 70.

Utah Exemptions Act does not violate supremacy clause by disallowing exemptions for various items of household furniture which would have been exempt under 11 USCS § 522(d) if Utah had not opted out; states may pre-empt § 522(d), and states are not required to conform their exemption laws to § 522(d); states need not provide exemptions comparable to, concomitant with, or corre-sponding to exemptions found in § 522(d) either in category or amount; states may set exemptions at levels lower or higher than those fixed by Congress. In re Neiheisel (1983, BC DC Utah) 32 BR 146, 11 BCD 32, CCH Bankr L Rptr P 69440.

To extent that state statute fails to adhere to standard of 11 USCS § 522(d)(5), which provides that homeowners and nonhomeowners be offered exemptions equal in amount, state statute is void under supremacy clause; section of New York's opt out statute is not in conflict with § 522(d)(5). In re Bartley (1983, BC ED NY) 33 BR 768.

Kentucky statute denying exemptions in property subject to consensual lien pursuant to "opt-out" clause of 11 USCS § 522(b)(1) is constitutional. In re Bennett (1984, BC WD Ky) 36 BR 893.

Where California statute, enacted pursuant to 11 USCS § 522, goes beyond simply opting out of federal bankruptcy exemptions to eliminate exemption stacking contrary to provisions in 11 USCS § 522(b) by providing (1) husband and wife who are joint debtors may choose either "unauthorized" federal bankruptcy exemptions or state exemptions, so long as they choose in common, (2) husband and wife who file individual petitions may claim federal bankruptcy exemption so long as other spouse waives in writing right to claim state exemptions, and (3) notwithstanding nonauthorization of federal bankruptcy exemptions in state, individual can choose federal or state exemptions so long as individual does not choose both, such statute is unconstitutional because of its violation of Su-premacy Clause; statute's severability clause does not save unobjectionable portions of statute since legislative history does not support conclusion that opt-out provision was to survive state attempt to prohibit exemption stacking. In re Garrido (1984, BC SD Cal) 43 BR 289, 11 CBC2d 506, CCH Bankr L Rptr P 70064.

Supremacy clause prevents state from enacting bankruptcy legislation that conflicts with area acted upon by Congress and since Congress has exercised its authority in area of property exemp-tions and lien avoidance under 11 USCS § 522, all state legislation in these areas is suspended ex-cept for limited Congressional delegation of authority to states allowing them to specify property

Page 68 11 USCS § 522

that may be exempt in each state because where both Congress and state assert power in same area, state legislation is suspended to extent it frustrates or burdens federal purpose; such delegation does not violate constitutional mandate for uniformity contained in bankruptcy clause. In re Pelter (1986, BC WD Okla) 64 BR 492, 14 BCD 1087, 16 CBC2d 306.

Montana exemption statute denying debtor exemption for workers' compensation benefits that debtor would be entitled to under federal exemption statute, 11 USCS § 522, is not unconstitutional; it is within Congress's power to concurrently allow states to determine what exemption provisions are allowable in bankruptcy case. In re Conzelman (1987, BC DC Mont) 68 BR 986.

California exemption statutes which do not allow debtors to choose federal bankruptcy exemp-tions and which are applicable only to debtors in bankruptcy, which are worded exactly the same as pre-amendment federal exemptions, exceed authority delegated to states by Congress and violate geographic uniformity requirement of U.S. Constitution; statutory wording of 11 USCS § 522(b)(2)(A) that debtor may claim property as exempt under applicable state or local law should not, in view of constitutional considerations, be interpreted so liberally as to authorize state exemp-tion scheme which is applicable only in federal bankruptcy court; due to invalidity of this portion of exemption scheme, portion of scheme opting out of federal exemptions must also be invalidated, and thus federal exemptions are available to debtors, although stacking with state exemptions is prohibited. In re Lennen (1987, BC ND Cal) 71 BR 80, 15 BCD 842, 16 CBC2d 1111.

Minnesota opt-out provision exempting family musical instruments without limitation of value violates state constitutional requirement that exemptions be of reasonable amount, so exemption is invalid and debtor cannot rely on it to avoid nonpossessory, nonpurchase money lien on Cremona violin held for personal pleasure and professional teaching. In re Hilary (1987, BC DC Minn) 76 BR 683.

Arkansas opt-out exemption provisions promulgated under 11 USCS § 522 do not violate uni-formity requirements of Bankruptcy Clause of United States Constitution, (USCS Const Art 1, § 8, cl 4) where all Arkansas debtors may take advantage of exemptions. In re Holt (1988, BC WD Ark) 84 BR 991, affd (1988, WD Ark) 97 BR 997, affd (1990, CA8 Ark) 894 F2d 1005, 22 CBC2d 337, CCH Bankr L Rptr P 73239.

In order to challenge constitutionality of Arkansas opt-out exemptions, creditor must show that: (1) enactment of statute has some actual or potential detrimental impact upon it in debtor's bank-ruptcy proceeding; and (2) it has personal stake in outcome of litigation. In re Holt (1988, BC WD Ark) 84 BR 991, affd (1988, WD Ark) 97 BR 997, affd (1990, CA8 Ark) 894 F2d 1005, 22 CBC2d 337, CCH Bankr L Rptr P 73239.

Under authority of 11 USCS § 552(b)(2), Chapter 7 debtor cannot claim Arkansas state exemp-tion where state statute providing claimed exemption violates state constitution by exempting all insurance proceeds without limitation, contrary to state constitution which places $ 500 limit on personal property exemptions, therefore, any exemption provided under such statute is unavailable to debtors because unconstitutional statute is inoperative and treated as if it had never been passed. In re Williams (1988, BC ED Ark) 93 BR 181.

Minnesota statute exempting rights of action for injuries to person of debtor or of relative whether or not resulting in death, and which imposes no monetary limit on amount of recovery, is unconstitutional because it is contrary to Minnesota constitution which provides that reasonable amount of property shall be exempt and that amount of such exemption shall be "determined by

Page 69 11 USCS § 522

law," which requires that amount of exemption must be made on face of statute. In re Medill (1990, BC DC Minn) 119 BR 685.

Arkansas statute exempting various personal property, such as vehicles, wedding band, and tools of trade is unconstitutional to extend it exceeds $ 500 personal property exemption in Arkan-sas constitution, and because court cannot rewrite statute to make it constitutional, exemptions pro-vided therein are unavailable to debtors. In re Giller (1990, BC WD Ark) 127 BR 215.

Retirement plans, including individual retirement accounts and annuities are exempt under Oklahoma law because these vehicles for retirement savings are not subject to ERISA statute and therefore are not preempted; Oklahoma statute is not unconstitutional as being in violation of Con-tracts Clause of Constitution. In re Pryor (1991, BC ED Okla) 134 BR 28.

Chapter 7 debtors' claimed exemption, made pursuant to Nevada statute, of 2 Individual Retire-ment Accounts with combined value of $ 128,300 does not violate contracts clause of Constitution, despite fact that statute's retroactive application presents impairment to contractual relationship be-tween debtors and their creditors not contemplated at time of contracting, where trustee failed to prove statute is unreasonable or unnecessary; statute was enacted to deal with broad, generalized economic or social problems and represents valid state interest. In re Seltzer (1993, BC DC Nev) 159 BR 329.

Indiana exemption statute exempting life insurance policies and proceeds or avails of life insur-ance policies violates article 1, § 22 of Indiana Constitution by failing to impose any limitation on dollar value or amount of property which may be exempted; Indiana statute exempting retirement plans does not violate constitution since it exempts contributions that were made to retirement plan by or on behalf of debtor that were not subject to federal income taxation at time of contribution, as statute provides reasonable cap on allowable exemption. In re Foster (1994, BC SD Ind) 168 BR 183.

Illinois amendment to available personal property exemptions so that debtors are no longer enti-tled to exempt wages withheld in wage deduction proceedings did not constitute a limitation on lien avoidance power granted under 11 USCS § 522(f) and did not violate Bankruptcy Clause of the Constitution since pursuant to authority granted to it by 11 USCS § 522(b), Illinois opted out of fed-eral schedule of exemptions and was free to determine what property was exempt under state law. In re Patterson (1998, BC CD Ill) 216 BR 413, 39 CBC2d 339.

Bankruptcy Court determined that Mich. Comp. Laws Ann. § 600.5451(1)(o) must be declared unconstitutional under Supremacy Clause because it conflicts with 11 USCS § 522(c) given that 522(c) clearly provides that property claimed as exempt under § 522(b), which would include Mich. Comp. Laws Ann. § 600. 5451(1)(o) exemption, is not liable for any pre-petition debt. In re Ray-nard (2005, BC WD Mich) 327 BR 623.

State's attempt to create its own set of bankruptcy-specific exemptions under Mich. Comp. Laws § 600.5451 is constitutionally unenforceable because 11 USCS § 522(b)(2) recognizes only those exemptions that state generally extends to debtors under its debt enforcement laws. In re Wallace (2006, BC WD Mich) 347 BR 626, CCH Bankr L Rptr P 80703.

Bankruptcy court sustained trustee's objection to Chapter 7 debtor's claim that she was entitled to exempt all her rights in disability insurance policy from her bankruptcy estate, pursuant to Minn. Stat. § 550.39. Minn. Stat. § 550.39 violated Minn. Const. art. I, § 12 because it did not contain ex-

Page 70 11 USCS § 522

press language which limited exemption to reasonable amount or provide method for calculating reasonable exemption, and because statute was invalid, debtor could not use it to claim exemption under 11 USCS § 522(b). In re Reiland (2007, BC DC Minn) 377 BR 232.

Lack of any external cap on aggregate value of received periodic benefits left Minn. Stat. § 550.39 fatally deficient under Minn. Const. art. I, § 12; law of "insurable interest" did not provide limitation because it was not objective as actual value of any individual insured's income that was lost by reason of personal disability, was specific to situation of each insured, determined against completely individualized factor (for example, multi-billionaire with large current earned income who had contracted for disability insurance could keep as exempt current benefits of policy paying hundreds of thousands, or millions, of dollars per year). In re Reiland (2008, BC DC Minn) 382 BR 770.

20. Homestead statutes

Supremacy Clause does not require District Court to vitiate Colorado homestead statute as vio-lative of USCS § 522(m) in that debtor joint tenant is allowed only half of full homestead exemp-tion under state law, because Colorado exercised "opt out" provision of § 522(b)(1); thus, state homestead exemption scheme is consistent with federal law. In re Robinson (1984, DC Colo) 44 BR 292.

Chapter 7 debtor may not avoid judgment lien under 11 USCS § 522(f) where lien was created prior to debtor's purchase of residence and lien was executed upon property prepetition and thus, under Kentucky exemption scheme, debtor may not exempt residence under homestead exemption; Kentucky homestead statute giving priority to purchase money mortgages and not to pre-existing debts or those arising from home improvements is not at odds with Bankruptcy Code. In re Brooks (1986, WD Ky) 71 BR 6, affd without op (1987, CA6 Ky) 817 F2d 104 and affd without op (1987, CA6 Ky) 817 F2d 104.

Indiana Code § 34-2-28-1(a)(5), which allows debtor in individual bankruptcy proceeding unlimited exemption of property held by entirety but withholds exemption where husband's and wife's individual bankruptcy petitions are subsequently consolidated, does not conflict with Bank-ruptcy Code's exemptions scheme, even though Indiana's exemptions scheme may exempt less of debtor's property than does federal scheme, and thus does not violate Supremacy Clause of Article VI of United States Constitution. Meyer v Hammes (In re Meyer) (1995, SD Ind) 187 BR 281, 35 CBC2d 124.

Although state's increase in homestead exemption does not per se impair obligation of contracts in violation of USCS Constitution, Article 1, § 10, if it is reasonable and in furtherance of valid so-cial, economic, or protective functions of state, amendment made by state legislature increasing value of exemption from $ 10,000 to $ 25,000, if applied retroactively, is violation of Constitution. In re Echavarren (1980, BC DC Idaho) 2 BR 215, 5 BCD 1229.

Enactment of state statute causing head of family status, and not merely deceased spouse's homestead exemption rights, to inure to surviving spouse, is constitutional, and may be applied ret-roactively to debts incurred before date of enactment of statute. In re Hinebaugh (1980, BC MD Fla) 5 BR 66.

Alabama homestead exemption provision is not violative of Fourteenth Amendment of Federal Constitution, on ground it discriminates against nonhomeowners, by virtue of policy in 11 USCS §

Page 71 11 USCS § 522

522(d)(5) to provide nonhomeowners with equivalent exemption granted to homeowners, § 522 not constituting binding determination of intent and meaning of United States Constitution, since, while § 522(d)(5) embodies permissible policy determination of Congress, same Congress gave states, under § 522(b), right to avoid such policy determination by substituting their own policy determina-tions. In re Quinlan (1981, BC MD Ala) 12 BR 824.

State statute establishing precondition on homestead exemption conflicts with Bankruptcy Code, exceeds scope of 11 USCS § 522(b), and is unconstitutional. In re Davis (1981, BC DC Md) 16 BR 62, 5 CBC2d 1023, CCH Bankr L Rptr P 68481.

Arizona homestead exemption is not preempted by Equal Credit Opportunity Act, 15 USCS §§ 1601 et seq., because lender, whether lending to single or married person, can expect to reach all single or married borrower's equity except $ 50,000 and policy of 11 USCS § 522 is to give states control of bankruptcy exemption scheme. In re Unkefer (1984, BC DC Ariz) 44 BR 55, 11 CBC2d 949.

Arizona homestead exemption scheme does not offend due process by treating married and sin-gle persons differently, because legislature had rational basis in judgment that married persons would share homestead; thus, smaller exemption resulting to individual members of married couple is function of purpose of homestead exemption, to maintain residence, and actual cash value of ex-emption to individual spouses is secondary consideration. In re Unkefer (1984, BC DC Ariz) 44 BR 55, 11 CBC2d 949.

Tennessee statute limiting state homestead exemption for leaseholds to leasehold estates of more than 2 years does not constitute denial of Chapter 7 debtors' right to equal protection because distinction drawn between leaseholds is reasonable and not arbitrary and bears rational relationship to legitimate state objective, as leasehold estate of less than 2 years in duration does not advance policies underlying homestead exemption statutes to sufficient degree to warrant their protection. In re Phillips (1986, BC ED Tenn) 60 BR 166, 14 BCD 437.

Retroactive application of § 41.002(a) of Texas Property Code with respect to homestead ex-emptions does not impermissibly impair existing contractual rights and/or constitute taking of prop-erty without due process of law in violation of United States Constitution. Hughes v Team Bank (In re Hughes) (1993, BC ND Tex) 159 BR 197.

Although ability of states which have opted out of federal exemptions to selectively opt-back to federal exemptions is not without doubt and need not be determined in instant case, court has no difficulty in accepting proposition that there is no constitutional or Bankruptcy Code obstacle for Florida to opt-back selectively into federal bankruptcy exemptions; legislative history of Code does not indicate intention by Congress to establish "all or nothing" policy by providing for opt-out and indirectly prohibiting opting-back. In re Harris (1995, BC MD Fla) 188 BR 444, CCH Bankr L Rptr P 76851, 9 FLW Fed B 176, affd (1997, CA11 Fla) 116 F3d 1492, cert den (1997) 522 US 950, 139 L Ed 2d 288, 118 S Ct 370.

From basic Bankruptcy Code provisions 11 USCS § 522(b) and 11 USCS § 541(a)(1), it follows that bankruptcy debtor may not exempt from property of estate property interest of any person other than bankruptcy debtor; however, Mich. Comp. Laws Ann. § 600.5451(1)(n), which explicitly states that debtor in bankruptcy may, under § 522(b)(2), exempt property interests of persons other than debtor, that is, codebtor, if any, and debtor's dependents, from "property of estate," conflicts with

Page 72 11 USCS § 522

Bankruptcy Code, and thus is unconstitutional under Supremacy Clause of U.S. Constitution. In re Vinson (2006, BC ED Mich) 337 BR 147.

In order to avoid any constitutional question, bankruptcy court encouraged debtor to amend his entireties exemption to list general exemption, Mich. Comp. Laws Ann. § 600.6023a, in lieu of en-tireties exemption under Mich. Comp. Laws Ann. § 600.5451(1)(o), noting that bankruptcy specific entireties exemption in § 600.5451(1)(o) could be subject to constitutional challenge. In re Basch (2006, BC WD Mich) 341 BR 615.

Chapter 7 trustee's objection to debtor's claimed exemption of interest in real property based upon Mich. Comp. Laws § 600.5451(1)(n) was sustained because § 600.5451 was state's attempt to create its own set of bankruptcy-specific exemptions, and, as such, violated Supremacy Clause, U.S. Const. art. VI, cl. 2. In re Wallace (2006, BC WD Mich) 347 BR 626, CCH Bankr L Rptr P 80703.

Bankruptcy appellate panel found no error in bankruptcy court's application of state law where debtors were entitled to claim one-quarter acre of their land as exempt homestead, pursuant to Ark. Const. art. 9, § 5; Ark. Code Ann. § 16-66-218(b)(4), and it was within debtors' discretion to desig-nate one-quarter acre as long as that designation was neither arbitrary, capricious, nor unreasonable; panel affirmed bankruptcy court's order that overruled trustee's objection. Williams v Bradley (In re Bradley) (2003, BAP8) 294 BR 64, 50 CBC2d 318, CCH Bankr L Rptr P 78867.

In 11 USCS § 522 exemption matter, fact that Utah Constitution provides for exemption only in land and things affixed to land had no significance in determining what type of property is exempt under Utah's current homestead exemption statute. Carlson v Diaz (In re Carlson) (2004, BAP10) 303 BR 478.

Debtor's claim to exemption in proceeds of pre-petition sale of their residence was held to be limited to 18 month period following sale, under Ariz. Rev. Stat. § 33-1101(C) (2006); thereafter, proceeds not used to establish new homestead became property of estate. Ford v Konnoff (In re Konnoff) (2006, BAP9) 356 BR 201.

21. Statutes restricting lien avoidance

Supremacy Clause requires that 11 USCS § 522(f)(1), allowing remarried debtor to avoid ex-wife's judicial lien on his half interest in condominium as homestead property, overrides Florida law giving judicial lien priority over homestead exemption, despite Florida's choice to opt out of federal exemptions. In re Hershey (1985, SD Fla) 50 BR 329.

To extent that Ohio statute not only reduces availability of exemptions, but also purports to pre-vent operation of provisions of 11 USCS § 522 permitting avoidance of lien because statute purports to disallow any exemption that would affect or invalidate any existing security interest or lien, such statute exceeds authority granted by 11 USCS § 522 to individual states to limit available exemp-tions; avoidance of liens on exempt property is valid exercise of bankruptcy powers conferred upon Congress and, without specific authority, state law cannot be read to deprive debtor of remedy pro-vided by 11 USCS § 522(f). In re Cox (1980, BC SD Ohio) 4 BR 240, 6 BCD 434, 2 CBC2d 255, CCH Bankr L Rptr P 67953.

Ohio statute providing that Ohio exemptions do not invalidate any security interest is in direct conflict with provisions of 11 USCS § 522 permitting debtor to avoid judicial lien or nonpossessory, nonpurchase-money security interests, and fact that state has opted out of federal exemption under 11 USCS § 522 does not affect debtor's power to avoid such security interests; pursuant to suprem-

Page 73 11 USCS § 522

acy clause of United States Constitution (USCS Constitution, Article VI, cl 2) such state legislation, which frustrates full effectiveness of federal bankruptcy law, is invalid. In re Hill (1980, BC ND Ohio) 4 BR 310, 6 BCD 307, 2 CBC2d 123, CCH Bankr L Rptr P 67666.

Although state may enact own bankruptcy exemption laws, there is no specific authority for states to enact laws beyond selecting debtor exemption entitlements so that if state opts out of fed-eral exemption, it does not affect debtor's power under 11 USCS § 522(f); thus, state exemption law which provides that liens are not affected by exemption legislation denies debtors domiciled in state availability of § 522 to avoid fixing of certain liens, in contravention of Congressional intent to pro-tect debtors, and is invalid. In re Fisher (1980, BC ND Ohio) 6 BR 206, 2 CBC2d 1335, CCH Bankr L Rptr P 67800, affd (1981, ND Ohio) 11 BR 716, 7 BCD 968, revd on other grounds (1983, CA6 Ohio) 698 F2d 298, CCH Bankr L Rptr P 69154 and revd without op, vacated without op (1983, CA6 Ohio) 722 F2d 740 and revd without op, vacated without op (1983, CA6 Ohio) 722 F2d 742.

Idaho statute denying debtors in federal bankruptcy proceeding right to avoid liens under 11 USCS § 522(f) is of no affect in light of clear congressional power to make uniforms laws concern-ing bankruptcy and congressional intent in enacting § 522(f) is so clear that direct conflict with fed-eral law exist. In re Strain (1982, BC DC Idaho) 16 BR 797, 5 CBC2d 1317.

While state may opt out of federal exemptions, there is no similar option under 11 USCS § 522(f); Oklahoma statute which attempts to limit Bankruptcy Court's power to avoid liens on agri-cultural equipment by placing value limit on amount of exemption for lien avoidance purposes only, is unconstitutional and will be suspended; retroactive application is inappropriate, however, because large number of creditors have relied on statute and inequities would result among them if holding were applied retroactively. In re Pelter (1986, BC WD Okla) 64 BR 492, 14 BCD 1087, 16 CBC2d 306.

Missouri lien preservation statute inserted in general child support statute enacted for purpose of preserving liens on consumer goods violates provision of Missouri Constitution barring inclusion of otherwise unrelated act in general statute and consequently cannot be relied upon by creditor as ba-sis for avoidance of liens upon household and other personal goods pursuant to 11 USCS § 522(f)(2)(A). In re Bowen (1988, BC ED Mo) 82 BR 102, 4 BAMSL 4051.

C.Opt-Out by States

1.In General 22. Generally

Secured debts, including judgment liens, generally survive bankruptcy; however, in accordance with policy objective of providing fresh start, bankruptcy law allows debtor to invoke certain ex-emptions to avoid debts that otherwise survive bankruptcy; Bankruptcy Code allows each state to opt out of federal exemptions and substitute its own exemptions for ones specified in 11 USCS § 522. David Dorsey Distrib. v Sanders (In re Sanders) (1994, CA10 Utah) 39 F3d 258, 32 CBC2d 582, CCH Bankr L Rptr P 76187 (superseded by statute as stated in Pepper v Public Serv. Emples. Credit Union (In re Pepper) (1997, BC DC Colo) 210 BR 480, 14 Colo Bankr Ct Rep 205, 38 CBC2d 596) and (superseded by statute as stated in In re Richardson (1998, BC ND Okla) 224 BR 804, 40 CBC2d 980, CCH Bankr L Rptr P 77815) and (superseded by statute as stated in Parsons v Investment Co. (In re Parsons) (1999, BAP10 NM) 16 Colo Bankr Ct Rep 55).

Page 74 11 USCS § 522

Purpose of Congress in Bankruptcy Code was to give debtors "fresh start" and since Congress was concerned with inadequacy of existing state exemption laws, it formulated federal exemptions; however, states are allowed to "opt out" under 11 USCS § 522(b)(1) and so long as there is confor-mity with federal legislature intent to provide "fresh start", state statute will control all determina-tions as to exemptions. In re Parrish (1982, BC DC Colo) 19 BR 331, 6 CBC2d 757.

When state opts out of federal exemptions under 11 USCS § 522, all exemptions claimed by debtors must come from state law; as to consensual liens, however, only those against property listed in 11 USCS § 522(f)(2)(A), (B), and (C) which is exempt under that state's law may be avoided. In re Villa (1987, BC DC Mont) 74 BR 497.

Bankruptcy Code and Rules, particularly 11 USCS § 522, prescribe method to be employed in claiming exemptions in bankruptcy cases, though state may choose by opt-out provisions to provide their own exemptions. In re Caruthers (1988, BC ND Ga) 87 BR 723, CCH Bankr L Rptr P 72335.

State may opt out of exemptions provided for in 11 USCS § 522(b) but allow exemptions pro-vided for in 11 USCS § 522(d). In re Green (1995, BC MD Fla) 178 BR 533.

State that opted out of federal exemptions prior to passage of Bankruptcy Reform Act of 1994 does not have to re-opt out, despite fact that Reform Act made substantial changes to 11 USCS § 522(d), because<5>22(b) contains language permitting state to opt out of federal exemptions, and Reform Act made no changes to it. In re Lee (1995, BC ED Mo) 179 BR 643.

Bankruptcy Code's provisions permitting debtors to elect state exemptions, and permitting states to op out of federal scheme entirely, do not permit state to enact procedural (as opposed to substan-tive) mechanism that defeats long-standing bankruptcy principle that property of estate and exemp-tions are determined as of petition date. In re Konnoff (2006, BC DC Ariz) 341 BR 28.

Though 11 USCS § 522(c)(1) does not preempt state exemption laws, that does not mean that § 522(c)(1) is rendered meaningless in case where debtor has elected to use state exemption laws. Rupp v Elmasri (In re Elmasri) (2007, BC ED NY) 369 BR 96.

Language of 11 USCS § 522(b) is product of two sets of competing policies: First, it seeks to strike balance between debtor's need for fresh start and creditor's need for payment; second, it seeks to balance federal and state relations appropriately by establishing federal exemption scheme aimed at supporting fresh start/creditor payment balance, but, at same time, it allows states to opt out of that scheme and substitute each state's own exemption laws so that competing fresh start and credi-tor payment policies can be tailored to needs of each state. In re Morrell (2008, BC ND W Va) 394 BR 405.

Bankruptcy Code provides that when state opts out of federal exemptions in 11 USCS § 522(d), exemptions available to debtor are for property that is exempt under federal law, other than 11 USCS § 522(d) or state or local law that is applicable on date of filing of petition; thus, by its plain language, 11 USCS § 522(b)(3) implicitly permits state's bankruptcy law to be "state or local law" by which exemption can be claimed. In re Morrell (2008, BC ND W Va) 394 BR 405.

Even though state had opted out of federal exemptions as matter of state law and under 11 USCS § 522(b)(2)(A), state's garnishment protection statutes were applicable to bankruptcy proceedings and debtor could exempt from property of estate her accrued, unpaid wages of $ 3,300 by utilizing both $ 1,000 exemption for wages and tax refunds of Iowa Code § 627.6(9)(c) in addition to any

Page 75 11 USCS § 522

amount debtor could protect from creditors under garnishment protections statutes of Iowa Code §§ 642.21 and 527.5105. Forker v Irish (In re Irish) (2004, BAP8) 311 BR 63.

23. Claim of "other federal exemptions"

Where state has "opted out" of opportunity to allow its debtors to use federal laundry list of ex-emptions contained in 11 USCS § 522(d), only property debtor is entitled to exempt from bank-ruptcy estate is property exempt under federal law other than laundry list and property exempt under state law. In re McManus (1982, CA5 La) 681 F2d 353, 9 BCD 561, 6 CBC2d 1194, CCH Bankr L Rptr P 68925, reh den (1982, CA5 La) 689 F2d 190 and reh den (1982, CA5 La) 689 F2d 190 and (ovrld as stated in In re Durban (2004, BC ND Tex) 2004 Bankr LEXIS 2032).

ERISA anti-alienation provision is not "other federal law" which would support exemption of retirement plans under 11 USCS § 522(b)(2)(A). In re Dyke (1991, CA5 Tex) 943 F2d 1435, 22 BCD 223, 25 CBC2d 986, 14 EBC 2376, CCH Bankr L Rptr P 74305.

Although 11 USCS § 522 exempts property held by debtor with non-debtor spouse as tenants by entirety, it does not create additional federal exemptions with regard to such property, but merely recognizes immunity if there is one under local law. In re Koehler (1980, BC MD Fla) 6 BR 203, 6 BCD 1126, CCH Bankr L Rptr P 67877.

Chapter 7 debtors' interests in employer's profit sharing retirement plan are not exempt assets of bankruptcy estates under federal nonbankruptcy law under 11 USCS § 522(b)(2)(A). In re Bowen (1987, BC DC SD) 80 BR 1012, 16 BCD 1315.

Debtor must have valid state-law exemption before such exemption can be asserted in bank-ruptcy; filing of bankruptcy petition did not revive Chapter 13 debtor's right to claim exemption un-der Maryland law where debtor had failed to comply with state-law requirements and had therefore waived any right to claim such exemption prior to filing. In re Gordon (1996, BC DC Md) 199 BR 7, 8 Fourth Cir & Dist Col Bankr Ct Rep 683.

As opt-out state defining its own exemptions, Georgia exempts local public assistance benefits; however, federal crop loss disaster relief payments are not "local" and therefore are not exempt. In re Boyett (2000, BC SD Ga) 250 BR 822.

Bankruptcy court found that trustee met burden under Fed. R. Bankr. P. 4003 and court sus-tained trustee's objection to debtor's claim of exemption of life insurance policy, pursuant to Ohio Rev. Code Ann. § 2329.66(A)(17) (2001) rather than 11 USCS § 522, where debtor provided no support for policy's beneficiaries and trustee met his burden of proof required to show that exemp-tion was not properly claimed; court found that under Ohio law debtor failed to rebut prima facie case made by trustee that debtor's mother and aunt did not qualify as "dependents" under Ohio Rev. Code Ann. § 3911.10 (2001). In re Peacock (2002, BC SD Ohio) 292 BR 593.

24. Preemption of state statutes exempting ERISA plans

Although Texas statute exempting rights in stock bonus, pension, profit-sharing, or similar plans "relates to" employee benefit plans, ERISA savings clause, 29 USCS § 1144(d), saves Texas statute from preemption. In re Volpe (1991, CA5 Tex) 943 F2d 1451, 25 CBC2d 1006, CCH Bankr L Rptr P 74319.

Florida exemption statute for "employee benefit plans" is not preempted by ERISA, and thus is available to Chapter 7 debtors. Schlein v Mills (In re Schlein) (1993, CA11 Fla) 8 F3d 745, 17 EBC

Page 76 11 USCS § 522

2020, CCH Bankr L Rptr P 75629, 7 FLW Fed C 1033 (superseded by statute as stated in In re Zamora (1995, BC SD Fla) 187 BR 783, 9 FLW Fed B 174) and (superseded by statute as stated in In re Pettit (1998, BC MD Fla) 224 BR 834, 12 FLW Fed B 19).

Arizona statute exempting interests in qualified retirement plans under Internal Revenue Code and ERISA (29 USCS § 1001) "relates to" ERISA plan by its reference to such qualified plans and its effect on them and is therefore preempted by ERISA; further, statute is not incorporated into Bankruptcy Code by 11 USCS § 522 and is not otherwise incorporated into body of federal law so as to be saved by federal law savings clause of ERISA (29 USCS § 1144(d)). In re Siegel (1989, DC Ariz) 105 BR 556.

Texas statute exempting pension and similar employee benefit plans qualified under IRC is not preempted by ERISA because statute does not purport to regulate any term or condition of em-ployee benefit plans; furthermore, even if ERISA's preemptive reach invalidates statute, it is saved by 11 USCS § 522(a)(2)(B) which incorporates state exemption statutes, because ERISA does not alter, amend, modify, invalidate, impair, or supercede any federal law. In re Dyke (1990, SD Tex) 119 BR 536, affd (1991, CA5 Tex) 943 F2d 1435, 22 BCD 223, 25 CBC2d 986, 14 EBC 2376, CCH Bankr L Rptr P 74305.

State law which purports to allow exemption for ERISA-qualified pension plans is preempted by ERISA and thus debtors are not entitled to exemption for subject pension plans; mere fact that 11 USCS § 522 authorizes debtor to rely on state exemption laws rather than federal exemption laws set forth in 11 USCS § 522(d) does not override underlying preemptive nature of ERISA as to all state laws which relate to ERISA benefit plan. In re Hirsch (1988, BC DC Ariz) 98 BR 1, 18 BCD 1500, affd (1989, DC Ariz) 105 BR 556.

Texas statute exempting pensions, profit-sharing pensions, similar plans, and plans qualified under Employee Retirement Income Security Act (ERISA) (29 USCS § 1001) is not preempted by ERISA where it does not purport to regulate terms and conditions of employee benefit plans and does not affect relationship between principal ERISA entities. In re Volpe (1989, BC WD Tex) 100 BR 840, affd (1990, WD Tex) 120 BR 843, affd (1991, CA5 Tex) 943 F2d 1451, 25 CBC2d 1006, CCH Bankr L Rptr P 74319.

Texas' exemption statute for ERISA-qualified employee pension benefit plans "relates to" ER-ISA and is thereby preempted. In re Komet (1989, BC WD Tex) 104 BR 799.

Montana exemption statute that exempts from bankruptcy estate retirement or pension benefits which are tax exempt under IRC § 401 makes reference to, and therefore relates to ERISA, and by reason thereof, is preempted by ERISA. In re Conroy (1990, BC DC Mont) 110 BR 492.

Attempts by states to create statutory exemption of ERISA-qualified plans are invalid as being preempted by ERISA (29 USCS § 11441(a)). In re Majul (1990, BC WD Tex) 119 BR 118.

Illinois statute providing that all ERISA-qualified plans are conclusively presumed to be spend-thrift trusts, which would exclude them from bankruptcy estates pursuant to 11 USCS § 541(c)(2), is invalid under Supremacy Clause. In re Wimmer (1990, BC CD Ill) 121 BR 539, affd (1991, CD Ill) 129 BR 563.

Illinois statute exempting ERISA-qualified employee benefit plans is preempted by ERISA, and therefore debtor's interest in such plan is not exempt. In re Wimmer (1990, BC CD Ill) 121 BR 539, affd (1991, CD Ill) 129 BR 563.

Page 77 11 USCS § 522

Indiana statute exempting debtor's interest in pension fund, retirement fun, annuity plan, indi-vidual retirement account, or similar plan is not preempted by ERISA because it makes no reference to ERISA and has no connection with ERISA plan; statute is unconstitutional as applied under fed-eral and state constitutions because exemption works substantial impairment upon those who con-tracted with debtor prior to passage of exemption, and it is per se unconstitutional because it does not exempt reasonable amount of property as required by Indiana Constitution. In re Garvin (1991, BC SD Ind) 129 BR 598, 21 BCD 1539.

Retirement plans, including individual retirement accounts and annuities are exempt under Oklahoma law because these vehicles for retirement savings are not subject to ERISA statute and therefore are not preempted; Oklahoma statute is not unconstitutional as being in violation of Con-tracts Clause of Constitution. In re Pryor (1991, BC ED Okla) 134 BR 28.

Employee Retirement Income Security Act of 1974 (ERISA) could not be read to preempt ex-emption in Mich. Comp. Laws § 600.6023(1)(k) in bankruptcy proceeding wherein debtor claimed exemption for individual retirement account; ERISA savings clause, 29 USCS § 1144(d), expressly prevented preemption of other federal statutory schemes, including bankruptcy laws, and state ex-emption was part of bankruptcy scheme by virtue of states' power under federal law to provide ex-emptions which were enforceable in bankruptcy. In re Tomlin (2004, BC ED Mich) 315 BR 439.

25. Opt-out of particular states

11 USCS § 522 does not limit states' ability to fashion own exemption scheme; Indiana statute exempting debtor's property from claims of contract debtors, but not from claims of tort creditors, is acceptable under Bankruptcy Code. In re Ondras (1988, CA7 Ind) 846 F2d 33, CCH Bankr L Rptr P 72284.

Utah has opted out of federal exemptions and substituted its own exemptions, adopting set of exemptions based on Uniform Exemptions Act. David Dorsey Distrib. v Sanders (In re Sanders) (1994, CA10 Utah) 39 F3d 258, 32 CBC2d 582, CCH Bankr L Rptr P 76187 (superseded by statute as stated in Pepper v Public Serv. Emples. Credit Union (In re Pepper) (1997, BC DC Colo) 210 BR 480, 14 Colo Bankr Ct Rep 205, 38 CBC2d 596) and (superseded by statute as stated in In re Richardson (1998, BC ND Okla) 224 BR 804, 40 CBC2d 980, CCH Bankr L Rptr P 77815) and (superseded by statute as stated in Parsons v Investment Co. (In re Parsons) (1999, BAP10 NM) 16 Colo Bankr Ct Rep 55).

Long-term disability payments that were part of bankruptcy estate were not entitled to 100 per-cent exemption where, pursuant to 11 USCS § 522, state had opted-out of federal exemption scheme through Ind. Code § 34-55-10-1, and state exemption statute in question, Ind. Code § 27-8-23(b), had been interpreted in light of Ind. Const. art. I, § 22 to permit exemptions only to extent that they were required to afford necessities of life; thus, where debtor was receiving $ 10,300 in disability payments from particular insurer for his depression, he was allowed to exempt $ 6000. Stinnett v LaPlante (In re Stinnett) (2006, CA7 Ind) 465 F3d 309, 38 EBC 2770, CCH Bankr L Rptr P 80724.

Because Virginia has decided to opt out pursuant to 11 USCS § 522 and set up its own exemp-tions and requirements for claiming exemptions, if Virginia debtor does not abide by Virginia pre-requisites for filing homestead deed, then debtor is not entitled to claim homestead property as ex-empt. Crossroads of Hillsville v Payne (1995, WD Va) 179 BR 486, 7 Fourth Cir & Dist Col Bankr Ct Rep 519 (criticized in Hoekstra v Oak Cluster Community Council (In re Hoekstra) (2000, BC ED Va) 268 BR 904, 86 AFTR 2d 5763).

Page 78 11 USCS § 522

Debtor's claimed exemption of two causes of action under 11 USCS § 522 was inappropriate in-asmuch as debtor is resident of Maine and exemptions set forth in that section are not available to Maine residents, as Maine has opted out of such exemptions. Petit v Fessenden (1995, DC Me) 182 BR 59 (criticized in In re Friedlander (2002, BC DC Mass) 284 BR 525, 40 BCD 96).

In appeal by Chapter 7 debtors from Bankruptcy Court decision limiting exemption for disabil-ity payments arising from insurance settlement for prepetition car accident, Iowa state law "vetoes" debtors' option to choose federal exemptions listed in 11 USCS § 522(d). In re Wiley (1995, ND Iowa) 184 BR 759.

Where debtors were Iowa residents, Iowa law determined what was exempt in their bankruptcy case because, pursuant to Iowa Code § 627.10, Iowa had "opted out" of exemption scheme and ex-pressly limited debtors to state law exemptions pursuant to 11 USCS § 522(b) LaSalle Bank, N.A. v Takes (In re Takes) (2005, ND Iowa) 334 BR 642.

Louisiana debtor filing petition in bankruptcy court has no choice of exemptions and is limited to those allowed under state law and federal law other than 11 USCS § 522(d), since state, by La. R. S. 13:3881, has specifically not authorized exemptions under 11 USCS § 522(d); under Louisiana law, use of homestead exemption by lessees is disallowed. In re Kimball (1980, BC WD La) 2 BR 560, 5 BCD 1374, 1 CBC2d 520, CCH Bankr L Rptr P 67343.

Examination of "opt-out" statute passed by Arizona Legislature makes it clear that only thing legislature did when it passed provision was to deny Arizona debtors the benefits of the "laundry list" of exemptions and substitute its own, and no other provision of the Code was abrogated by A.R.S. § 33-133. In re McKelvey (1982, BC DC Ariz) 20 BR 405, CCH Bankr L Rptr P 68768.

Individual debtor in North Carolina may, pursuant to 11 USCS § 522(b)(2)(A), claim as exempt property in North Carolina due to state's opting out of federal bankruptcy exemptions and may, pur-suant to 11 USCS § 522(b)(2)(B), claim as exempt property under state common law doctrine of tenancy by entireties. In re Banks (1982, BC WD NC) 22 BR 891.

Objections to debtors' use of federal exemptions are sustained where decision by United States Court of Appeals held that Tennessee legislature had successfully opted out of federal exemptions, reversing contrary decision; debtors are to receive exemptions intended by Tennessee legislature. In re Frye (1983, BC MD Tenn) 33 BR 653, 9 CBC2d 661.

Debtor is entitled to claim applicable Missouri exemptions because debtor filed her bankruptcy petition after effective date of Missouri statute opting out of federal exemptions. In re Burger (1983, BC WD Mo) 34 BR 467.

Court of Appeals decision upholding Tennessee's opt out statute applies to all pending bank-ruptcy cases in which timely objections to claim of federal exemptions were raised. In re Matheney (1983, BC MD Tenn) 35 BR 62.

South Dakota residents are not entitled to claim federal exemptions provided by 11 USCS § 522(d), since South Dakota has opted out. In re Stephenson (1983, BC DC SD) 35 BR 69.

In reopened Chapter 7 case filed prior to Colorado's opting out of federal exemption scheme, 11 USCS § 522(d)(1) controls, thus debtor may only exempt up to $ 7,500 of her equity in homestead and may not avoid judicial liens beyond that amount and liens to attach to remaining equity over amount of exemption. In re Palmquist (1985, BC DC Colo) 54 BR 24.

Page 79 11 USCS § 522

Iowa exemption statutes are incorporated into bankruptcy proceeding under 11 USCS § 522(b) and that section, along with Iowa law, controls allowability of Chapter 7 debtor's exemption claims. In re Breuer (1985, BC ND Iowa) 68 BR 48.

In view of limited eligibility of life insurance policies issued by Veterans' Administration, lib-eral construction accorded to veteran's legislation, and benefits policy affords to veteran, Chapter 7 debtor's life insurance policy is "benefit due" as contemplated by 38 USCS § 3101(a) and inclusion in that section allows debtor to claim exemption in policy under provisions of both 11 USCS § 522(b)(2)(A) and Ohio law, which exempts property which is exempt under federal law; even in ab-sence of Ohio law allowing exemptions under federal law, Ohio's opting out of federal scheme does not preclude debtor from asserting exemption which is available under statutes other than § 522. In re Szabo (1986, BC ND Ohio) 60 BR 144.

South Dakota's opting out of 11 USCS § 522(d) exemptions in favor of its own exemptions does not preclude Chapter 7 debtor from claiming other federal exemptions; therefore, court may prop-erly consider debtor's federal homestead exemption claim. In re Corbly (1986, BC DC SD) 61 BR 843; In re Johnson (1986, BC DC SD) 61 BR 858.

Although Ohio has opted out of federal exemptions provided in 11 USCS § 522(d), § 522(g) su-persedes state law and is applicable to property recovered by trustee pursuant to avoiding powers enumerated in 11 USCS § 551. In re Snyder (1989, BC ND Ohio) 108 BR 150.

California has "opted out" of federal exemption scheme under 11 USCS § 522, meaning that debtor in California case can only claim exemptions under California law and any applicable non-bankruptcy law. In re Yau (1990, BC CD Cal) 115 BR 245.

There was no exemption for prepetition settlement proceeds of personal injury cause of action, since under Chapter 7, proceeds once paid became simple money, and debtors had already availed themselves of all exemptions for cash available under state law, where state had opted out of Fed-eral bankruptcy exemption scheme. In re Searcy (1996, BC WD Mo) 193 BR 895.

In order to prove debtor's entitlement to exemption for personal injury lawsuit based on sexual harassment under California's statute "copied almost word for word from 11 USCS § 522(d)(11)," where California had opted out of federal exemptions, she must clearly demonstrate with convinc-ing certification, such as doctor's declaration or other medical evidence, that she has suffered appre-ciable physical injury, whether or not injury was accompanied by pain and suffering. In re Ciotta (1998, BC CD Cal) 222 BR 626, 40 CBC2d 651.

11 USCS § 522 was not applicable to debtor, where Florida had opted out of federal exemptions; co-debtor whose husband died after their Chapter 7 case was filed was not entitled to exemption for $ 25,000 life insurance proceeds, although state law would protect proceeds of annuity contract and she arguably had opportunity to accept proceeds in form of annuity, since trustee obtained from her right to determine how insurance proceeds would be distributed, and further, she could not make that decision to avoid reach of creditors post-petition. In re Williams (1998, BC SD Fla) 222 BR 662, 11 FLW Fed B 339.

Kansas has opted out of federal exemption scheme, thereby preventing its residents from claim-ing federal exemptions and forcing them to elect exemptions set forth in 11 USCS § 522(b). In re Adcock (1999, BC DC Kan) 234 BR 815 (criticized in In re Doughman (1999, BC DC Kan) 263 BR 905) and revd, remanded on other grounds (2000, DC Kan) 264 BR 708.

Page 80 11 USCS § 522

Although Chapter 13 debtor did have right, by virtue of 11 USCS § 522(h) but not by virtue of 11 USCS § 1303, to exercise trustee's avoiding powers under 11 USCS § 544 with respect to her homestead, relief from stay was denied, where recorded notice of trustee's sale put world on con-structive notice that sale was pending, so that unrecorded trustee's deed was valid and binding as to all innocent purchasers, and, therefore, no bona fide purchaser could exist. LR Partners L.L.C. v Steiner (In re Steiner) (2000, BC DC Ariz) 251 BR 137, 36 BCD 116, CCH Bankr L Rptr P 78235.

Florida's opt-out statute, Fla. Stat. ch 222.20, did not apply to non-immigrant alien debtor that resided in state of Florida, but was not domiciled in Florida when debtor filed bankruptcy petition, and did not prevent debtor from utilizing federal exemptions under 11 USCS § 522(b). In re Arispe (2002, BC SD Fla) 289 BR 245, 16 FLW Fed B 28.

It is of no consequence that Florida's opt-out statute, Fla. Stat. ch. 222.20, uses term "resident," because bankruptcy court does not look to Florida law under 11 USCS § 522(b) if debtor is not domiciled in Florida. In re Arispe (2002, BC SD Fla) 289 BR 245, 16 FLW Fed B 28.

Under 11 USCS § 522(b)(1) and Me. Rev. Stat. Ann. tit. 14, § 4426, Maine has "opted out" of exemptions provided by federal law. Dubois v Fales (In re Dubois) (2004, BC DC Me) 306 BR 423.

In enacting Ala. Code § 6-10-11 (1975), state opted out of federal exemptions for those who file for relief under Title 11 of U.S. Bankruptcy Code; therefore, state law governed propriety of debtors' homestead exemption claim. In re Hughes (2004, BC MD Ala) 306 BR 683.

Pursuant to 11 USCS § 522(b) and Ala. Code § 6-10-11, Alabama opted out of federal exemp-tion scheme and, accordingly, state law governs property of claim for exemption in bankruptcy cases filed in Alabama. In re Cheatham (2004, BC MD Ala) 309 BR 631.

Ariz. Rev. Stat. § 33-1126(A)(3) exempts child support paid pursuant to court order, and exemp-tion continues in funds when deposited in bank account, provided they are traceable to exempt source. In re Palidora (2004, BC DC Ariz) 310 BR 164.

As money paid to Chapter 7 debtor as wages lost its exempt status under state law once it was deposited in debtors' bank account, court granted trustee's objection to debtors' claim of exemption. In re Palidora (2004, BC DC Ariz) 310 BR 164.

Pursuant to Tenn. Code Ann. § 26-2-112, Tennessee has "opted out" of federal exemptions. In re Luttrell (2004, BC ED Tenn) 313 BR 751.

Debtor's rental of two bedrooms to students in his single-family home for extra income did not change character of real property into principally nonresidential commercial enterprise and thus, full value of exemption was available under D.C. Code Ann. § 15-501(a)(14) as District had opted out of 11 USCS § 522(d) exemptions pursuant to 11 USCS § 522(b)(1), which permitted state law that was applicable to debtor under 11 USCS § 522(b)(2). In re Springmann (2005, BC DC Dist Col) 328 BR 251.

Pursuant to Ohio Rev. Code Ann. § 2329.662 and 11 USCS § 522(b)(1), Ohio has elected to "opt out" of federal exemptions for bankruptcy case and has specifically enumerated its own exemptions in Ohio Rev. Code Ann. § 2329.66. In re Sforzo (2005, BC ND Ohio) 332 BR 294.

Louisiana is "opt out" state as its legislature, pursuant to authority of 11 USCS § 522(b), has de-termined that persons filing for bankruptcy in Louisiana can claim only those exemptions permitted

Page 81 11 USCS § 522

by state law and federal law other than Title 11 of U.S. Code pursuant to La. Rev. Stat. Ann. § 13:3881B(1). In re Braxton (2005, BC WD La) 350 BR 710.

Ohio has elected to opt out of federal exemptions and instead Ohio residents use exemptions set forth in Ohio Rev. Code Ann. § 2329.66. In re McCashen (2006, BC ND Ohio) 339 BR 907.

As state is "opt out" state, debtors who file for relief under U.S. Bankruptcy Code in state are al-lowed to claim only those exemptions allowed by state law and non-bankruptcy federal law pursu-ant to 11 USCS § 522(b) and La. Rev. Stat. Ann. § 13:3881(B)(1); law of opt out state determines scope of exemption. In re Robinson (2006, BC WD La) 352 BR 436.

Chapter 7 debtor was entitled to exempt from her bankruptcy estate two annuities she had pur-chased several years earlier, pursuant to pursuant to N.Y. Debt. & Cred. Law § 282 and N.Y. Ins. Law § 3212. In re Combes (2008, BC ED NY) 382 BR 186.

West Virginia's bankruptcy only exemption statute is not preempted by Bankruptcy Code on four grounds: (1) West Virginia has inherent power to enact bankruptcy laws; (2) enactment of bankruptcy only exemption statute is not precluded by 11 USCS § 522(b)'s opt out provision but, rather, bankruptcy only exemption statute is perhaps best method of harmonizing existing state ex-emption laws with fresh start objectives of bankruptcy; (3) while states are prohibited from allocat-ing consequences of bankruptcy between debtor and creditor, exemption laws are unique in that Congress has specifically recognized non-preemption of state's exemption statutes; and (4) limits of West Virginia's bankruptcy only exemptions do not frustrate any Congressional policy for allowing exemptions in bankruptcy. In re Morrell (2008, BC ND W Va) 394 BR 405.

Utah has opted out of federal exemption scheme set forth in 11 USCS § 522(d). Carlson v Diaz (In re Carlson) (2004, BAP10) 303 BR 478.

Montana has chosen to opt out of exemption plan set forth in federal bankruptcy statute, via Mont. Code Ann. § 31-2-106, and debtors who live in "opt out" state like Montana may claim ex-emptions provided under state law, for purposes of 11 USCS § 522(b)(3)(A). In re Maynard (2006) 2006 MT 162, 332 Mont 485, 139 P3d 803. Unpublished Opinions

Unpublished: Chapter 7 debtor could avail himself of exemption in life insurance proceeds un-der Kan. Stat. Ann. § 40-414(a)(4) and § 60-2313(a)(7), despite enactment of Bankruptcy Abuse Prevention and Consumer Protection Act, because Kan. Stat. Ann. § 60-2312(a) remained effective as opt-out provision under 11 USCS § 522(b)(2). In re Foth (2007, BC DC Kan) 2007 Bankr LEXIS 4358.

2.Application of Other Provisions of § 522 26. Generally

11 USCS § 522(b)(1) does not give state power to opt out of § 522 in its entirety, but power is clearly limited by its language to excluding only federal exemption specified in § 522(d). Eanes v Shepherd (1983, WD Va) 33 BR 984, 9 CBC2d 1029, revd without op (1984, CA4 Va) 735 F2d 1354 and revd without op (1984, CA4 Va) 735 F2d 1354.

Debtor, who under North Carolina opt-out legislation waived his right to claim exemption in real estate by failing to file motion claiming exemptions within 20 days, is entitled to relief from waiver because 11 USCS § 522(1) which provides no specific time limit for filing exemptions, pre-

Page 82 11 USCS § 522

empts state statute; 11 USCS § 522(b) pertains only to 11 USCS § 522(d) and other sections of stat-ute operate independently of it. In re Howell (1985, MD NC) 51 BR 1015, 13 BCD 743.

Because Third Circuit precedent was overruled by U.S. Supreme Court precedent, wife's indi-vidual retirement account (IRA) was exemptible under 11 USCS § 522(d)(10)(E) and bankruptcy court did not err when it found that IRA was reasonably necessary for support of wife and husband. Frank v Wiggins (In re Wiggins) (2006, MD Pa) 341 BR 506, 97 AFTR 2d 2241 (criticized in Krebs v Skiba (2006, WD Pa) 2006 US Dist LEXIS 28319).

State's exclusion under 11 USCS § 522(b)(2) merely reinstates exemptions available to state's debtors prior to enactment of § 522 since state's "opting out" statute is limited to excluding only federal exemptions specified in § 522(d), since authority for "opting out" statute, 11 USCS § 522(b)(1), does not give states power to "opt out" of § 522 in its entirety but allows "opting out" only with respect to federal exemptions, and since if § 522 does not apply in state then no exemp-tions are available to debtors in this state because only authority for such exemptions is found in § 522(b)(2). In re Thacker (1980, BC WD Va) 5 BR 592.

Effect of 11 USCS § 522(p) is that value of homestead derived from any money in excess of $ 125,000 that is put into relatively recently acquired homestead will not be exempt in debtor's bank-ruptcy; in Florida context, only exception to $ 125,000 cap is for money derived and rolled over from sale of prior homestead within state of Florida, 11 USCS § 522(p)(2)(B); thus, homestead value acquired by debtor from money derived from sale of even exempt assets, other than prior homestead, is also not exempt; further, 11 USCS § 522(p) applies even where individual has no right to elect between federal and state exemptions by virtue of Fl. Stat. § 222.20. In re Rasmussen (2006, BC MD Fla) 349 BR 747, 19 FLW Fed B 395.

27. Separate application of exemptions to joint debtors

11 USCS § 522(m) does not preempt any contrary state law which does not allow separate ex-emptions to husband and wife filing joint petition in bankruptcy where, although § 522(m) would allow separate federal homestead exemptions to debtor in joint case, exemptions do not apply in Alabama and, accordingly, § 522(m) does not operate to give separate homestead exemptions to joint debtors under Alabama Law. First Nat'l Bank v Norris (1983, CA11 Ala) 701 F2d 902, 10 BCD 473, 8 CBC2d 1078 (criticized in In re Betz (2002, BC DC Mass) 273 BR 313).

State which opts out of federal exemption alternative as permitted under 11 USCS § 522(d) need not provide each of 2 debtor members of household with separate exemption notwithstanding provi-sion for separate exemption rights in 11 USCS § 522(m). In re Granger (1985, CA9 Or) 754 F2d 1490, 13 BCD 837, 12 CBC2d 194, CCH Bankr L Rptr P 70300 (criticized in In re Betz (2002, BC DC Mass) 273 BR 313).

11 USCS § 522(m) and other federal exemption provisions relating to homestead are irrelevant to interpretation of state homestead exemption, which is purely state law question when state opts out. In re Robinson (1984, DC Colo) 44 BR 292.

In cases of joint filing for relief under Chapter 7, use of North Dakota homestead exemption by one joint debtor to exempt both debtors' interest in homestead precludes other joint debtor from ex-empting property "in lieu of homestead"; 11 USCS § 522(m) does not compel different result since, although that section allows joint debtors to exercise their exemptions independently, it does not

Page 83 11 USCS § 522

apply where state has opted out of federal exemptions and limited its residents to state exemptions. In re Reisnour (1985, DC ND) 56 BR 225.

Where husband and wife jointly filed voluntary petition pursuant to Chapter 7, and husband was domiciliary of New York State, which had opted-out of federal bankruptcy exemption scheme, hus-band was required to elect exemption scheme set forth under New York law, and so was wife, under 11 USCS § 522(b), although she was not domiciliary of New York State; consequently, debtors were only entitled to claim exemption of $ 7,500 for wife's personal injury action, as that was statu-tory maximum under New York State scheme. Seung v Silverman (2003, ED NY) 288 BR 174.

Trustee in joint case may not argue that since Virginia has allegedly "opted out" of federal ex-emptions, under surviving Virginia law, both husband and wife may not claim state exemptions, since Virginia statute is so worded as to acknowledge that only 11 USCS § 522(d) is affected; rather, effect of statute is that each and every debtor may separately claim state exemptions, but not federal exemptions, under 11 USCS § 522(d). In re Thompson (1980, BC ED Va) 2 BR 380, 5 BCD 1302, 1 CBC2d 467.

State's power to "opt out" under 11 USCS § 522(b)(1) in cases of exemption is not limited by 11 USCS § 522(m), allowing each debtor to separately claim exemptions, and close reading of cases suggests that 11 USCS § 522(m) indicates first reliance on state exemption scheme to justify double exemption claims, and addition of § 522(m) as make-weight. In re Wilson (1982, BC DC Or) 22 BR 146, CCH Bankr L Rptr P 68877.

All of 11 USCS § 522 is not nullified by opt out; § 522(m) continues to be applicable even after opt out. In re Brooks (1983, BC SD NY) 31 BR 302, 10 BCD 1051, 8 CBC2d 1082.

There is no conflict between 11 USCS § 522(m), giving separate exemptions to individual debt-ors in joint case, and Arizona homestead exemption statute allowing only one claim by married couple, because under Arizona law, married person filing separately is entitled to own exemption of $ 50,000, or couple is entitled to $ 50,000 together, but, in either case, full $ 50,000 exemption for homestead is allowed. In re Unkefer (1984, BC DC Ariz) 44 BR 55, 11 CBC2d 949.

11 USCS § 522(m) does not apply to state exemptions of Missouri, an opt-out state, and thus, spousal debtors are limited to one $ 8,000 homestead allowance. In re Richman (1985, BC ED Mo) 3 BAMSL 1625.

State which opts out and provides its own exemptions is not bound by 11 USCS § 522(m); rather, states are free to both create and limit exemptions for their residents. In re Nygard (1985, BC ED Cal) 55 BR 623, 13 CBC2d 1101, affd (1987, BAP9 Cal) 71 BR 779.

State which opts out of 11 USCS § 522(d) and provides its own system of exemptions is not bound by subsection (m) as to those exemptions and thus state may validly provide that married couple must share single homestead exemption; Nevada homestead exemption provides that, in case of married couple, either spouse may declare homestead and thus bind other spouse in that selection or both spouses may join in selection; however, in either case, there is only one exemption which may not exceed $ 90,000. In re Lenox (1986, BC DC Nev) 58 BR 104, 14 BCD 194.

States that opt out of federal exemption scheme set forth at 11 USCS § 522(d) are not bound by 11 USCS § 522(m) to provide exemptions separately to joint debtors. In re Garvin (2001, BC DC Mont) 262 BR 529.

Page 84 11 USCS § 522

11 USCS § 522(m) provided that provisions of § 522, which included § 522(p), shall apply sepa-rately with respect to each debtor in joint case; accordingly, each debtor in joint case could sepa-rately claim homestead exemption of $ 125,000 for total exemption of $ 250,000. In re Rasmussen (2006, BC MD Fla) 349 BR 747, 19 FLW Fed B 395.

Policies of liberal construction of exemptions and fresh start for joint debtors requires that each joint debtor be allowed to elect federal or state exemptions independently pursuant to 11 USCS § 522(m); just as personal property exemptions are cumulatively applied to withdraw property from bankruptcy estate, so too are homestead exemptions applied to residential real property; therefore, election and stacking of federal and California homestead exemptions are proper. In re Dahdah (1982, BAP9 Cal) 20 BR 665, 9 BCD 166, CCH Bankr L Rptr P 68704.

State which opts out of federal exemption scheme is not required by Congress to provide sepa-rate individual exemption to each debtor in joint case; thus, 11 USCS § 522(m) does not preempt state opt-out provisions. In re Baldwin (1987, BAP9) 70 BR 612, 15 BCD 747, CCH Bankr L Rptr P 71700.

Since 11 USCS § 522(m) is independent of "opt out" statute, state cannot relieve itself of its ob-ligation to provide joint debtors with its designated exemptions; thus where existing state exemption law frustrates purposes of § 522(m), it is necessary conclusion that State Legislative in enacting "opt out" statute intended to accede to Federal policy and to allow aggregation of exemptions within bankruptcy content. Manufacturers & Trades Trust Co. v Borst (1984, Sup) 128 Misc 2d 691, 490 NYS2d 665.

28. Lien avoidance

State is not permitted to opt out of lien avoidance provisions of 11 USCS § 522(f); although Georgia opted out of exemptions provided in § 522(d), it did not opt out of lien avoidance provi-sions. In re Maddox (1983, CA11 Ga) 713 F2d 1526, 9 CBC2d 568, CCH Bankr L Rptr P 69770.

11 USCS § 522(b)(1) does not grant state authority to alter operation of 11 USCS § 522(f) since although § 522(b)(1) enables states to establish their own items of exempt property, and place limits thereon, § 522(b)(1) does not sanction state interference with availability of lien avoidance. In re Miller (1983, MD Tenn) 30 BR 819, CCH Bankr L Rptr P 69230.

Debtor's lien avoidance rights under 11 USCS § 522(f) are determined as of date on which bank-ruptcy petition is filed. Because lien avoidance is part and parcel of exemption scheme, right to avoid judicial lien must also be determined as of petition date. Ohanian v Irwin (In re Irwin) (2006, ED Cal) 338 BR 839.

Fact that state has opted out of federal exemption, so that only property allowed exempt under state law may be claimed, does affect debtor's power to avoid liens on exempt property under 11 USCS § 522, notwithstanding that state statute says state exemption does not invalidate any security interest or liens; state exemptions which debtor may claim are those applicable on date of filing of petition, and where state has increased amount of property debtor may claim under state exemp-tions, such increase will not be unconstitutional impairment of preexisting contract, where it creates only minimal alteration of contractual relationship between debtor and creditor, and merely adjusts state exemption to take inflation into account. In re Curry (1980, BC ND Ohio) 5 BR 282, 2 CBC2d 710, affd (1981, ND Ohio) 11 BR 716, 7 BCD 968, revd on other grounds (1983, CA6 Ohio) 698

Page 85 11 USCS § 522

F2d 298, CCH Bankr L Rptr P 69154 and revd without op, vacated without op (1983, CA6 Ohio) 722 F2d 740 and revd without op, vacated without op (1983, CA6 Ohio) 722 F2d 742.

State exemption statutes coexist with, but do not displace, lien avoidance provisions of 11 USCS § 522, and while such state statutes may specify what property may be claimed exempt, where state has specifically provided that federal exemptions under 11 USCS § 522 will not be available to per-sons filing in such state, lien avoidance effect of 11 USCS § 522 cannot be altered by state exemp-tion provisions. In re Dubrock (1980, BC WD Ky) 5 BR 353, 6 BCD 771, 2 CBC2d 776.

Bankruptcy Code does not authorize state of Ohio to enact law limiting exemption entitlements to those not affecting or invalidating security interests; state may not deny debtors availability of 11 USCS § 522(f) to avoid fixing of certain liens on non possessory, nonpurchase-money security in-terests in household furnishings. In re Storer (1980, BC SD Ohio) 13 BR 1, CCH Bankr L Rptr P 67918.

Congress never intended for states to have power to opt out of 11 USCS § 522(f)(2) despite grant of authority to states to determine amount of exemptions which they could allow. In re Meadows (1981, BC ND Ga) 9 BR 882.

Fact that state has opted out of federal exemption scheme does not affect debtor's power to avoid liens pursuant to 11 USCS § 522(f). In re Decker (1983, BC ND Ind) 34 BR 640, CCH Bankr L Rptr P 69496.

Fact that state has opted out of federal exemption plan does not mean that debtor in such state would not be empowered, pursuant to 11 USCS § 522(f), to avoid judicial liens and nonpossessory, nonpurchase money security interests in certain goods to extent of exemptions allowed under state law; power to avoid liens against those interests specifically enumerated in § 522(f) operates inde-pendently of state's choice regarding its exemption scheme. In re Lillard (1984, BC WD Ark) 38 BR 433.

Despite state's opt out election, debtor may seek protection of 11 USCS § 522(f) to avoid secu-rity interest on livestock. In re Thompson (1984, BC SD Iowa) 46 BR 1, affd (1984, CA8 Iowa) 750 F2d 628, 11 CBC2d 1024, CCH Bankr L Rptr P 70155.

Bankruptcy court overruled creditor's objection to debtor's claimed exemption under Tennessee statute where it found that creditor's case law was no longer good law and garnishment lien im-paired exemption that debtor was entitled to under Bankruptcy Code; creditor's judicial lien could be avoided. In re Lafoon (2002, BC ED Tenn) 278 BR 767, affd (2002, ED Tenn) 2002 US Dist LEXIS 27405.

Debtor's motion to "step into shoes of Chapter 13 trustee" and avoid, as preference under 11 USCS §§ 522(h) and 547(b), state court judgment lien filed against her real estate was denied; al-though debtor proved that all five elements of avoidable preference were present and that secured creditor would receive more in present proceedings than he would have received had debtor's estate been administered under Chapter 7 and he had not obtained lien, debtor's failure to show that she was entitled to exempt that portion of equity to which lien attached was fatal to her efforts to avoid lien. In re Dyson (2006, BC ED Va) 348 BR 314.

Lienholders are not precluded from challenging debtor's claimed homestead exemption as de-fense to lien avoidance motion; as holders of secured claims on property, lienholders have option of

Page 86 11 USCS § 522

ignoring bankruptcy proceedings until they are forced to defend debtor's attempts to avoid their liens. In re Tinker (2006, BC DC Mass) 355 BR 380.

State may not defeat lien avoidance provisions of 11 USCS § 522(f) by defining exemption to exclude property subject to consensual liens. In re Taylor (1987, BAP9 Mont) 73 BR 149, 15 BCD 1261, CCH Bankr L Rptr P 71844, affd (1988, CA9 Mont) 861 F2d 550, 18 BCD 836, CCH Bankr L Rptr P 72526 (superseded by statute as stated in In re Neutgens (1989, BC DC Mont) 126 BR 91).

29.--Dependence on entitlement to exemption under state law

Debtors in Louisiana are not entitled to exempt household goods and furnishings subject to chat-tel mortgage from bankruptcy estate because of Louisiana "opt-out"; Louisiana debtor may not util-ize 11 USCS § 522(f) to avoid chattel mortgage in such property. In re McManus (1982, CA5 La) 681 F2d 353, 9 BCD 561, 6 CBC2d 1194, CCH Bankr L Rptr P 68925, reh den (1982, CA5 La) 689 F2d 190 and reh den (1982, CA5 La) 689 F2d 190 and (ovrld as stated in In re Durban (2004, BC ND Tex) 2004 Bankr LEXIS 2032).

Chapter 7 debtors may not avoid nonjudicial, nonpossessory, nonpurchase-money lien under 11 USCS § 522(f) on farm equipment exempted under Texas opt-out provisions where Texas exemp-tion statute does not allow exemption of property subject to secured lien. In re Bessent (1987, CA5 Tex) 831 F2d 82, 17 CBC2d 1073, CCH Bankr L Rptr P 72031 (ovrld as stated in In re Durban (2004, BC ND Tex) 2004 Bankr LEXIS 2032).

States may not opt out of provisions of 11 USCS § 522(f) by limiting state law exemptions to unencumbered property. In re Leonard (1989, CA10 Colo) 866 F2d 335, 6 Colo Bankr Ct Rep 143, 19 BCD 32, CCH Bankr L Rptr P 72656.

State which opts out of federal exemption system pursuant to 11 USCS § 522(b) may condition granting of property exemptions to debtors on absence of any valid outstanding liens at time debtor petitions for bankruptcy, and if state does impose such condition, it does not conflict with either 11 USCS § 522(f) or U.S. Constitution's Supremacy clause. Foster v City & Loan Sav. Co. (1981, ND Ohio) 16 BR 467, 8 BCD 360.

Debtor may avoid judicial lien against property exempted under North Carolina's homestead ex-emption; however, lien is not cancelled because under North Carolina law, debtor would not be en-titled to homestead exemption if she discontinues using property as residence or conveys ownership to another party. In re Love (1985, ED NC) 54 BR 947.

In state prohibiting use of federal exemptions, provision of 11 USCS § 522 permitting debtor to avoid fixing of lien in debtor's exempt property applies only where debtors meet state requirements as to what property may be claimed as exempt, and debtors may not avoid security interest in household goods and furnishings where state has granted exemption in such goods only if goods are not already subject to security interests, pledge, or lien created thereby, since, if debtors are not enti-tled to claim exemption, there is no exemption for lien to impair. In re Panesky (1980, BC ND Ohio) 5 BR 201, 2 CBC2d 835.

Where debtor grants security interest in household goods to creditor and subsequently files homestead deed in household goods in accordance with state law, although state has opted out of federal exemptions of 11 USCS § 522(d) by enacting its own exemption legislation, exemptions claimed by debtor under state homestead laws are still protected by debtor's ability under § 522(f) to avoid judgment liens and nonpossessory, nonpurchase money security interests in certain household

Page 87 11 USCS § 522

and personal goods to extent of exemptions allowable under state law since avoidance of such liens is valid exercise of Congress' bankruptcy powers to enact uniform system of bankruptcy. In re Rodgers (1980, BC WD Va) 5 BR 761, 2 CBC2d 1294, CCH Bankr L Rptr P 67690.

Ohio law purporting to limit debtor's exemptions in household goods to $ 200.00 in any particu-lar item does not invalidate debtor's lien avoidance power under 11 USCS § 522(f); no specific pro-vision of Bankruptcy Code grants states authority to pre-empt any subsection of 11 USCS § 522 other than subsection (b) concerning exemptions and thus even if state opts out of federal exemp-tions, debtor's lien avoidance power is not affected; further while Ohio must comply with Article I § 10 of Constitution prohibiting states from enacting laws impairing obligation of contract Congress is not so forbidden and may exercise such power in enacting uniform laws on bankruptcy. In re Marinski (1981, BC ND Ohio) 9 BR 579.

Debtor's application for lien avoidance will be denied since Ohio has effectively opted out of lien avoidance provisions of 11 USCS § 522(f) by drafting their exemption statutes very narrowly and denying their resident debtors opportunity to use more generous federal exemptions set out in § 522(d); pursuant to Ohio law, Ohio debtors are denied exemptions in property that would otherwise be exempt if they had allowed properly perfected security interest to attach to property before filing their bankruptcy petition. In re Law (1984, BC SD Ohio) 37 BR 501.

Valid exemption under state law is prerequisite to receiving relief through lien avoidance under 11 USCS § 522(f) in states where uniform federal exemptions do not apply. In re Myers (1985, BC SD Iowa) 56 BR 423.

Assuming that Chapter 7 debtors' fully encumbered Mercedes is tool of trade in their catering business, debtor's may not exempt it under 11 USCS § 522(b) because Texas law does not exempt property which is subject to secured lien; further, debtors may not avoid lien on vehicle because 11 USCS § 522(f) is dependent upon entitlement to exemption under 11 USCS § 522(b). In re Graham (1986, BC SD Tex) 64 BR 469.

Chapter 7 debtor may avoid judicial lien which impairs homestead exemption despite fact debtor lacks equity in property where applicable state exemption statute contains no language limit-ing right to claim only unencumbered portion of property as exempt and debtor is therefore entitled under state law to claim his homestead as exempt to extent of its value. In re Ganakes (1988, BC SD Iowa) 81 BR 518, 16 BCD 1293, CCH Bankr L Rptr P 72144.

While noting that issue is not free from doubt, Bankruptcy Court has adopted broad reading of language in 11 USCS § 522(h) that debtor may step into trustee's shoes and avoid transfer only up to dollar amount that debtor could have claimed as exempt had trustee avoided transfer because it be-lieves that broader reading is more consistent with purpose of statute, which is to put debtor in same position, if trustee fails to act, as he or she would have enjoyed had trustee avoided transfer. In re Dyson (2006, BC ED Va) 348 BR 314.

30.--Particular applications

North Carolina statute limiting homestead exemption to duration of debtor's actual residence in that place does not affect power of 11 USCS § 522(f) to avoid liens which impair debtor's exemp-tion, either actual exemption under state statute or hypothetical federal exemption where state has opted out of federal scheme--judicial liens can be avoided under § 522(f) even though state has de-fined exempt property in such a way as specifically to exclude property encumbered by liens; how-

Page 88 11 USCS § 522

ever, lien larger in amount than exemption available to debtor does not impair that exemption, and thus only that part of lien which actually interferes with debtor's homestead exemption may be avoided. In re Opperman (1991, CA4 NC) 943 F2d 441, 3 Fourth Cir & Dist Col Bankr Ct Rep 709, 22 BCD 15, 25 CBC2d 601, CCH Bankr L Rptr P 74239 (criticized in Butler v Southern O Corp. (In re Butler) (1996, BC WD Va) 196 BR 329, 8 Fourth Cir & Dist Col Bankr Ct Rep 780, 35 CBC2d 1479).

Ohio exemptions statute sets minimum level of protection for Ohio debtors facing execution of judgments in state court and proceedings in federal bankruptcy court and fact that law provides that exemptions will not impair liens on personal property in state court does not mean that Ohio debtor is not entitled to avoid liens in proceedings in federal bankruptcy court; states are permitted not to authorize federal exemptions but instead to make state exemptions available; however Congress did not permit states to exercise any discretion over lien avoidance which was congressional response to nationwide problem whereby dragnet security interests in household goods and personal property seriously threatened rehabilitation of bankrupt and therefore one of overriding goals of federal bankruptcy law. Curry v Associates Financial Services (1981, ND Ohio) 11 BR 716, 7 BCD 968, revd on other grounds (1983, CA6 Ohio) 698 F2d 298, CCH Bankr L Rptr P 69154 and revd with-out op, vacated without op (1983, CA6 Ohio) 722 F2d 740 and revd without op, vacated without op (1983, CA6 Ohio) 722 F2d 742.

Debtor claiming exemptions under Tennessee law may use 11 USCS § 522(f) to avoid creditor's nonpossessory, nonpurchase money security interest; § 522(f) continues to be operative despite en-actment of state opt out legislation and separate state exemption provisions; § 522(b)(1) does not sanction state interference with availability of lien avoidance. In re Miller (1983, MD Tenn) 30 BR 819, CCH Bankr L Rptr P 69230.

Tennessee opt-out statute, which declares that only exemptions specified in 11 USCS § 522(d) are superseded, does not attempt to deny Tennessee residents benefits of 11 USCS § 522(f) lien avoidance since intent of legislation is to supersede only specific monetary limits provided in § 522(d). In re Miller (1983, MD Tenn) 30 BR 819, CCH Bankr L Rptr P 69230.

Creditor may not argue that lien avoidance provision of 11 USCS § 522 should not be applied in Virginia because Virginia legislature elected to opt out of federal exemption scheme, inasmuch as supremacy of bankruptcy laws of United States would invalidate conflicting state law or policy, and inasmuch as provision of Virginia law opting out of federal exemption scheme explicitly states Vir-ginia has opted out of exemption scheme only, and does not refer to lien avoidance provisions of 11 USCS § 522. In re Barto (1981, BC ED Va) 8 BR 145, affd (1983, CA4 Va) 704 F2d 142.

Fact that Indiana has opted out of federal exemption scheme does not affect Chapter 7 debtor's power to avoid liens under 11 USCS § 522(f). In re Owen (1987, BC ND Ind) 70 BR 366.

11 USCS § 522(f) lien avoidance provision is available to debtors claiming under Georgia ex-emption statute. In re Caruthers (1988, BC ND Ga) 87 BR 723, CCH Bankr L Rptr P 72335.

Section 522(f) operates in opt-out states such as California. In re Mayer (1993, BC SD Cal) 156 BR 54, CCH Bankr L Rptr P 75343, affd in part and vacated in part, remanded on other grounds (1994, BAP9 Cal) 167 BR 186, 94 CDOS 4165, 94 Daily Journal DAR 7510.

Motion brought by Chapter 7 debtors to avoid judicial liens on homestead pursuant to 11 USCS 522(f)(1) was granted despite fact that California has opted out of federal bankruptcy exemptions

Page 89 11 USCS § 522

set forth in 11 USCS § 522(d); lien avoidance under 11 USCS § 522(f)(1) involves more than deter-mination of exemption rights under state law, permitting debtor to avoid fixing of judicial lien that impairs debtor's exemption. In re Mulch (1995, BC ND Cal) 182 BR 569, 33 CBC2d 948.

Debtors were entitled to avoid entire judicial lien of creditors under 11 USCS § 522(f) due to homestead exemption entitlement under Mo. Rev. Stat. § 513.475, even though they waited until two years after Chapter 7 discharge and property had appreciated during that period, because proper date for valuing property was date that bankruptcy petition was filed and creditors failed to show prejudice or equitable justification for denying avoidance of lien. In re Hall (2005, BC WD Mo) 327 BR 424.

Bankruptcy court did not err in allowing debtor to make new claim of exemption for her vehicle in bankruptcy court, based on specific California statute applicable only to those debtors who file bankruptcy petition, even where municipal court had previously denied her general exemption, since filing bankruptcy gave her new and specific opportunity to claim exemption under different state statute, as allowed by 11 USCS § 522. Little v Reaves (In re Reaves) (2000, BAP9) 256 BR 306, 2000 CDOS 10109, 2000 Daily Journal DAR 13621, affd (2002, CA9) 285 F3d 1152, 2002 CDOS 3019, 2002 Daily Journal DAR 3679, CCH Bankr L Rptr P 78632. Unpublished Opinions

Unpublished: Where bankruptcy court concluded that Internal Revenue Service tax lien, which was junior to creditor's judicial lien on debtor's home, should be included in calculation under 11 USCS § 522(f)(2)(A), and sum of liens and state exemption under O.C.G.A. § 44-13-100 greatly ex-ceeded debtor's interest in property, bankruptcy court correctly concluded that creditor's judicial lien could be avoided in its entirety. Cadle Co. v Taras (In re Taras) (2005, CA11 Ga) 131 Fed Appx 167, reported at (2005, CA11 Ga) 143 Fed Appx 308.

Unpublished: Creditor was entitled to enforce consensual security interest secured by property lien, which parties reached after creditor sued for title, possession, and foreclosure in state court, against Chapter 7 bankruptcy debtor who sought to avoid lien under 11 USCS § 522(f)(1)(A); be-cause creditor had paid taxes owing on property, for which he held warranty deed, he was equitably subrogated to rights of lien holder. Franks v Wynne (In re Wynne) (2006, CA5 Tex) 2006 US App LEXIS 29582.

III.ENTITLEMENT TO EXEMPTIONS


Right of exemption under 11 USCS § 522 is personal privilege and court will therefore carefully see that exemption laws are not construed so as to make them instruments of fraud; for example, where property sought to be exempted is determined to be fruit or instrumentality of crime or where property to be exempted was fraudulently concealed by debtor both before and after filing, exemp-tion will not be allowed. In re Hanson (1984, BC DC ND) 41 BR 775.

Under 11 USCS § 522(b)(2), only debtor may exempt property that is exempt under state law applicable on date of filing; therefore, wife who filed jointly with husband about one month prior to his decease is not entitled to North Carolina's widow's allowance on car included within husband's estate because husband did not and could not claim exemption in car. In re Estate of Barefoot (1984, BC ED NC) 43 BR 608.

Page 90 11 USCS § 522

Assertion of exemption is personal right of Chapter 7 debtor and may not be asserted by others, including trustee of debtor's retirement plan fund, on behalf of debtor. In re Cates (1987, BC DC Or) 73 BR 874.

Once attorney fees were paid out of settlement amount that arose from personal injury lawsuit in which debtors were plaintiffs, debtors were entitled to protect sums from their creditors to fullest extent allowed by applicable exemption. In re Harrington (2003, BC ED Tex) 306 BR 172.

32. Head of household or family

Husband and wife who are living together in same residence may both be deemed householders under Virginia law permitting each in joint bankruptcy action to file homestead exemption, any other construction conflicting with 11 USCS § 522(m). Cheeseman v Nachman (1981, CA4 Va) 656 F2d 60, 7 BCD 1385, 4 CBC2d 1218, CCH Bankr L Rptr P 68245.

Divorced mother was entitled to same exemption as male in her circumstances where, under Missouri law, there was no requirement that parent be residing with children nor any requirement that bankrupt prove "primary" source of economic or moral support in order to claim homestead exemption based on contribution to support of children in custody of other parent. In re Murrell (1978, ED Mo) 467 F Supp 756, 20 CBC 65.

Chapter 7 debtor widow who lives alone and has no dependents is "family" for purposes of Texas exemptions, where debtor could claim her husband's exemptions at time of his death and, as such, debtor's ability to claim family exemption survives with debtor until such time as she dies. United States ex rel. Farmers Home Admin. v Coffman (In re Coffman) (1994, ND Tex) 163 BR 766, CCH Bankr L Rptr P 75745.

Wife filing for individual bankruptcy cannot claim Florida exemption as head of family, not-withstanding that she earns more than husband, where, under Florida law, husband is deemed head of family unless unable to discharge duties due to permanent illness, incarceration, or mental in-competence. In re Barnes (1980, BC MD Fla) 4 BR 600, CCH Bankr L Rptr P 67676.

Single man cohabiting with woman in violation of state law, who therefore is not head of any cognizable family unit in law or in fact as of date of filing bankruptcy petition, is not entitled to state exemption as head of family, based either on cohabitation with unmarried woman, or on exis-tence of unborn child of couple, born after date of debtor's filing petition. In re Rivera (1980, BC MD Fla) 5 BR 313.

Debtor is not entitled to state exemption as head of household notwithstanding that she has legal custody of children, where she is unemployed, has no savings, and no significant assets, and support of children is being provided by ex-husband. In re Estridge (1980, BC MD Fla) 7 BR 873, CCH Bankr L Rptr P 67794.

Debtor will not be regarded as head of family for purposes of bankruptcy exemption pursuant to state statute based primarily on economic considerations where debtor's family's sole source of sup-port is income generated by her present husband, all household expenses including food and cloth-ing for debtor's children by prior marriage are paid by present husband, and only small amount of money has been received from children's father during preceding year. In re Crippen (1983, BC ED Mo) 36 BR 7, 2 BAMSL 577.

Under opt-out state's statute limiting homestead exemption to head of family, person claiming head of family must show either (1) legal duty to support arising out of family relationship or (2)

Page 91 11 USCS § 522

continuing communal living by at least 2 persons with one person recognized as being in charge; where monthly child support and alimony payments fully supported debtor, neither debtor nor for-mer spouse is solely in charge of raising child, and debtor's former spouse claimed legal responsibil-ity for child in separate bankruptcy case and on federal income tax returns, debtor is not head of household and thus is not entitled to homestead exemption. In re Jacobson (1985, BC SD Fla) 46 BR 617.

Missouri head of family exemption is sexually, maritally, and anatomically neutral, giving no preference to either spouse, and is not restricted in any way by any prohibited classification, and thus statute is not in violation of equal protection clause; because statute allows only one individual per family to claim exemption, husband and wife Chapter 7 debtors cannot both claim exemption. In re Sartain (1986, BC WD Mo) 61 BR 1007.

Debtor is not head of family under 11 USCS § 522 even though her husband did not continu-ously reside with her where: (1) husband furnished funds to purchase home and for living expenses; (2) debtor has not earned income for 20 years; and (3) even after debtor obtained real-estate license, primary source of income was from husband's investments. In re Butcher (1986, BC ED Tenn) 62 BR 162, affd (1987, ED Tenn) 75 BR 441, affd without op (1988, CA6 Tenn) 848 F2d 189 and affd without op (1988, CA6 Tenn) 848 F2d 189.

Chapter 7 debtor is entitled to claim homestead exemption, even though debtor is divorced indi-vidual without minor children, where property was at one time occupied by debtor as "head of fam-ily," his spouse and children, and homestead character of land did not change when debtor was di-vorced or when his children moved out of household, and from time homestead was established debtor continuously occupied land and it was never sold or abandoned; at time homestead exemp-tion is claimed, it is not necessary for debtor to be "head of family"; fact that home is located on leased property is irrelevant; debtor may not assert homestead against claims of his dependents for support. In re Bartlett (1993, BC DC Neb) 153 BR 881.

Debtor was entitled to claim homestead exemption under 11 USCS § 522(b)(2)(A) because she met elements of head of household under Ark. Const. art. 9, § 3, and Ark. Code Ann. § 16-66-210 (Supp. 2003) where, although she might not have been legally obligated to support her mother, she undertook obligation; her mother was partially dependent upon debtor for basic financial needs; and because of mother's medical condition, debtor had assumed decision-making role with regards to household affairs. In re Warnock (2005, BC WD Ark) 323 BR 249.

33. Partner

Under former law, in bankruptcy of individual partners and of partnership, partners were not en-titled to claim exemption out of partnership property. Schefman v Degroot (1929, CA6 Mich) 35 F2d 950, cert den (1929) 280 US 562, 74 L Ed 616, 50 S Ct 19.

Under former law, individual partner was entitled to exemption in property conveyed to him by firm by way of division. In re David (1931, DC Fla) 54 F2d 140.

Only individual debtor is entitled to exempt property of estate, and where husband and wife who filed joint petition in bankrupt claimed as exemption inventory of business which creditor claims is asset of partnership, determination of whether husband and wife are acting as partnership is left to facts of case and applicable state law; in community property state such as Arizona, in order to find partnership, where spouses operate business and where rights of third party are not involved, there

Page 92 11 USCS § 522

must be evidence that spouses had subjective intent to create legal partnership and debtors will be entitled to exclude property as exempt where there is no evidence to sustain finding debtors in-tended to act as partnership. In re Cramer (1980, BC DC Ariz) 3 BR 428, 6 BCD 17, 1 CBC2d 607.

Individual partners cannot exempt partnership property in partnership's bankruptcy proceedings; however, whether creditor's lien is non-exemptible partnership property hinges on existence of part-nership as determined by state law. In re Johnson (1982, BC DC Kan) 19 BR 371.

Where farming partnership was dissolved and property owned by partnership split between in-dividual partners, property is no longer partnership property but rather is individual property, even though in some cases property was jointly owned and property is exemptible by each partner as debtor under 11 USCS § 522 and state law. In re Schmitt (1986, BC ND Iowa) 56 BR 708.

Burden of proof is on objecting creditors, pursuant to Bankruptcy Rule 4003(c), to show that items initially claimed exempt by Chapter 7 debtors are partnership property. In re Indvik (1990, BC ND Iowa) 118 BR 993, 23 CBC2d 948.

Chapter 7 debtor brothers were partners in farming operation and therefore equipment used in that operation is partnership property not exemptible by individual debtors where brothers agreed to share profits and losses equally, they executed "partnership" documents in connection with loan transactions and partnership name was used as borrowing entity, and they listed certain debts as "partnership" debts on bankruptcy schedules; even if partnership did not exist, debtors would be es-topped from denying existence of partnership where loan documents indicated existence of partner-ship. In re Indvik (1990, BC ND Iowa) 118 BR 993, 23 CBC2d 948.

Individual debtors may not claim as exempt their partner's rights in specific partnership prop-erty. In re Indvik (1990, BC ND Iowa) 118 BR 993, 23 CBC2d 948.

34. Miscellaneous

Under former law right of exemption was personal to debtor and could not be asserted by credi-tor holding lien against property which may be set aside as preferential or fraudulent. In re Mattingly (1941, DC Ky) 42 F Supp 83.

Under 11 USCS § 522, retirement systems may not exercise exemption on behalf of debtor, since such exemption is personal to debtor. In re Ross (1982, ND NY) 18 BR 364, 6 CBC2d 1277.

Under 11 USCS § 522(b), creditor bank did not have standing to assert debtor's defense of ex-empt status of funds transferred and under 11 USCS § 541, transfer of debtor's exempt retirement benefits from bankruptcy estate within preference period constituted avoidable preference. In re Everhart (1981, BC ND Ohio) 11 BR 770.

Applying Virginia law, Chapter 7 trustee's objection to claim of homestead exemption by debtor is sustained where debtor failed to file homestead deed within time limits required by state law; fur-thermore, Rule 9006(a) does not exclude Saturday, Sunday, and holidays from computation periods where state has opted out of federal statutory exemption scheme under 11 USCS § 522(b). In re Bernstein (1995, BC WD Va) 189 BR 113.

Restrictions to homestead exemption under Fla. Stat. § 222.20 did not apply when debtor claimed exemption under 11 USCS § 522(b)(3)(B) for debtor's interest in property located in Florida that debtor owned in tenancy by entirety. In re Cauley (2007, BC MD Fla) 374 BR 311, 20 FLW Fed B 535.

Page 93 11 USCS § 522

Where debtor was ordered removed from home by court order, divorce decree divested his own-ership, and property was ordered sold, debtor could not claim homestead exemption pursuant to Wash. Rev. Code. § 6.13.040(3) by declaring his intent to reside there because, under circum-stances, his return to home was impossible. Wilson v Arkison (In re Wilson) (2006, BAP9) 341 BR 21.

B.Spouses 35. Generally

California statute providing that husband and wife are entitled only to one set of exemptions be-tween them even if both spouses are judgment debtors, modifies all California exemption statutes that do not express contrary intent; such law does not violate Bankruptcy Code provisions providing for double exemptions for spouses where state has chosen to opt out of federal scheme. In re Tal-madge (1987, CA9 Cal) 832 F2d 1120, 17 CBC2d 1140, CCH Bankr L Rptr P 72106.

Absent husband's intent to make gift to wife when wife and husband signed application for title to truck that husband purchased and for which husband alone signed financing note, wife has no interest at all in truck at least for purposes of debtor-creditor relationship and wife therefore can claim no exemption in truck. General Motors Acceptance Corp. v Lefevre (1983, DC Vt) 38 BR 980, 38 UCCRS 602.

Bankrupt wife who has indicated in her statement of affairs that her occupation was that of housewife, and has offered no proof she earned any of income from which income taxes apparently were withheld, has no right to any of proceeds of refund checks issued jointly by IRS to her and her husband, and consequently no right to have same set apart as her exempt property. In re Griffin (1979, BC MD Tenn) 1 BR 653.

Congress, in allowing debtors to choose between federal and state exemptions, did not intend to grant less to joint petitioners than to individual petitioners, but intended that in joint case each debtor shall be entitled to exemptions; election by one joint debtor to choose state set of exemp-tions, which includes "head of family" exemption exempting homestead for joint benefit of both spouses but does not require both spouses to join in claiming homestead exemption, neither requires election of state exemptions by spouse nor precludes spouse's selection of federal bankruptcy ex-emptions. In re Brosius (1980, BC CD Cal) 7 BR 811.

Husband and wife, filing as joint debtors, are entitled under 11 USCS § 522(m) and state law to claim his or her own exemptions separately in statutory amount and are not limited to claiming ex-emption per family unit. In re Ferguson (1981, BC DC Colo) 15 BR 439.

Debtor, full-time housewife, is entitled to file homestead deed to exempt property under state law consistent with 11 USCS § 522(m), even if she could not show contribution to maintenance of household. In re Gustinis (1981, BC ED Va) 16 BR 108, 5 CBC2d 1120, CCH Bankr L Rptr P 68570.

Joint Chapter 13 debtor may not exempt as part of her separate exemptions under 11 USCS § 522(d)(5) portion of her spouse's bequest received from estate of spouse's mother remaining after spouse exempted portion of bequest, where joint debtor is not heir of estate; joint petitioners have separate bankruptcy estates, and separate bankruptcy estate of joint petitioner consists only of prop-erty in which that debtor has legal or equitable interest; and pursuant to § 522(b) each joint peti-tioner may exempt certain property from their individual bankruptcy estates, but exemption is per-

Page 94 11 USCS § 522

sonal in nature and can only be asserted by or on behalf of debtor. In re Freund (1983, BC WD Wis) 32 BR 622, 9 CBC2d 277, CCH Bankr L Rptr P 69362.

While it is right of debtor to choose exemptions, exemptions must be claimed in good faith and not for purpose of circumventing debtor's obligation to support his spouse, and when debtor who has not met obligations to support spouse has claimed inadequate exemptions, spouse should be permitted under 11 USCS § 522(l) to claim additional exemptions as long as additional exemptions do not unduly prejudice debtor. In re Crouch (1983, BC ED NC) 33 BR 271, 9 CBC2d 443, CCH Bankr L Rptr P 69430.

Pursuant to 11 USCS § 522(b)(2)(B) and Bankruptcy Rule 1016, right to claim exemption on behalf of debtor husband vested at time of husband and wife debtors filed joint Chapter 7 petition, and debtor-husband's subsequent death did not alter said claim of exemption with result that debtor-wife can claim, in addition to her own federal "homestead" exemption of $ 7,500, federal homestead exemption of debtor-husband though husband had died subsequent to filing. In re Friedman (1984, BC ED Pa) 38 BR 275, CCH Bankr L Rptr P 69812.

Under 11 USCS § 522(b)(2), only debtor may exempt property that is exempt under state law applicable on date of filing; therefore, wife who filed jointly with husband about one month prior to his decease is not entitled to North Carolina's widow's allowance on car included within husband's estate because husband did not and could not claim exemption in car. In re Estate of Barefoot (1984, BC ED NC) 43 BR 608.

Two individuals are not required to share common exemption simply because they were once married if on date of filing bankruptcy petition parties are divorced, each has separate residence, and each meets statutory "use" requirements for exemption. In re Hendrick (1985, BC MD La) 45 BR 965.

Debtor may not exempt, pursuant to Ohio law, one-half interest acquired in former wife's re-tirement and pension plan by virtue of divorce decree because exemption is personal to individual whose work gave rise to right to receive pension. In re Mabrey (1985, BC SD Ohio) 51 BR 383.

Chapter 7 debtor husband and wife may use unused individual $ 7,500 homestead exemptions to exempt under 11 USCS § 522(d)(5) aggregate of $ 15,000 in pension monies paid postpetition, re-gardless of fact that debtor wife has died during pendency of bankruptcy petition. In re Magnus (1988, BC ED Pa) 84 BR 976, 17 BCD 632.

Debtors who filed for divorce during pendency of their Chapter 7 case were not entitled to ap-portion value of property they claimed as exempt between their respective bankruptcy estates based on principles of equitable distribution of marital property prior to date of dissolution of marriage. In re Johnson (1997, BC DC Minn) 210 BR 153.

For exemption purposes, individual ownership interest of each debtor spouse will be presumed to be one-half interest although debtors will always be afforded opportunity to present proof that their ownership interest in joint asset is other than one-half; in case of residence owned by husband and wife as tenants by entirety, each individual spouse can only claim homestead exemption in one-half interest in equity which represents their individual ownership interest. In re Nye (2000, BC WD NY) 250 BR 46.

In joint cases, each of joint estates is separate entity and exemptions available to each co-debtor may only be claimed from his or her separate estate. In re Cohen (2001, BC DC NJ) 263 BR 724.

Page 95 11 USCS § 522

11 USCS § 522(l) applies when debtor does not file list of property that debtor claims as exempt and, if debtor does not file such list, dependent may do so on behalf of debtor; therefore, where hus-band in Chapter 7 case attempted to exempt portion of his custodial account IRA, wife was not enti-tled to claim exemption in remaining IRA funds under § 522(l) because husband did not fail to claim exemption. Walsh v Galloway (In re Galloway) (2001, BC WD Pa) 308 BR 709.

Bankruptcy court applied 11 USCS § 522(j) and Wash. Rev. Code § 6.13.080, and held that creditor's judgment lien, which resulted from termination of same-sex long-term relationship and property dispute, could be avoided under 11 USCS § 522(f); bankruptcy court agreed with debtor that creditor was not "spouse" under federal bankruptcy law or 1 USCS § 7, and creditor did not qualify for exception in Bankruptcy Code. In re Goodale (2003, BC WD Wash) 298 BR 886, 51 CBC2d 35.

Non-debtor spouse was not entitled to assert homestead exemption on debtor's behalf where debtor unsuccessfully appealed to U.S. Court of Appeals for Eighth Circuit three times on issue of his entitlement to homestead exemption; court of appeals held that debtor was not entitled to home-stead exemption, and decision applied also to debtor's spouse in her attempt to assert exemption. Stephens v Jensen-Carter (In re Alexander) (2003, BAP8) 288 BR 127, 40 BCD 211, CCH Bankr L Rptr P 78792.

Rights of dependent of debtor under 11 USCS § 522(1) are derivative of rights of debtor and are limited to asserting exemptions that are available to debtor; 11 USCS § 522(1) and Fed. R. Bankr. P. 4003(a) only allow dependent of debtor to assert derivative right, not independent right. Stephens v Jensen-Carter (In re Alexander) (2003, BAP8) 288 BR 127, 40 BCD 211, CCH Bankr L Rptr P 78792.

36. Stacking of exemptions

Under Arkansas state homestead exemption adopted pursuant to 11 USCS § 522(b), husband and wife as joint debtors were entitled to only one homestead exemption, and provision of 11 USCS § 522(m) providing each joint debtor with exemptions under federal scheme does not compel differ-ent result. Stevens v Pike County Bank (1987, CA8 Ark) 829 F2d 693, CCH Bankr L Rptr P 71985.

When disabled homeowner's spouse filed homestead exemption regarding their residence, it had effect, under Mass. Gen. Laws ch. 188, § 2, of terminating homestead exemption homeowner had previously filed under Mass. Gen. Laws ch. 188, § 1A, as disabled person, so homeowner could not apply both exemptions to his residence in bankruptcy proceeding, in effort to avoid creditor's judi-cial lien. Garran v SMS Fin. V, LLC (In re Garran) (2003, CA1 Mass) 338 F3d 1, CCH Bankr L Rptr P 78887.

One joint debtor may not take advantage of federal exemption under 11 USCS § 522 while spouse claims full head of household homestead exemption since law requires union of both spouses in claiming benefits of exemption. In re Skipwith (1981, BC SD Cal) 9 BR 730, 3 CBC2d 867, CCH Bankr L Rptr P 67885.

Where California statute, enacted pursuant to 11 USCS § 522, goes beyond simply opting out of federal bankruptcy exemptions to eliminate exemption stacking contrary to provisions in 11 USCS § 522(b) by providing (1) husband and wife who are joint debtors may choose either "unauthorized" federal bankruptcy exemptions or state exemptions, so long as they choose in common, (2) husband and wife who file individual petitions may claim federal bankruptcy exemption so long as other

Page 96 11 USCS § 522

spouse waives in writing right to claim state exemptions, and (3) notwithstanding nonauthorization of federal bankruptcy exemptions in state, individual can choose federal or state exemptions so long as individual does not choose both, such statute is unconstitutional because of its violation of Su-premacy Clause; statute's severability clause does not save unobjectionable portions of statute since legislative history does not support conclusion that opt-out provision was to survive state attempt to prohibit exemption stacking. In re Garrido (1984, BC SD Cal) 43 BR 289, 11 CBC2d 506, CCH Bankr L Rptr P 70064.

11 USCS § 522(m) provides that each debtor in joint case is entitled to claim exemptions; there-fore, California statute, which provides that husband and wife in joint petition may not utilize dif-ferent applicable exemption provisions, is contrary to federal law and is unconstitutional. In re Ferraro (1986, BC ND Cal) 67 BR 228.

Where two Chapter 13 debtors resided on premises sought to be exempted under 11 USCS § 522 at time of filing, both are entitled to claim homestead exemptions of at least $ 7,500 in premises. In re Chandler (1987, BC ED Pa) 77 BR 513, CCH Bankr L Rptr P 71970 (criticized in Wood v LA Bank (In re Wood) (1996, BC MD Pa) 190 BR 788, 28 BCD 570, 35 CBC2d 275).

Where under state law husband no longer has any interest in property acquired by both husband and wife as tenants in entireties after husband transferred his interest prepetition to his wife, hus-band has no interest in realty to which homestead exemption under 11 USCS § 522(b) can attach and therefore husband and wife can not both claim homestead exemption in joint Chapter 11 case pursuant to 11 USCS § 522(m), notwithstanding fact husband has continuing liability on mortgage obligation and shares residence with spouse and contributes to its maintenance. In re Gorski (1988, BC WD Pa) 85 BR 371, CCH Bankr L Rptr P 72291.

Chapter 13 debtor properly claimed as exempt both property that Arizona law would have per-mitted him to exempt individually and property that Arizona law would have permitted his spouse to exempt because debtor was acting for benefit of community. In re Perez (2003, BC DC Ariz) 302 BR 661.

37.--Federal and state exemptions

11 USCS § 522(b) prohibits stacking of Texas and federal exemptions by joint Chapter 7 debtors even though no formal order of joint administration has been given under Bankruptcy Rule 1015(b) because practice in this district is to treat filing of joint petition as request for unitary administration and no formal order is issued; to hold otherwise would do violence to perceived legislative intent in amending 11 USCS § 522(b); debtors are, however, allowed to stack federal exemptions. In re Gallo (1985, BC ND Tex) 49 BR 28, 12 BCD 1272, 12 CBC2d 1138.

Exemption authorized by 11 USCS § 522(b)(2)(B), relating to interests as tenancy by entirety or joint tenant, is cumulative to exemption under state or local law authorized under § 522(b)(2)(A). In re Gillette (1999, BC MD Fla) 248 BR 845.

38.--State exemptions

Under state law, when both spouses file bankruptcy, each is debtor and there are 2 exemptions available for each item of jointly-owned property; thus, each spouse had $ 200 exemption in house-hold goods, creating joint claim which totals $ 400, and each spouse may claim exemption of one-half interest in different cars, creating joint claim totaling $ 2,400, without violating 11 USCS § 522. In re Lambert (1980, BC ND Ind) 10 BR 11, 6 BCD 1124, 3 CBC2d 37.

Page 97 11 USCS § 522

When one spouse elects California state residential exemption other spouse must also claim that exemption because splitting exemptions between state and federal is prohibited under 11 USCS § 522(d); however where one spouse claims California residential exemption other spouse may claim exemption under 11 USCS §§ 522(d)(1) and (5) for property other than residential using any unused amount of exemption provided in 11 USCS § 522(d)(1) up to $ 7,900; further when one spouse has claimed California residential exemption to its full extent other spouse's aggregate interest in com-munity property is undivided one-half and debtor can only exempt his or her one-half interest in community property with other half remaining in estate. In re Brents-Pickell (1981, BC SD Cal) 12 BR 352, CCH Bankr L Rptr P 68227.

Husband and wife, separate debtors in joint petition in bankruptcy, can both claim exemption for household goods under state law as authorized by 11 USCS § 522(b). In re Alvarez (1981, BC DC Colo) 14 BR 940, 8 BCD 415, 5 CBC2d 485.

It would achieve little good to force married debtors to file separately to achieve "fresh start" manifested in 11 USCS § 522(n); numerous cases have held that Supremacy Clause of Constitution and 11 USCS § 522(n) required double exemptions even where state exemption law would prohibit it; state law permitting $ 10,000 exemption to debtor against his creditors permits joint debtors to each claim $ 10,000 exemption on their own estate, for an aggregate of $ 20,000 against whole of their equity combined. In re Rizzo (1982, BC WD NY) 21 BR 913, CCH Bankr L Rptr P 68835.

New York resident joint debtors, who file after effective date of New York's opt out statute, may aggregate their homestead exemptions since 11 USCS § 522(m) which requires that all allowable exemptions run to benefit of each debtor spouse who files joint petition is independent of opt-out statute and state cannot relieve itself of its obligation to provide each joint debtor with its designated exemption; where existing state exemption law frustrates § 522(m), it is obvious and necessary con-clusion that it must have been intent of state legislature, in enacting opt out statute, to accede to fed-eral policy and to allow aggregation of exemptions within bankruptcy context. In re Pearl (1983, BC ED NY) 28 BR 492, 10 BCD 437, CCH Bankr L Rptr P 69128.

Joint debtors may aggregate their homestead exemptions under New York homestead exemp-tion. In re Webb (1983, BC ED NY) 29 BR 280, CCH Bankr L Rptr P 69145.

Under California law, as to exemptions having maximum dollar amount, both debtor spouses together in joint petition are entitled to one exemption, either of § 703.140(b) exemptions or other state exemptions, and married persons who file individual petitions will be entitled to only one such exemption between them. In re Nygard (1985, BC ED Cal) 55 BR 623, 13 CBC2d 1101, affd (1987, BAP9 Cal) 71 BR 779.

Pursuant to 11 USCS § 522(m), Colorado constitution and exemption statute, and case law, wife, in joint Chapter 7 case, who had ownership interest in medical equipment arising from her daily use of equipment as well as her contributions to parties' medical practice, is entitled to claim exemption in tools of trade in addition to exemption claimed by her debtor husband/doctor; this conclusion is not precluded by Colorado presumption which provides that husband is owner of household goods when both spouses are living together because this case involves tools of trade and not household goods and because there is abundant evidence to contrary that wife contributed to medical practice itself, which rebuts presumption. In re Reeder (1986, BC DC Colo) 60 BR 312.

Joint Chapter 7 debtors may not independently claim exemptions provided by California law, but rather must share exemptions because states which have "opted out" of federal exemptions are

Page 98 11 USCS § 522

not bound by 11 USCS § 522(m). In re Lucas (1986, BC SD Cal) 62 BR 949, 14 BCD 729, affd in part and revd in part on other grounds (1987, BAP9 Cal) 77 BR 242.

California exemption statutes which do not allow debtors to choose federal bankruptcy exemp-tions and which are applicable only to debtors in bankruptcy, which are worded exactly the same as pre-amendment federal exemptions, exceed authority delegated to states by Congress and violate geographic uniformity requirement of U.S. Constitution; statutory wording of 11 USCS § 522(b)(2)(A) that debtor may claim property as exempt under applicable state or local law should not, in view of constitutional considerations, be interpreted so liberally as to authorize state exemp-tion scheme which is applicable only in federal bankruptcy court; due to invalidity of this portion of exemption scheme, portion of scheme opting out of federal exemptions must also be invalidated, and thus federal exemptions are available to debtors, although stacking with state exemptions is prohibited. In re Lennen (1987, BC ND Cal) 71 BR 80, 15 BCD 842, 16 CBC2d 1111.

Chapter 7 debtor husband and wife may each claim $ 1,500 exemption in same vehicle for total claimed exemption of $ 3,000 under Idaho exemption statute, because each debtor filing joint peti-tion is entitled to claim exemptions, and while joint debtors may not allocate their individual $ 1,500 exemptions among different vehicles, Idaho law does not preclude debtors from applying each exemption to same motor vehicle, or each individual exemption to separate vehicle. In re Jackson (1992, BC DC Idaho) 147 BR 49.

Where debtor filed individual Chapter 7 bankruptcy, the community property over which the debtor had sole, equal, or joint management and control became property of the estate, and debtor could not claim exemptions on behalf of the non-debtor spouse in that property as though joint peti-tion for bankruptcy had been filed; the right to assert exemptions vested solely in debtor, and the statutory limits for exemptions for individual, rather than joint, bankruptcies applied. In re DeHaan (2002, BC DC Idaho) 275 BR 375 (criticized in In re Perez (2003, BC DC Ariz) 302 BR 661).

Spouses who were living apart before filing joint bankruptcy could each claim as exempt, under Vermont homestead exemption statute, Vt. Stat. Ann. tit. 27, § 101, real property in which they and one or more of their children lived where there was no allegation they were attempting to defraud their creditors by these living arrangements. In re Roberge (2004, BC DC Vt) 307 BR 442, 52 CBC2d 95.

It is possible to have two family units, one consisting of father and child and other consisting of mother and some children, within marriage; Vermont homestead exemption, Vt. Stat. Ann. tit. 27, § 101, is available to each family unit within joint bankruptcy case and may be used to exempt two homestead parcels but only if spouses were living apart prior to filing of bankruptcy case, if each homestead is necessary to preserve family unit, and if there is no evidence of fraud. In re Roberge (2004, BC DC Vt) 307 BR 442, 52 CBC2d 95.

Bankruptcy court determined whether various items of property awarded to debtor's former spouse in final divorce decree were subject to competing interests of trustee and bankruptcy estate; spouse was granted relief from automatic stay to enforce decree with respect to property that was not property of bankruptcy estate; among items of property that were not subject to competing in-terests of trustee and bankruptcy estate were items of furniture, jewelry, and stock to which debtor claimed state law exemption, to extent of claimed exemption, and funds that were escrowed pursu-ant to family court order from sale of marital property; however, remaining items were part of

Page 99 11 USCS § 522

debtor's estate and subject to interests of trustee. In re Skorich (2005, BC DC NH) 2005 BNH 33, 332 BR 77.

Joint Chapter 7 debtors are entitled to claim only one set of exemptions under California law. In re Baldwin (1987, BAP9) 70 BR 612, 15 BCD 747, CCH Bankr L Rptr P 71700.

California statute which limits married debtors to one set of exemptions is not unconstitutionally vague because statute clearly limits each married couple to single set of exemptions; further, statute does not deny married couples equal protection because loss of second set of exemptions does not inhibit right to marry. In re Baldwin (1987, BAP9) 70 BR 612, 15 BCD 747, CCH Bankr L Rptr P 71700.

Where state statute allows for aggregation of real property exemptions within context of bank-ruptcy proceeding, spouses who filed joint petition were allowed $ 20,000 exemption, even though statute provided for homestead exemption not exceeding $ 10,000. Manufacturers & Trades Trust Co. v Borst (1984, Sup) 128 Misc 2d 691, 490 NYS2d 665.

IV.CLAIM AND ALLOWANCE OF EXEMPTIONS


Chapter 7 trustee should be permitted reasonable time to perform administrative duties with re-spect to property exempt under 11 USCS § 522, but honest debtors should be afforded fresh start as soon as possible; trustee will not be ordered to turn over exempt property where: (1) trustee has not completed administrative duties and is not ready to distribute property of estate; and (2) there is some reason to suspect that debtors may not be entitled to discharge. Greene v Balaber-Strauss (1987, SD NY) 76 BR 940, affd without op (1988, CA2 NY) 859 F2d 148.

Determination under 11 USCS § 522(f) that property is ineligible for lien avoidance does not mean that property is then ineligible for exemption; debtor's entitlement to exemption remains un-disturbed regardless of outcome of lien avoidance action. In re Montgomery (1987, BC WD Tex) 80 BR 385, 16 BCD 1351.

Debtor's control of claimed exemption is not factor in determining validity or extent of exemp-tion under 11 USCS § 522; just as claimed exemption for homestead or motor vehicle shall not be denied because debtor controls his house or car, claimed exemption in Individual Retirement Ac-count shall not be denied because debtor controls IRA. In re Cilek (1990, BC WD Wis) 115 BR 974, 11 UCCRS2d 937.

Debtors may plan their bankruptcies to take full advantage of exemption laws, and upon dis-charge debtors may do whatever they wish with their exempt property. In re Cilek (1990, BC WD Wis) 115 BR 974, 11 UCCRS2d 937.

Chapter 7 debtor may not exempt anything he chooses, but rather may only claim property listed under 11 USCS § 522(b)(1) or (2) as exempt. In re Staniforth (1990, BC WD Wis) 116 BR 127, 20 BCD 962 (criticized in Hartje Lumber v Brach (In re Brach) (1995, BC WD Wis) 195 BR 897) and (criticized in Hartje Lumber v Boshardy (In re Boshardy) (1995, BC WD Wis) 1995 Bankr LEXIS 2043).

Chapter 7 debtor's exemptions were filed in bad faith where, except for limited categories, debtor exempted none of basic resources essential to his or his family's personal and ongoing well being, such as homestead, household goods and furnishings, significant cash accounts, and transpor-

Page 100 11 USCS § 522

tation and debtor, rather than making use of either head-of-family or in-lieu-of-homestead exemp-tion category under North Dakota law to preserve particular asset in any meaningful way has parsi-moniously exempted nominal value for nearly every exempted asset leaving it subject to partition and liquidation by trustee with purpose of frustrating trustee's legal responsibility to marshal and liquidate assets for benefit of unsecured creditors. In re Larson (1992, BC DC ND) 143 BR 543.

Debtor may not claim as exempt property which he knowingly concealed and failed to disclose to trustee which normally would be exempt had it been properly scheduled and claimed. In re Park (2000, BC ED Tex) 246 BR 837, 43 CBC2d 1701.

When 11 USCS § 522(l) declares that property claimed as exempt is exempt, property claimed cannot be anything other than what statute allows, namely debtor's aggregate interest in any prop-erty; thus, for purposes of 11 USCS § 522(d)(5) and (l), debtor's aggregate interest in property, not property claimed as exempt itself, becomes exempt after expiration of thirty-day objection period. In re Peiman (2000, BC ED Tex) 255 BR 178.

Debtor must have ownership interest in property before exemption may be claimed. In re Cohen (2001, BC DC NJ) 263 BR 724.

Settlement proceeds from debtor's workers' compensation claim were exempt under N.Y. Debt. & Cred. Law § 282 (2003) because bankruptcy trustee failed to make timely objection to debtor's claim of exemption and workers' compensation benefits were disability benefits under N.Y. Work-ers' Comp. Law § 33 (2003), and as such were exempt. In re Herald (2003, BC WD NY) 294 BR 440.

Exemptions should be construed liberally in favor of debtor. In re Gaudreault (2004, BC DC Mass) 315 BR 1.

By using essentially same phrase in 11 USCS § 522(o) as is used in 11 USCS §§ 548, 727, cases construing fraudulent conveyance and discharge provisions also apply to add body to bare words of new language in 11 USCS § 522(o). In re Maronde (2005, BC DC Minn) 332 BR 593, CCH Bankr L Rptr P 80394.

11 USCS § 522(c) (1) renders exempt property liable for certain tax debts and domestic support obligation debts; it does not limit debtor's right to claim all exemptions otherwise available under § 522. In re Quezada (2007, BC SD Fla) CCH Bankr L Rptr P 80856, 20 FLW Fed B 261.

There are several basic premises at work in 11 USCS § 522(c), including that (1) it seeks to in-sulate exempt property, but only against pre-petition debts, (2) it does not protect against all pre-petition debts because it expressly excludes certain pre-petition tax debts, family support obliga-tions, fraudulent student loan debts, and certain obligations owed to banking regulators, (3) exempt property is generally not insulated from pre-petition debts that are secured by liens, unless liens have been avoided under one of specified statutes, and (4) there is no exclusion mentioned for debts that arise under 11 USCS § 523(a)(2). Bank of Cushing v Vaughan (In re Vaughan) (2004, BAP10) 311 BR 573.

40. Necessity of claiming exemptions

Immature cotton crop was property of estate when trustee sold it, since debtor had not yet claimed part of crop as part of his exempt homestead. Hardage v Herring Nat'l Bank (1988, CA5 Tex) 837 F2d 1319, CCH Bankr L Rptr P 72206.

Page 101 11 USCS § 522

Under Mississippi opt-out provisions, Chapter 11 debtor's failure to designate specific 160 acres, sale of which provided proceeds from which he now claims homestead exemption, does not affect debtor's qualification to declare exemption per se, though that fact may figure into valuation of exemption. In re Williamson (1988, CA5 Miss) 844 F2d 1166, CCH Bankr L Rptr P 72303.

Because debtors did not claim exemption under 11 USCS § 522(l) and Fed. R. Bankr. P. 4003(a), bankruptcy court did not consider question of whether television revenue distributions were exempt under state law when it resolved trustee's turnover motion; thus, appellate court dis-agreed with bankruptcy panel's conclusion that bankruptcy court implicitly determined that distribu-tions were estate property; rather, bankruptcy court treated funds as estate property because debtors had not properly claimed exemption. Scrivner v Mashburn (In re Scrivner) (2008, CA10) 535 F3d 1258.

Debtors interest in lawsuit could not be considered exempt from bankruptcy estate when debtors had not listed cause of action as asset that they intended to claim as exempt, unless debtors could show that trustee had abandoned its interest in lawsuit. Miller v Pac. Shore Funding (2002, DC Md) 287 BR 47, affd (2004, CA4 Md) 92 Fed Appx 933.

Lack of legal training of debtor is not sufficient grounds or cause to dismiss case of debtor who, in filing voluntary pro se petition, listed all unsecured creditors under Schedule A-1, when they should have been shown on Schedule A-3, and further failed to claim exemptions, where list of creditors is sufficient to comply with 11 USCS § 521, inasmuch as there is sufficient information in order for creditors to be notified of proceedings, and trustee has admitted debtor has scheduled all assets and that case is capable of being administered as filed, and where debtor did co-operate with trustee in furnishing oral information as requested; it is matter of choice whether debtor wishes to claim exemptions or not claim exemptions under 11 USCS § 522. In re Way (1980, BC ND Ohio) 2 BR 372, 5 BCD 1371, 1 CBC2d 423.

Unlike prior law under which exempt property never vested in estate and debtor had no duty to claim exemption, under 11 USCS § 522, all of debtor's property vests in estate subject to exempt property being excluded by debtor's claiming exemptions in schedule; thus, debtor must affirma-tively claim exemption before it can be allowed. In re Thacker (1980, BC WD Va) 5 BR 592.

Although precision and accuracy must be demanded of debtors when claiming their exemptions, spirit of Bankruptcy Code is to encourage fair interpretation in debtors' best interest; exemption is allowed even though schedules describe interest in real property rather than legal or equitable inter-est based upon contract. In re Karns (1981, BC ED Mo) 1 BAMSL 460.

Mistake in description of location of exempt property is not fatal to claim of exemption. In re Burchard (1983, BC ED Mo) 2 BAMSL 604.

Virginia law rather than Bankruptcy Rule 9006(a) provisions regarding exclusion of weekends and legal holidays governs how 5-day period for filing homestead exemption provided under Vir-ginia law should be calculated; because federal law has granted states right to establish exemptions, state law should also govern how exemptions are to be claimed. In re Haynesworth (1992, BC ED Va) 145 BR 222, 4 Fourth Cir & Dist Col Bankr Ct Rep 713, 27 CBC2d 1221.

Bankruptcy court denied debtors' motion for homestead exemption under Ky. Rev. Stat. Ann. § 427.060 because homestead exemption was not properly raised by debtors as they simply stated on schedule that employment of exemptions under 11 USCS § 522(d) was to be determined in bank-

Page 102 11 USCS § 522

ruptcy plan, but they never moved to amend schedule to assert exemption; this was simply not suf-ficient to put creditors on notice of specific exemptions to be raised in case. In re Wilson (2006, BC WD Ky) 338 BR 315.

It is mandatory under language of statute that debtor file list of property he claims exempt under 11 USCS § 522(l) and list of property connotes selection of specific property; therefore claim to "other assets of petitioner" does not comply with statute. In re Andermahr (1983, BAP9 Cal) 30 BR 532, 10 BCD 917, 8 CBC2d 1316, CCH Bankr L Rptr P 69267.

41. Compliance with filing requirements

Debtor who intends to claim as exempt property which would be subject to one of debtor's avoiding powers under 11 USCS § 522 should communicate such intention to trustee, and, in turn, trustee should file with Bankruptcy Court in writing, his intention not to pursue such action based on debtor's intention to claim such property as exempt. In re Taylor (1981, BC DC Dist Col) 8 BR 251, CCH Bankr L Rptr P 67790.


Debtors who tardily file claims of exemption forfeit benefit of deadline prescribed by Fed. R. Bankr. P. 4003(b) for objections to claims of exemption but do not forfeit their substantive entitle-ment to exemptions. In re Montanaro (2004, BC ED Cal) 307 BR 194, 51 CBC2d 1866.

Fact that debtors scheduled contracts under state's Prepaid Affordable College Tuition (PACT) Program as asset and then claimed exemption did not constitute waiver of their argument that con-tracts were not part of estate where bankruptcy forms contained no effective means of disclosing assets that debtors believed were not part of their estate. In re Cheatham (2004, BC MD Ala) 309 BR 631.

42. Combination of federal and state exemptions

Victim's, defendants' telemarketing of wrongful death insurance with unlicensed telemarketers, failure to disclose account with $ 800 to bankruptcy court did not result in windfall in present case because even if victim had disclosed account, victim would have kept money as personal property exemption; therefore, judicial estoppel did not apply. McClain v Coverdell & Co. (2003, ED Mich) 272 F Supp 2d 631.

Individual debtor may exempt property under 11 USCS § 522(b)(1) or under 11 USCS § 522(b)(2), but not under both sections simultaneously. In re Lawson (1985, BC DC Vt) 45 BR 686, 12 BCD 818.

Under 11 USCS § 522(b)(1) and (2), debtor must select either Code exemptions or exemptions provided by state and nonbankruptcy federal law--he cannot pick and chose between lists. In re Stone (1990, BC ED Wash) 119 BR 222 (criticized in Huskey v Huskey (In re Huskey) (1995, BC SD Cal) 183 BR 218).

Statute that purports to permit debtor to choose combination of exemptions in 11 USCS § 522(b)(1) and (b)(2) is in direct contravention to Bankruptcy Code. In re Rosenquist (1990, BC MD

Page 103 11 USCS § 522

Fla) 122 BR 775, revd on other grounds (1992, MD Fla) 1992 US Dist LEXIS 20206, affd in part and revd in part, remanded on other grounds (1993, CA11 Fla) 8 F3d 745, 17 EBC 2020, CCH Bankr L Rptr P 75629, 7 FLW Fed C 1033 (superseded by statute as stated in In re Zamora (1995, BC SD Fla) 187 BR 783, 9 FLW Fed B 174) and (superseded by statute as stated in In re Pettit (1998, BC MD Fla) 224 BR 834, 12 FLW Fed B 19).

11 USCS § 522(b) clearly requires debtor to choose either state or federal exemptions, not to choose both or some of both; thus, debtor may exempt property under 11 USCS § 522(d), so long as resident state has not opted out; in alternative, debtor may choose to exempt property that is exempt under federal law other than § 522(d); finally, debtor may exempt property under applicable state law, including rights to exempt joint tenancies or tenancies by entireties. In re Lamb (1994, BC DC NJ) 179 BR 419, 33 CBC2d 458, CCH Bankr L Rptr P 76435.

Where debtor has selected exemptions under both federal and state law, final determination of which exemptions will be applied to debtor will turn on what exemptions are best for debtor; 11 USCS § 522(b) clearly requires debtor to choose either state or federal exemptions, not to choose both or some of both; state exemptions will be selected for Chapter 7 debtor whose Individual Re-tirement Account (IRA) was most valuable asset, since under applicable New Jersey law IRAs are exempt, whereas 11 USCS § 522(d)(10)(E) requires that IRA be reasonably necessary for support of debtor and any dependent in order to qualify as exempt, and debtor's limited earning potential in his chosen field as choir leader and age of debtor's elderly parents do not clearly establish that his IRA is exempt under § 522(d)(10)(E). In re Lamb (1994, BC DC NJ) 179 BR 419, 33 CBC2d 458, CCH Bankr L Rptr P 76435.

43. Effect of claiming exemption

Trustee did not forfeit his right to administer real estate as property of bankruptcy estate for benefit of either joint or non-joint creditors when he failed to file timely objection under 11 USCS § 522(l) and Rule 4003(b) to debtor's claimed exemption of her interest in real estate, since he was not required to object to exemption to which debtor was fully entitled. Williams v Peyton (In re Wil-liams) (1997, CA4 Va) 104 F3d 688, 9 Fourth Cir & Dist Col Bankr Ct Rep 76, 37 CBC2d 548, CCH Bankr L Rptr P 77257.

Chapter 7 trustee may not sell property regarding which debtors have exempted their interest as land-contract vendees without objection because once property is exempted from estate under 11 USCS § 522, it revests in debtor and is no longer part of estate, even though value of debtors' inter-est in exempted property exceeds statutory exemption amount. Seifert v Selby (1989, ED Mich) 125 BR 174 (criticized in In re Gaylor (1991, BC ED Mich) 123 BR 236, 21 BCD 421, CCH Bankr L Rptr P 73805) and (criticized in In re Bregni (1997, BC ED Mich) 215 BR 850).

Chapter 7 debtor's exemption of $ 15,250 worth of real estate equity embodied in building under 11 USCS § 522 does not mean that building is no longer property of estate, but that property is en-cumbered by lien in favor of debtor in that amount. In re Reich (1985, BC ED Mich) 54 BR 995, 13 BCD 953, 13 CBC2d 988.

Where debtor's husband, in separate bankruptcy, claimed exemption to property held in tenancy by entireties with debtor by citing to Ind. Code § 34-55-10-2(b)(1), but husband may have intended--but for citation error--to claim 100 percent of value of property under Ind. Code § 34-55-10-2(b)(5), critical element in exemption claim was statutory provision under which exemption was

Page 104 11 USCS § 522

claimed; accordingly, regardless of intent, citation to Ind. Code § 34-55-10-2(b)(1) meant that hus-band claimed only $ 7,500.00 exemption. In re Kuhn (2005, BC ND Ind) 322 BR 377.

In those instances where bankruptcy debtor's exemption schedules reflect exemption amount equal to property's listed value amount, debtor claims exemption of 100 percent of debtor's property interest, regardless of property's ultimate valuation amount. Opel v Daly (In re Daly) (2005, BC MD Pa) 344 BR 304.

Bankruptcy court rejected debtor's argument that effect of claiming exemption was to remove property from bankruptcy estate, and thus, post-petition transfer of property under 11 USCS § 549 could not have been avoided because she did not transfer "property of estate"; debtor's reasoning was flawed because at time of transfer, no Chapter 7 creditors meeting had been held, and time for objection to exemptions had not expired; therefore, property was not yet exempt and was part of estate at time of transfer. In re Villegas (2007, BC DC NM) 364 BR 781.

Debtors' interest in stock that was partially exempt under 11 USCS § 522(d)(5) was properly sold by trustee, under 11 USCS § 363(b), and debtors were paid their claimed exemption amount; balance of sale proceeds were properly distributable to creditors under 11 USCS § 726. In re Cormier (2008, BC WD Mich) 382 BR 377.

Under 11 USCS § 553, landlord of Chapter 7 debtors may set off claim for damage to rental property against debtor's claim for breach of rental contract, even though debtors have exempted their claim under California opt-out provisions or 11 USCS § 522. In re Pieri (1988, BAP9 Cal) 86 BR 208, 17 BCD 1016, 18 CBC2d 924, CCH Bankr L Rptr P 72554.

44. Title to exempt property

Texas court's sanctions order declaring that debtor had abandoned homestead claim to certain property was entitled to res judicata treatment for bankruptcy purposes since it constituted valid judgment under Texas law rather than unconstitutional forced sale. McDaniel v Camp (In re Camp) (1995, CA5 Tex) 59 F3d 548.

Court agreed with bankruptcy court that debtor could not claim exemption for earnings under 11 USCS § 522 by relying on 15 USCS § 1673, part of Consumer Credit Protection Act, 15 USCS § 1601 et seq., because its limitations were exclusively for purpose of restricting wage garnishment, and provision was not applicable to bankruptcy. Riendeau v Canney (In re Riendeau) (2002, DC Vt) 293 BR 832, affd (2003, CA2 Vt) 336 F3d 78.

Assets properly exempted by debtor are withdrawn from bankruptcy estate and title to those ex-empt assets is vested in debtor; bankruptcy estate has no interest whatsoever in exempt assets; debtor is sole owner of insurance proceeds covering contents that were properly exempted where title had vested in debtor before fire destroyed them, and debtor is entitled to recover fire insurance based on replacement costs. In re Snow (1982, BC ED Cal) 21 BR 598.

Even if debtor had listed revolver on schedule of personal property and schedule of exempt property, fact that revolver was sold prior to filing of petition resulted in debtor having no interest in weapon for bankruptcy estate to assume with result that debtor has no interest to exempt, and while debtor could have sought to bring weapon back into estate, had proper grounds existed, he had not chosen to do so; however, entire analysis is rendered moot by failure to list property as personal property owned by debtor or as property claimed as exempt. In re May (1983, BC ND Ohio) 33 BR 599.

Page 105 11 USCS § 522

Once property is exempted from estate it revests in debtor and is no longer part of estate; once exemption is claimed in particular property, such property is exempt if no party in interest objects; thus property claimed by debtor as exempt became property of debtor after 15-day-period for objec-tions to exemption expired. In re Wiesner (1984, BC WD Wis) 39 BR 963.

Lien avoidance is not allowed as to farm equipment which was scheduled by one debtor but claimed later as exemption by another debtor where there is no satisfactory explanation for postpeti-tion transfer of ownership of property, except that such transfer was to bring each of claims of ex-emption of several debtors within statutory maximum; even without improper motive, exemption cannot be claimed by transferee debtor because equipment was admittedly not his as of date of fil-ing. In re Rasmussen (1985, BC WD Mo) 54 BR 965.

Mere fact that property is owned by joint tenants, only one of whom is in bankruptcy, does not exempt property from claims of creditors in either New Jersey or Florida; debtor's interest in prop-erty may be partitioned under 11 USCS § 363(h). In re Spatola (1986, BC SD Fla) 65 BR 49.

Operation of 11 USCS § 541 vests title even to properly exempt property in Chapter 7 trustee, and thus prior law compelling trustee to turn over exempt assets to debtor, who retained title, is in-applicable, and trustee may retain exempt property in estate, but trustee may not necessarily be enti-tled to hold distribution of exempt assets to final distribution under 11 USCS § 726; rather, various subsections of 11 USCS § 704 require only that trustee satisfy himself that exempt assets are not subject to some unavoidable claim such as tax claim under 11 USCS § 523(a)(1); where, as here, debtor has been divorced, Chapter 7 trustee is entitled to hold Chapter 7 debtor's homestead exemp-tion until trustee is satisfied within reasonable time that exempt assets are not subject to superior rights, including claims for alimony or support under 11 USCS § 522(c)(1). In re Kaufman (1986, BC SD NY) 68 BR 391, 15 BCD 273.

Constructive trust imposed upon all property of debtors following debtor husband's failure to pay over 24 percent of his retirement benefits to former spouse as ordered by divorce court is not unfair manipulation of Bankruptcy Code, but, rather, it represents choate equitable interest imposed prepetition, after extensive litigation, evidenced by recorded instrument issued by state court which was imposed due to markedly fraudulent and tortious behavior of both debtors, and, therefore, for-mer spouse holds not only equitable title to 24 percent interest in retirement benefits but also holds equitable title to all property of both debtors, and since debtors have no equitable interest in prop-erty they may not exempt it. In re Naydan (1993, BC WD Ark) 162 BR 204, 17 EBC 2182.

Debtor must have ownership interest in property before exemption may be claimed. In re Cohen (2001, BC DC NJ) 263 BR 724.

11 USCS § 522(b)(3)(B) recognizes exemptions for interests that debtor has in property "imme-diately before commencement of case"; thus, § 522(b)(3)(A) and § 522(b)(3)(B) focus on status of ownership as of moment of bankruptcy filing, and not as of date of any pre-petition event; absent evidence of fraud, court will allow any recognized exemption for assets that debtors own at com-mencement of bankruptcy proceeding, even when debtors may have enhanced value of that exemp-tion by reason of careful planning with advice of counsel. In re Martiny (2007, BC WD NY) 378 BR 52.

Date of conversion of original Chapter 13 case to Chapter 7 case is controlling date on which to determine debtor's exemptions under 11 USCS § 522. In re Winchester (1984, BAP9 Or) 46 BR 492, 12 CBC2d 293, CCH Bankr L Rptr P 70296 (superseded by statute as stated in In re Weed

Page 106 11 USCS § 522

(1998, BC DC Nev) 221 BR 256, 40 CBC2d 254) and (superseded by statute as stated in In re Rogers (2002, BC DC Nev) 278 BR 201, 48 CBC2d 374).

Wife who filed joint petition with her husband under Chapter 7 of Bankruptcy Code was not al-lowed to claim exemption in tax refunds she and her husband received on income husband earned pre-petition because wife did not have ownership interest in tax refunds under Minnesota law; hus-band was sole wage-earner during period taxes were paid, and fact that he and his wife filed joint tax return, and that refunds were placed in joint account, did not transform refunds into joint prop-erty. Carlson v Moratzka (In re Carlson) (2008, BAP8) 394 BR 491, CCH Bankr L Rptr P 81322.

45. Res judicata

Res judicata did not bar bankruptcy trustee from further seeking to surcharge debtors' wild card exemption of 11 USCS § 522(d)(5) because factual bases asserted in trustee's surcharge motion were not fully established when she sought denial of discharge under 11 USCS § 727(a); trustee was unable to discover existence of debtors' undisclosed bank account until more than one year after fil-ing of bankruptcy petition. Latman v Burdette (2004, CA9 Wash) 366 F3d 774, 52 CBC2d 639, CCH Bankr L Rptr P 80087, amd (2004, CA9 Wash) 2004 US App LEXIS 11231 and reprinted as amd (2004, CA9 Wash) 2004 US App LEXIS 11212.

Debtors' late claim of homestead exemption under 11 USCS § 522 which they failed to make in timely fashion due to inexcusable negligence of their counsel should not stop sale of homestead to liquidate equity in house and lot over and above exemption available to debtor where no reason has been asserted for prohibiting sale of house and lot. In re Johnson (1983, MD Tenn) 30 BR 467.

Chapter 7 debtor's claim of exemption in personal injury settlement monies is denied where court finds debtor acted in bad faith by repeatedly failing to adequately schedule personal injury claim as asset, this being clear and convincing evidence of intentional concealment and bad faith warranting denial of exemption under 11 USCS § 522. In re St. Angelo (1995, BC DC RI) 189 BR 24, CCH Bankr L Rptr P 76820 (criticized in In re Daniels (2001, BC ED Mich) 270 BR 417) and (criticized in In re Robinson (2003, BC SD Ohio) 292 BR 599).

Where Chapter 7 debtor attempted to claim his automobile and IRA account as exempt under federal law and his interest in real property as exempt under state entireties law, and court issued order that became final disallowing debtor's exemption claims under state law, debtor was barred by res judicata from later amending his exemptions. In re Romano (2007, BC ED Pa) 378 BR 454.

Where debtor had attempted to claim as exempt payments that she received under policy of dis-ability insurance under Minn. Stat. § 550.39, but bankruptcy court sustained Chapter 7 Trustee's ob-jection, holding that statute violated Minn. Const. art. I, § 12, debtor's amended claim of exemption claiming that payments were exempt under different statute, Minn. Stat. § 550.37, subd. 24, was not barred by res judicata; showings required under two statutes involved different nuclei of operative fact. In re Reiland (2008, BC DC Minn) 382 BR 779.

Where court entered final binding order disallowing all of debtor's claims of exempt property under 11 USCS § 522 during pendency of debtor's Chapter 11 case, upon conversion of case to Chapter 7, doctrine of res judicata bars debtor from claiming any of those property interests barred in Chapter 11, but does not bar debtor from claiming interests not included in original schedule of exemptions in Chapter 11 which were not disallowed by judge's order. In re Magallanes (1988, BAP9 Cal) 96 BR 253.

Page 107 11 USCS § 522

Where debtors were denied homestead exemption under 11 USCS § 522, they were barred by res judicata from 15 months later seeking homestead exemption for same property under state law. Ladd v Ries (In re Ladd) (2005, BAP8) 319 BR 599.

Chapter 7 debtor's action under 11 USCS § 522(f) seeking to avoid creditor's lien in certain tools of debtor's trade was not barred by res judicata where although debtor had stipulated to relief from automatic stay in creditor's favor with respect to tools pursuant to 11 USCS § 362(d) and actions were based on same underlying facts, lien avoidance rights were not affirmative defenses to motion for stay relief and pending lien motion would not necessarily have defeated stay relief motion. Ginter v Alliant Bank (In re Ginter) (2006, BAP8) 349 BR 193.

46. Miscellaneous

Abandonment by trustee under 11 USCS § 554 of contract and tort cause of action against bank is not prerequisite to debtors' exemption of such cause of action under 11 USCS § 522, nor is it pre-requisite to debtors' standing to pursue action because unequivocal language of 11 USCS § 522 does not require abandonment as prerequisite to exemption. Wissman v Pittsburgh Nat'l Bank (1991, CA4 W Va) 942 F2d 867, 3 Fourth Cir & Dist Col Bankr Ct Rep 712, 21 BCD 1697, 25 CBC2d 605, CCH Bankr L Rptr P 74225 (criticized in In re Forti (1998, BC DC Md) 224 BR 323, 10 Fourth Cir & Dist Col Bankr Ct Rep 593, 40 CBC2d 1025).

Proceeds of sale of exempt property were not property of estate, and bankruptcy and district courts erred in ruling that trustee could retain funds on behalf of creditors until conclusion of debt-ors' Chapter 13 plan. Gamble v Brown (In re Gamble) (1999, CA11 Ga) 168 F3d 442, CCH Bankr L Rptr P 77893, 12 FLW Fed C 550 (criticized in In re Launza (2005, BC ND Tex) 2005 Bankr LEXIS 1017).

Chapter 11 plan proposed by debtors' creditors cannot be confirmed where it fails to provide for debtors' exemption rights even though sufficient assets will remain after sale of property under plan to cover amounts of debtors' claimed exemptions. Buroker v Raybourn (1986, SD Ohio) 61 BR 10, 14 BCD 110, 14 CBC2d 516.

Under 11 USCS § 522(b) creditor is entitled to carry its perfected security interest into post-Chapter 11 identifiable proceeds or products in accordance with security agreement if authorized by applicable nonbankruptcy law; where court orders creditor to permit use of cash collateral or where creditor consents to use he has right under 11 USCS §§ 362(d), 363(e) and 364(c), respectively, to demand and to receive both lien on property and priority to extent necessary to insure adequate pro-tection; if creditor fails to obtain substitute collateral, his consent to use of proceeds destroys his right to trace proceeds into other products and his claim is governed by priorities of 11 USCS § 507; creditor has no interest in crops sown after filing of bankruptcy petition where stipulated order for use of cash collateral did not preserve creditor's right to trace proceeds into new crop or otherwise grant substitute lien. In re Lovelady (1982, BC DC Or) 21 BR 182, 34 UCCRS 713.

Confirmation of debtor's Chapter 13 plan does not violate 11 USCS § 1325(b), despite provi-sions for plan payments of $ 100 per month for parochial school tuition and $ 120 per month for tithe, because tithing and religious education, while not priorities for every debtor, are not per se unreasonable choices for maintenance and support of Chapter 13 debtor's family and do not consti-tute expenses for luxury goods and services, under parallel analysis of 11 USCS §§ 523(a)(2)(c) and 522(d)(10)(E), since these expenses are incurred purely out of debtor's conviction that they are es-sential for spiritual well-being of family; as debtor's proposed expenses, as whole, are quite austere

Page 108 11 USCS § 522

and evidence shows debtor is committed to paying all disposable income into plan, court is unwill-ing to substitute its judgment for debtor's belief in value of religious contributions and education. In re Navarro (1988, BC ED Pa) 83 BR 348, 17 BCD 361, CCH Bankr L Rptr P 72233.

Property cannot be exempted from bankruptcy estate to extent that it is encumbered by security interest, but rather, maximum allowable exemption under 11 USCS § 522(d) is debtor's equity in property or applicable statutory ceiling, whichever is less, and debtor's property remains property of estate to extent that its value exceeds statutory amount which debtor is permitted to exempt. In re Gaylor (1991, BC ED Mich) 123 BR 236, 21 BCD 421, CCH Bankr L Rptr P 73805.

While proceeds from sale of non-exempt property are subject to claims of creditors, exempt property retained at confirmation is different; exempt means exempt and therefore unavailable to either trustee or claimant. In re McCollum (2006, BC ED La) 348 BR 377.

Debtor's right to receive future payment from his former spouse at time of their youngest child's emancipation was estate asset under 11 USCS § 541(a)(1) because it was clearly property settlement for release of whatever interest he had in marital home; court refused to allow debtor to amend his schedules under Fed. R. Bankr. P. 1009(a) to include payment and to exempt it under 11 USCS § 522(d)(5) because his assertion that it was earmarked for education was not supported by language of separation agreement. In re Orlando (2007, BC DC Mass) 359 BR 395.

Revesting of property under 11 USCS § 522(l) does not immunize it from being brought into es-tate upon conversion of Chapter 13 case. Campbell v Stewart (In re Campbell) (2004, BAP10) 313 BR 313, 52 CBC2d 1229 (criticized in In re Fonke (2005, BC SD Tex) 321 BR 199).

B.Time Exemptions are Determined 47. Generally

Virginia law, rather than Bankruptcy Rules, controls computation of time allowed Virginia debtor to claim homestead exemption and, under Virginia law, debtor had "set apart" property claimed as exempt once he had delivered properly executed homestead deed, with fees paid, to ap-propriate clerk; since opt-out states are allowed to specify bankruptcy exemptions, those states are permitted to determine both substance of those exemptions and procedure by which they are claimed. Mayer v Quy Van Nguyen (In re Quy Van Nguyen) (2000, CA4 Va) 211 F3d 105.

Correct date for determining which property of involuntary Chapter 7 debtor will be subject to exemptions under 11 USCS § 522 is date on which order for relief is granted. In re Wilson (1985, ED Tenn) 62 BR 43, 14 BCD 1144.

Exemptions under 11 USCS § 522 are determined by examination of exemption statutes in ef-fect at time bankruptcy petition is filed, not time debts arose. In re Van Hove (1987, ND Iowa) 78 BR 917.

Date of filing of involuntary Chapter 7 petition against debtor, rather than date of reconversion from Chapter 11 case in which no plan was confirmed, is applicable date for determining debtor's exemptions under 11 USCS § 522. In re Butcher (1986, BC ED Tenn) 62 BR 162, affd (1987, ED Tenn) 75 BR 441, affd without op (1988, CA6 Tenn) 848 F2d 189 and affd without op (1988, CA6 Tenn) 848 F2d 189.

Determination of whether property may be exempted under state opt-out provisions must be made under statutes in effect at time of bankruptcy where statute more favorable to Chapter 11 debtor has come into effect since filing of petition but is not retroactive. In re Connally (1989, BC WD Tex) 94 BR 908, 18 BCD 1129.

Page 109 11 USCS § 522

Congress delegated to states only power to identify exempt property, not power to determine when exemptions would be effective. In re Lynch (1995, BC ED Ky) 187 BR 536.

48. Filing of petition

Value and status of exempt property in bankruptcy is determined as of date petition is filed. Armstrong v Hursman (1988, DC ND) 106 BR 625, 19 BCD 1495.

Critical time for determining debtor's entitlement to exemption is date bankruptcy petition is filed. In re Grindal (1983, BC DC Me) 30 BR 651.

Personal bankruptcy exemptions are determined and evaluated as of date petition for relief is filed. In re Bartoszewski (1984, BC ND NY) 36 BR 424 (criticized in In re McNeill (1996, BC ED NY) 193 BR 654).

Critical time for determining debtor's entitlement to exemption is date that bankruptcy petition is filed. In re Tardiff (1984, BC DC Me) 38 BR 974.

In Chapter 7 case exemptions are determined and evaluated as of date petition for relief is filed. In re Wiesner (1984, BC WD Wis) 39 BR 963.

Homestead rights are generally determined as of date of filing of petition in bankruptcy. In re Avery (1984, BC DC Vt) 41 BR 224, 12 BCD 162.

Exemption rights in bankruptcy are determined as of date of bankruptcy petition. In re Hanson (1984, BC DC ND) 41 BR 775.

Exemptions are determined under 11 USCS § 522 as of date of filing petition. In re Grosso (1984, BC DC NM) 51 BR 266.

Filing of bankruptcy petition is line of cleavage at which Chapter 7 debtor's entitlement to ex-emptions is determined. In re Sajkowski (1985, BC DC RI) 49 BR 37, CCH Bankr L Rptr P 70538.

Debtor's exemptions are determined as of date of filing bankruptcy petition. In re Eckols (1986, BC DC NH) 63 BR 523.

Bankruptcy Court faced with Chapter 7 debtor's claim of exemptions will apply law in effect on date bankruptcy petition is filed unless such application would be unconstitutional; parties com-plaining of unconstitutionality have burden of proof. In re Punke (1987, BC ND Iowa) 68 BR 936, 16 CBC2d 68.

Property of estate under 11 USCS § 541 is determined as of commencement of case, as are ex-emptions under 11 USCS § 522. In re Sheets (1987, BC WD NY) 69 BR 542.

Date of filing of Chapter 13 bankruptcy petitions is significant time for measurement of all fac-tors relevant to exemptions under 11 USCS § 522(a). In re Chandler (1987, BC ED Pa) 77 BR 513, CCH Bankr L Rptr P 71970 (criticized in Wood v LA Bank (In re Wood) (1996, BC MD Pa) 190 BR 788, 28 BCD 570, 35 CBC2d 275).

Exemptions under 11 USCS § 522 are assessed as of date of Chapter 7 bankruptcy filing. In re Magnus (1988, BC ED Pa) 84 BR 976, 17 BCD 632.

Chapter 7 debtor's exemption rights under 11 USCS § 522 are determined on basis of circum-stances existing at time of filing. In re Jones (1988, BC MD Ga) 87 BR 738.

Page 110 11 USCS § 522

Exemption rights in bankruptcy, pursuant to 11 USCS § 522, are determined as of date petition is filed. In re Yau (1990, BC CD Cal) 115 BR 245.

Normally, date petition is filed is relevant date for determination of exemption issues. In re Henry (1995, BC ND Tex) 183 BR 748, 33 CBC2d 1545.

Though debtors were entitled to homestead exemption under Minnesota law, as they resided in home on date they filed chapter 7 petition, exemption did not extend to creditors' judgment lien on property that arose before debtors occupied home as their principal residence, and debtors could not avoid this lien under 11 USCS § 522(f)(1)(A). In re Estad (2003, BC DC Minn) 295 BR 905.

Debtor's exemptions are determined as of date upon which bankruptcy case commenced. In re Luttrell (2004, BC ED Tenn) 313 BR 751.

While 11 USCS § 522(b)(2)(A) provides that debtor may exempt from property of estate any property that is exempt under federal law or state law that is applicable on date of filing of petition, § 522(b)(2)(A) can be read to fix law controlling exemptions not to fix property subject to these ex-emptions at time of time filing of petition; because 11 USCS § 303(f) permits bankruptcy court to stay any business transactions it fears will jeopardize rights of creditors and because that court al-ways has power to set aside any transactions that defraud creditors, correct date for determining which property of debtor will be subject to exemptions in involuntary bankruptcy case is date on which order for relief is filed. In re Gaudreault (2004, BC DC Mass) 315 BR 1.

Where 11 USCS § 522(b)(2)(A), which permits states to opt-out of federal exemption scheme that otherwise applies in bankruptcy proceeding, is invoked, state or local law that is in force on date of filing of petition applies in bankruptcy case; U.S. Bankruptcy Court for Eastern District of New York has rejected suggestion that state laws that are in force on date on which debt was in-curred, position taken in Perry v. Zarcone, 431 N.Y.S.2d 250 (N.Y. App. Div. 1980), believing that such position is in direct contradiction of 11 USCS § 522(b)(2)(A). Rupp v Elmasri (In re Elmasri) (2007, BC ED NY) 369 BR 96.

Bankruptcy court's denial of debtors' motion to amend their exemption schedule after reopening of their case was reversed where court based its decision on erroneous premise that debtor's ability to amend for purpose of avoiding lien under 11 USCS § 522(f) terminated once case was closed; court correctly stated that scheduled property of estate that was not administered by trustee was automatically abandoned to debtor pursuant to 11 USCS § 554(c) upon closure of case but, because critical date for determining exemption rights was petition date, court's focus on effect of case clo-sure was misplaced. Goswami v MTC Distrib. (In re Goswami) (2003, BAP9) 304 BR 386.

49.--Under particular circumstances

Version of state exemption statute which became effective on June 25, 1980 is applicable to case in which debtor filed bankruptcy petition in November 1981, because date upon which bank-ruptcy petition is filed is relevant date for determining exemptions. In re Reid (1985, CA10 Okla) 757 F2d 230, 12 CBC2d 727, CCH Bankr L Rptr P 70307.

Debtors are entitled to same exemptions as were in effect when they filed their Chapter 13 peti-tion even though debtors' amended plan may have been filed and confirmed after state changed al-lowable exemptions. Hollytex Carpet Mills v Tedford (1982, WD Ark) 24 BR 197, affd (1982, CA8 Ark) 691 F2d 392, 9 BCD 1087, 7 CBC2d 551, CCH Bankr L Rptr P 68881, reported in full (1999, CA8 Ark) 198 F3d 251.

Page 111 11 USCS § 522

Chapter 7 debtors are not entitled to $ 7,500 of proceeds from sale of property back to secured creditor, on basis of claim to 1988 rent on their schedule of exemptions, despite contention that un-der North Dakota law debtor is entitled to rents from property during redemption and their claim for 1988 rent was evidence that they had expectancy interest in these redemption period rents, because petition was filed in 1987, and, as of that date, value of 1988 rent was zero; therefore, no property existed in estate for debtors to exempt, and 11 USCS § 541(a)(6) applies only to rents to or from property of estate, not mere expectancy of rents to be collected in future; furthermore, under North Dakota law, no foreclosure took place, no redemption period therefore arose, and no right to rents arose; however, debtors may amend their exemption schedules pursuant to Bankruptcy Rule 1009 to claim exemption in proceeds of sale because, as matter of course, debtor should be allowed to amend his exemption claims to include newly found property if case has not been closed; debtors claimed rental income on schedules at time when it was reasonable to assume that no equity existed in property, but when property was sold back to creditor, surplus was realized which became prop-erty of estate and qualifies as newly found property. Armstrong v Hursman (1988, DC ND) 106 BR 625, 19 BCD 1495.

Because debtor in involuntary bankruptcy case retains ability to control his or her property, proper date for determining what property is exempt in such case is date order for relief was en-tered. Jenkins v Hodes (In re Hodes) (2002, DC Kan) 287 BR 561, affd (2005, CA10 Kan) 402 F3d 1005, CCH Bankr L Rptr P 80262.

Exemption rights in bankruptcy are determined as of time of bankruptcy filing; however, debtor is entitled to state farmer's exemption although not engaged in occupation of farming at time of fil-ing, where he habitually had made living at occupation, and testified that farming was his life's work and that he had no intention to abandon occupation. In re Hahn (1980, BC SD Iowa) 5 BR 242, 2 CBC2d 761.

Exemptions which debtors may claim under state exemption statute are those applicable on date of filing of petition, and where state has recently increased amount of such exemptions, lien against exempt property may be avoided to full amount of new exemption, notwithstanding that lien pre-dates increase in exemption amount. In re Curry (1980, BC ND Ohio) 5 BR 282, 2 CBC2d 710, affd (1981, ND Ohio) 11 BR 716, 7 BCD 968, revd on other grounds (1983, CA6 Ohio) 698 F2d 298, CCH Bankr L Rptr P 69154 and revd without op, vacated without op (1983, CA6 Ohio) 722 F2d 740 and revd without op, vacated without op (1983, CA6 Ohio) 722 F2d 742.

Debtor's right to claim exemptions is governed by facts and governing circumstances which ex-isted on date petition was filed, and not by any changes which may have occurred thereafter; debtor is not entitled to state exemption as head of household, which requires that there must be at least two persons living together as one family with one of two recognized and acting as head of family, and with either legal or moral obligation to discharge duties of head of family permanently and con-tinually where, on date of filing petition, debtor cohabitated with unmarried woman in relationship which conferred no legal or moral duty, and was illegal under state law; debtor's ineligibility for ex-emption as head of household is not affected by birth of child subsequent to filing of petition where he had no legal or moral obligation to unborn child, either by legally enforceable admission of fa-therhood or by judicial fiat, as of date of his filing petition. In re Rivera (1980, BC MD Fla) 5 BR 313.

Chapter 7 debtor's homestead exemption should be determined at time of filing of bankruptcy petition and not at time of original homestead sale; therefore proceeds of contract for deed yet to be

Page 112 11 USCS § 522

paid at time petition was filed are properly includable as part of homestead exemption under state opt-out legislation pursuant to 11 USCS § 522. In re Pierce (1985, BC DC SD) 50 BR 718.

Value of exempt property under 11 USCS § 522 must be determined upon filing date or date such property becomes property of estate; therefore, debtor wife may exempt value of her survivor-ship interest in entireties property as of date of filing joint petition and fact that her survivorship in-terest has ripened into fee interest after filing by death of her husband should not affect valuation. In re Crowell (1985, BC MD Tenn) 53 BR 555, 13 CBC2d 878.

Chapter 7 debtors may claim exemption in farm equipment and animal feed and may avoid liens on same where: (1) at time of filing, debtors were in possession of animal feed and machinery, even though 17 days later at voluntary auction, machinery and feed were sold; and (2) debtor husband, who had been forced to take on another type of employment due to financial difficulties, testified that he had been farming his whole life and desired to farm again as soon as possible; exemption rights are determined by circumstances present at time of filing and changes occurring after filing are not relevant. In re Brzezinski (1985, BC WD Wis) 65 BR 336.

Chapter 7 debtors' homestead rights are to be determined as of date of filing petition; thus, they are entitled to $ 15,000 joint exemption in mobile home pursuant to Illinois homestead statute in effect on date of filing rather than $ 10,000 which would have been allowed under statute in effect on date of agreement to purchase home; applying statute in effect at time of petition neither substan-tially impairs parties' contractual relationship nor is unreasonable or unnecessary for accomplish-ment of important public purpose and thus is not violation of contract clause of constitution. In re Hockinson (1986, BC ND Ill) 60 BR 250.

Chapter 11 debtor's clear intent to sell her homestead in future cannot establish present aban-donment of homestead where, at time of filing, debtor still resided at homestead. In re Bernstein (1986, BC DC Vt) 62 BR 545.

Chapter 7 debtors may exempt proceeds from sale of tools of trade exempt under Wisconsin opt-out provisions where sale occurred 2 days after filing of petition, but debtors were entitled to exemption on date of petition. In re Werner (1986, BC WD Wis) 79 BR 819.

Debtor may not exempt mobile home in which he resides under Louisiana homestead statute, not because he does not own land on which it sits, but because he did not move into home and oc-cupy it until after he had filed for bankruptcy. In re Baker (1987, BC WD La) 71 BR 312.

Chapter 7 debtors can avoid liens on personal property that was subject to claim of exemption pursuant to 11 USCS § 522(f)(2)(A) at time debtors filed bankruptcy, despite fact that such property was destroyed by fire prior to debtors' motion to avoid lien, because operative date for determining property of estate, debtors' exemption and whether debtor may avoid lien, is filing date of bank-ruptcy petition; as such, debtors are entitled to return of insurance proceeds withheld by creditor because insurance proceeds are simply another form of such exempt personal property. In re Sher-wood (1988, BC ED Cal) 94 BR 679, CCH Bankr L Rptr P 72603.

Where Chapter 7 debtors resided on property entitled to homestead exemption under state law at time they filed bankruptcy petition, such exemption is not lost by debtors' subsequent departure from property because appropriate date for determining exemptions is date of filing. In re Lindsey (1988, BC SD Ala) 94 BR 723.

Page 113 11 USCS § 522

Value of any interest in property which debtor wishes to exempt under 11 USCS § 522 must be ascertained as of date bankruptcy petition was filed; value of Chapter 7 debtor's employment dis-crimination cause of action was $ 110,000 on date of bankruptcy filing, rather than $ 10,000 as-serted by debtor, where decision had already been rendered in debtor's favor and, although damages had not yet been determined, debtor and her attorneys anticipated recovery of $ 90,000 and case was actually settled for $ 110,000. Taylor v Freeland & Kronz (1989, BC WD Pa) 105 BR 288, affd (1990, WD Pa) 118 BR 272, revd on other grounds (1991, CA3 Pa) 938 F2d 420, 22 BCD 633, 25 CBC2d 167, CCH Bankr L Rptr P 74067, affd (1992) 503 US 638, 118 L Ed 2d 280, 112 S Ct 1644, 92 CDOS 3363, 92 Daily Journal DAR 5260, 22 BCD 1396, 26 CBC2d 487, CCH Bankr L Rptr P 74513A, 6 FLW Fed S 194 (criticized in In re Thompson (2001, BC WD Okla) 263 BR 134) and (criticized in In re Patterson (2002, BC DC Colo) 275 BR 578) and (criticized in In re Lang (2002, BC SD Fla) 276 BR 716, 48 CBC2d 1291, 15 FLW Fed B 143) and (criticized in Novak v Woodin (In re Woodin) (2003, BC DC Conn) 294 BR 436, 50 CBC2d 1109) and (criticized in In re Sacred Heart Hosp. (1995, BC ED Pa) 186 BR 891).

Estate of Chapter 7 debtor, who died shortly after filing petition, is entitled to claim of home-stead exemption under California law, despite trustee's contention that it is inequitable to permit de-ceased debtor, who is no longer in need of fresh start, to discharge his debts and pass on his exempt assets free from those debts to his beneficiaries, where debtor's right to claim homestead exemption is generally fixed upon petition date. In re Combs (1994, BC ND Cal) 166 BR 417.

Parties' contentions as to whether or not Chapter 7 debtor resided at condominium on date homeowners association's judgment lien attached are irrelevant in determining whether debtor is entitled to claimed homestead exemption, where nature and extent of debtor's exemption rights are determined as of date of petition. In re Bruton (1994, BC SD Cal) 167 BR 923, 25 BCD 1201.

Property must be characterized for purposes of determining and obtaining bankruptcy exemp-tions as of date of bankruptcy petition, and not on eventual exemption filing date; accordingly, Chapter 7 debtors were not entitled to exempt Nebraska property as homestead under Virginia opt-out provisions where their first filing of homestead deed was in wrong county and thus of no legal effect and their second filing of homestead deed was made after postpetition foreclosure sale of homestead. In re Heater (1995, BC ED Va) 189 BR 629.

Where involuntary Chapter 7 petition was filed against debtor, debtor was entitled to claim homestead exemption under Mass. Gen. Laws ch. 188, § 1 after date of involuntary petition because exemption was claimed before order of relief was entered. In re Gaudreault (2004, BC DC Mass) 315 BR 1.

Debtors were not entitled to homestead exemption for their cabin in Idaho because, while they intended to make cabin their permanent home, at time they filed for bankruptcy their domicile was in Utah; thus, under 11 USCS § 522(b)(2)(A), because debtors were domiciled in Utah, they could not claim Idaho homestead exemption. In re Kline (2005, BC DC Idaho) 350 BR 497.

Chapter 7 debtors could not claim exemption to federal tax refund that was applied prepetition, pursuant to 31 USCS § 3720A, to mortgage obligation that debtors owed to U.S. Department of Ag-riculture because setoff was authorized and complete before petition was filed. Harrison v United States Dep't of Agric. Rural Dev. (In re Harrison) (2008, BC WD Ky) 383 BR 398.

50. Converted cases

Page 114 11 USCS § 522

Debtors' farmland became property of estate upon their filing of Chapter 11 petition and land remained property of estate after conversion of case to Chapter 7 without confirmation of reorgani-zation plan; redemption rights that attached to farmland postpetition are property of estate pursuant to 11 USCS § 541(a)(6) as are rental proceeds stemming from those redemption rights; however, 11 USCS § 522(b)(2)(A) does not permit debtors to withdraw postpetition, postconversion farmland rental proceeds from property of estate as exempt property because debtors had no right to rental proceeds under state redemption law at either date of Chapter 11 filing or date of conversion to Chapter 7, regardless of which date controls exemption eligibility, where foreclosure sale took place after Chapter 11 filing and conversion to Chapter 7 and redemption right did not arise until that time; although debtors could properly amend their schedule of exemption, that does not require that newly claimed exemption in rental proceeds be allowed. In re Harris (1989, CA8 ND) 886 F2d 1011, 19 BCD 1415, 21 CBC2d 849, CCH Bankr L Rptr P 73162.

Law in effect on original filing date, rather than law in effect as of date of conversion from Chapter 13 to Chapter 7 determines whether exemption will be available where law, rather than facts, has changed between filing and conversion. In re Marcus (1993, CA10 Colo) 1 F3d 1050, CCH Bankr L Rptr P 75379.

Pursuant to 11 USCS § 522, Chapter 7 debtor is entitled to exempt real property acquired subse-quent to Chapter 13 filing and prior to conversion to Chapter 7, where property qualified as home-stead property as of date of conversion of case and there has been no objection that property does not qualify as debtor's homestead. In re Bartlett (1992, BC WD Tex) 149 BR 446 (superseded by statute as stated in In re Zamora (2002, BC WD Tex) 274 BR 268).

Where debtor converted his Chapter 13 case to case under Chapter 7 after his plan had been confirmed, his home was not entitled to protection afforded by 11 USCS § 522(c) because it had not been exempted from bankruptcy estate by operation of § 522(l), but rather had been removed through confirmation process. In re Brown (2007, BC WD Mich) 375 BR 362.

C.Amendment of Claimed Exemptions 51. Generally

Debtors cannot amend list of claimed exemptions under 11 USCS § 522(b)(1) where debtors' original claim was minimal in attempt to conceal assets, because to allow amendment upon discov-ery would inflict no punishment on dishonest debtors. Payne v Wood (1985, CA7 Ill) 775 F2d 202, 13 BCD 991, 13 CBC2d 1047, CCH Bankr L Rptr P 70808, cert den (1986) 475 US 1085, 89 L Ed 2d 722, 106 S Ct 1466.

Bankruptcy Court did not err in denying creditor's objection to admission of homestead evi-dence at time of bankruptcy hearing and in motion to strike, or trustee's similar motion asserting that debtor neglected to plead entitlement to 200-acre homestead properly where Bankruptcy Court took judicial notice of fact that debtor claimed 200-acre rural homestead exemption, and even assuming that debtor's pleadings were deficient, court was empowered to allow amendment of pleadings in-stanter as long as creditor was not prejudiced by amendment under FRCP 15(b), made applicable to bankruptcy proceedings by Bankruptcy Rule 7015. In re Hill (1992, CA5 Tex) 972 F2d 116.

Chapter 11 debtor may be denied privilege of amending list of exempt assets under 11 USCS § 522 where debtor has acted in bad faith, where party in interest may be prejudiced, and where ex-ceptional circumstances so warrant; amendment will not be denied where there was mere misunder-standing as to number of cattle debtor represented he owned at time of filing of petition. In re Fal-coner (1987, WD Mich) 79 BR 283.

Page 115 11 USCS § 522

As matter of course debtor should be allowed to amend his exemption claims under 11 USCS § 522 and Bankruptcy Rule 1019 to include newly found property if case has not been closed; then any interested party can object to exemption amendment within 15 days from date amendment is filed; if someone does object, court is to hold hearing on notice to all interested parties in order to resolve issues raised on objections; if no one objects, amended exemption is allowed. Armstrong v Hursman (1988, DC ND) 106 BR 625, 19 BCD 1495.

Permission to amend schedule of exemptions, though matter of discretion which, generally, ought to be exercised liberally in favor of debtor, should be granted only when administration of estate would not be prejudiced; it is not in interests of orderly administration to permit amendment to schedule to increase claimed exemption for real estate where trustee has sold real estate and where increase in exemption would decrease trustee's compensation. In re Keenum (1980, BC ED Mo) 1 BAMSL 133.

Although legislative history of Bankruptcy Code mandates that there be some leeway to amend exemption claims, final election should be made by or before time that others can be hurt in relation to their reliance upon position taken by debtor and, when proper claim of exemption under either state or federal law becomes final by not being amended or objected to for 15 days, or, if there is objection, when order eventually becomes final, there can be no change; debtors who originally claim exemption under state law and who seek to amend claim of exemption pursuant to federal statutes after original claim has become final may not amend claim; debtors whose amendment to claim exemption under federal law is timely will be allowed amendment unless trustee's objections to amended claim of exemption are meritorious and timely; debtors whose exemptions were errone-ously claimed under both state and federal law will be permitted to amend, since claims cannot be-come final, and amendment not only can be made, but must be made, to correctly make election. In re Cobb (1980, BC ND Cal) 3 BR 150, 6 BCD 9, 1 CBC2d 540.

Bankruptcy Court should exercise equitable powers and allow amendment to debtor's claim of exemptions when exemption was not claimed by reason of excusable neglect, such as failure due to negligence, mistake, or lack of knowledge of bankruptcy procedures by debtor's attorney; however allowance should be conditioned upon paying from sources other than exempt property to trustee for any out of pocket costs to him by reason of late claim of exemption. In re Boyer (1981, BC DC Idaho) 7 BR 930, 7 BCD 88.

Under 11 USCS § 522(b)(2)(B), debtor may amend his election of exemptions to that under state law, in order to exempt property held as tenants by entirety where no party in interest has alleged change in position or that it has been harmed because of reliance on debtor's original election of federal exemptions. In re Buck (1982, BC DC Hawaii) 17 BR 168, 5 CBC2d 1349.

Standards for allowance of amendments to exemption schedules have been clearly articulated as 4-part test: (1) will adverse party's rights be prejudiced if amendment is allowed, (2) will not allow-ing amendment cause undue hardship to debtor who has acted in good faith, (3) is there reasonable excuse for not claiming exemption on original schedule, and (4) is there reasonable excuse for any delay in seeking amendment. In re Kochell (1982, BC WD Wis) 23 BR 191, 7 CBC2d 613.

Amendments to debtors' list of property claimed as exempt which are filed for purpose of claim-ing exemption in property known to exist at time of debtor's petition filing is barred by granting of debtor's discharge. In re Elliott (1983, BC SD Ohio) 31 BR 33, CCH Bankr L Rptr P 69255.

Page 116 11 USCS § 522

Upon objection by trustee in bankruptcy, allowance of amended exemption depends on whether there is showing of bad faith by debtor or prejudice to creditors; absent showing of bad faith or prejudice, and provided case is still open, allowable exemption should be allowed no matter when it is claimed. In re Sheridan (1983, BC DC Vt) 38 BR 52.

Debtors may not amend schedules to claim homestead exemption under 11 USCS § 522 when no declaration of homestead was filed as of petition date because debtors did not have valid home-stead exemption under state law on petition date. Martinson v Michael (In re Michael) (1995, BC DC Mont) 183 BR 230.

Where: trustee objected to debtor's claimed federal exemption in Roth IRA under 11 USCS § 522(d)(10)(E), debtors defended and in alternative requested leave to amend Schedule C to claim state exemption, and bankruptcy court sustained objection on its merits but granted leave to amend without prejudice, all in same proceeding, debtors were already precluded by res judicata from as-serting theory of state exemption by their failure to actually assert it in earlier proceeding; debtors did not need leave to amend under Rule 1009(a). In re Walls (2000, BC DC Minn) 249 BR 506.

Exemption should be allowed under 11 USCS § 522 no matter when it is claimed absent show-ing of bad faith by debtor or prejudice to creditors and turnover should not be denied on grounds of delay where there is no evidence of bad faith, and at most negligent act, or prejudice to creditors. In re Andermahr (1983, BAP9 Cal) 30 BR 532, 10 BCD 917, 8 CBC2d 1316, CCH Bankr L Rptr P 69267.

Where bankruptcy debtors listed their home as having $ 80,000 value, yet, among other things, they rejected offer to purchase it "as is" for $ 150,000, bankruptcy court did not err in finding that debtors acted in bad faith, and debtors were not entitled to amend their exemptions due to their bad faith. Bauer v Iannacone (In re Bauer) (2003, BAP8) 298 BR 353, 41 BCD 255, CCH Bankr L Rptr P 78918.

52. Timeliness

Debtor is allowed to amend his exemption claims to include newly found property, before case is closed. Redmond v Tuttle (1983, CA10 Kan) 698 F2d 414, 10 BCD 116, 8 CBC2d 1183, CCH Bankr L Rptr P 69036.

Debtor may amend schedules to add exempt property under Bankruptcy Rule 1009 as matter of course at any time before bankruptcy case is closed; Bankruptcy Rule 1009 is not inconsistent with 11 USCS § 522(d) and proposal exemptions are still subject to objection by party in interest. Lucius v McLemore (1984, CA6 Tenn) 741 F2d 125, 12 BCD 847, 11 CBC2d 296, CCH Bankr L Rptr P 69974.

Debtor may amend his filed schedules to add to list of property exempted from bankruptcy pro-ceedings, as matter of course at any time prior to close of case; courts may refuse to allow amend-ment if debtor has acted in bad faith or where property has been concealed. Lucius v McLemore (1984, CA6 Tenn) 741 F2d 125, 12 BCD 847, 11 CBC2d 296, CCH Bankr L Rptr P 69974.

After passage of substantial amount of time and action by trustee in bankruptcy settling rights of creditors, it is to late for bankrupt to amend his schedules to assert exemptions under federal law as distinguished from exemptions under state law. In re Brewer (1982, MD Tenn) 22 BR 983.

Debtor's choice of exemptions between those provided by state of debtor's domicile and those provided under federal exemptions is mutually exclusive, and Bankruptcy Court will not permit

Page 117 11 USCS § 522

debtor to amend exemption schedules in order to claim federal exemptions once period fixed by Rule 4004 for amendment or objection to exemptions has passed, and party has sought affirmative relief based upon determination of exemptions based upon debtor's election. In re Lyon (1980, BC DC Kan) 6 BCD 343, 2 CBC2d 561.

Schedules may be amended as matter of course at any time before case is closed. In re McQueen (1982, BC DC Vt) 21 BR 736.

Debtor's motion to amend her exemption claim is granted even though motion was made outside 15 days after meeting of creditors where debtor promptly filed second motion to amend her exemp-tion schedule and to reallocate her disallowed exemption, where no interested party has demon-strated detrimental reliance on debtor's original exemption schedule, where trustee has not objected, and where debtor's misperception concerning legitimacy of original exemption was reasonable. In re Rhoten (1983, BC MD Tenn) 27 BR 494.

Debtor has right to amend schedule of exempt property after time for claiming exemptions un-der former Bankruptcy Rules 403(a) and 108(b) has expired; debtors should be allowed to amend their schedules at any time prior to closing of case, subject to objections by any party which is ad-versely affected by amendment; where no party in interest has objected, debtors' exemption sched-ule as amended should be allowed. In re McDonald (1983, BC DC SC) 34 BR 842.

Although debtor may choose only one of exemption options offered by 11 USCS § 522(b), debtor may amend schedule of claimed exempt property to reflect different exemption election un-der § 522(b); amendment may be made on notice at any time prior to closing of case. In re Van Nostrand (1995, BC DC NJ) 183 BR 82, 33 CBC2d 1673.

Chapter 7 debtors could not amend their exemptions under 11 USCS § 522(b) to add new ex-emption of previously scheduled property, after their case was closed, and then move to avoid prepetition judgment lien against that property pursuant to § 522(f)(1) on grounds that judgment lien impairs new exemption. In re Oster (2003, BC ED Cal) 293 BR 242, 50 CBC2d 785 (criticized in Goswami v MTC Distrib. (In re Goswami) (2003, BAP9) 304 BR 386).

Fed. R. Bankr. P. 1009 prevented debtors from reopening their bankruptcy case under 11 USCS § 350 in order to amend their claimed exemptions to avoid judicial lien because amendment was limited until case was closed, equity in property was not required to claim exemptions and could not be used to circumvent limitations of Fed. R. Bankr. P. 1009, and once case was closed there was no estate on which exemptions could be claimed under 11 USCS 522(f). In re Barlett (2005, BC ND Ind) 326 BR 436.

Chapter 7 Trustee suffered prejudice and exemption was disallowed where debtor did not amend her schedule to claim exemption in real property held by entireties until 18 months after she filed her case and Trustee moved for summary judgment in adversary proceeding seeking to avoid mort-gage on real property as preferential transfer; because debtor initially chose 11 USCS § 522(d)(1) exemption, only $ 11,000 of equity in property was exempt, property came into estate for benefit of all creditors, and mortgage was avoided as preference. Shapiro v First Franklin Fin. Corp. (In re Rechis) (2006, BC ED Mich) 339 BR 643.

53. Payment of fees

Where debtors failed to assert homestead exemption due to gross negligence and carelessness on counsel's part, debtors will be allowed to amend claim to assert exemption only on condition debt-

Page 118 11 USCS § 522

ors' counsel remits from personal funds moneys to trustee as payment of fees, costs and expenses including attorney's fees occasioned by negligence of debtors' counsel and debtors' counsel shall further remit from personal funds moneys to trustee to make payment on mortgage, which payment would have been made from proceeds of trustee's sale but for actions of debtors' counsel and finally, debtors' counsel shall also refund to debtors a portion of fee he has received from them. In re John-son (1983, MD Tenn) 30 BR 467.

Debtor will be required to pay $ 50 toward cost of administration, as condition to being allowed to amend exemption schedules to claim exemptions under federal, rather than state law, so that trus-tee will be reimbursed for cost of objecting to exemptions which were improper as originally claimed under state law. In re Mertsching (1980, BC DC Idaho) 4 BR 519, 6 BCD 445, 2 CBC2d 301.

Debtor is entitled to amend exemption claim where there is no showing any third party will be prejudiced by amendment; since 11 USCS § 522 provides trustee can receive no fee out of exempt property, trustee would suffer financial loss in case where there are no other assets available for liq-uidation, if debtor were permitted to amend exemption claims, and such amendment will be allowed only upon payment from sources other than exempt property to trustee for any out of pocket costs to him by reason of late claim of exemption. In re Boyer (1981, BC DC Idaho) 7 BR 930, 7 BCD 88.

54. Particular amendments

Debtors' list of Illinois exemptions under 11 USCS § 522(b)(1) does not contain enough infor-mation to put trustee on notice that further investigation is warranted; where original list showed only a few old appliances and one new TV, debtors will not be allowed to amend list to add newly discovered assets to exempt categories; rather, debtors are limited to values in categories originally claimed, except for clothing category, which, under state law, has no ceiling on exemption value. Payne v Wood (1985, CA7 Ill) 775 F2d 202, 13 BCD 991, 13 CBC2d 1047, CCH Bankr L Rptr P 70808, cert den (1986) 475 US 1085, 89 L Ed 2d 722, 106 S Ct 1466.

Unlike Chapter 13 case, where case is converted from Chapter 11 to Chapter 7, exemptions are determined from date of Chapter 11 filing, under 11 USCS § 348(a) and 11 USCS § 522(b)(2)(A); thus debtor is entitled to make post-conversion claim of homestead exemption in full amount on date of Chapter 11 filing, not just on remaining 2 acres held as of Chapter 7 filing. In re Williamson (1986, CA5 Miss) 804 F2d 1355, 15 CBC2d 1225, CCH Bankr L Rptr P 71523.

Debtors should be permitted to amend their exemption schedules under 11 USCS § 522 to claim exemption in homestead on grounds of excusable neglect, even though carelessness or negligence of debtors' counsel is not normally itself excusable neglect, balance of factors leading to this con-clusion where gross negligence and carelessness on counsel's part in failing to assert homestead ex-emption will force debtors to suffer loss of home absent an amendment. In re Johnson (1983, MD Tenn) 30 BR 467.

Bankruptcy Court will deny debtor's motion requesting that trustee be directed to pay debtor sum of debtor's 1979 income tax refund where, prior to debtor filing amended schedule of exemp-tions claiming refund as exempt, debtor had received discharge and trustee had filed final report of administration and was no longer administering property of debtor's estate, while creditors who filed proof of claim in response to notice that there would be assets in estate available for distribu-tion to general creditors would be adversely effected. In re Duncan (1980, BC ND Ohio) 7 BR 484.

Page 119 11 USCS § 522

Debtor is not permitted to amend exemption schedules to include silverware where such silver-ware is only asset of estate, where trustee has performed substantial administration upon asset, and where debtor's reason for not originally claiming exemption is shallow. In re Polk (1981, BC ED Mo) 1 BAMSL 417.

Unexplained delay of debtor in not giving trustee any notice of debtor's intention to claim as ex-empt funds which trustee has recovered as preferential transfer until estate is ready for closing, re-sults in obvious prejudice to creditors of estate, and amounts to laches which is sufficient to bar debtor from amending schedules to claim such recovered funds as exempt. In re Taylor (1981, BC DC Dist Col) 8 BR 251, CCH Bankr L Rptr P 67790.

Where debtors did not attempt to amend their claim for exemptions so as to include 4 United States Savings Bonds valued at $ 100 until almost 3 months after they had relinquished possession to trustee they are not entitled to amend schedule and compel trustee to return bonds to them; al-though every claim for exemptions is not necessarily final and binding unless amended or objected to within 15 days of its filing as provided for under Rule 403(c) there is some point in time when trustee is justified in relying upon debtor's claim for exemption and may act accordingly, otherwise diligent performance of trustee and vested rights of unsecured creditors would be prejudiced. In re Houck (1981, BC ED Mich) 9 BR 460, 7 BCD 486, 3 CBC2d 956.

Debtor may amend schedule listing exempt property to include television and videotape re-cording unit, where there was no showing of any adverse effect from allowing debtor to do so, and no party acted in detrimental reliance on original schedule. In re Vest (1982, BC DC NM) 18 BR 241.

Debtor's application to amend 11 USCS § 522(d) schedule of exemptions will be denied where trustee has acted in reliance on exemptions claimed under original schedule, hardship on debtor if amendment is not allowed is not so great as to favor amendment, no excuse for not originally claim-ing exemptions under state law is offered, and requesting amendment 127 days after original sched-ules were filed and 23 days prior to trial on claim for original exemptions is so late in proceeding as to be subject to no reasonable excuse. In re Kochell (1982, BC WD Wis) 23 BR 191, 7 CBC2d 613.

Debtor may amend exemption schedule to add to their exemptions proceeds of lawsuit settle-ment received by debtors after their bankruptcy case was closed where debtors have demonstrated excusable neglect; court found that the trustee had not abandoned interest in settlement proceeds because debtor failed to schedule lawsuit as asset and abandonment occurred only with respect to property listed in debtor's schedule of assets. In re King (1983, BC MD Tenn) 27 BR 754, CCH Bankr L Rptr P 69096.

Debtors are permitted to amend their exemption schedule to claim exemption in garnished funds recoverable as voidable preference even though debtors had already received discharge; exemption laws are generally afforded liberal construction in conjunction with absence of prejudice to any party in interest. In re Button (1983, BC ED Tenn) 29 BR 118, 10 BCD 563, 8 CBC2d 475, CCH Bankr L Rptr P 69147.

Where there is no evidence of bad faith on part of debtor or prejudice to creditors, debtor's claim to exemption of checking account balance will be allowed, even though debtor had originally listed balance of checking account as asset and later sought amendment to include it in schedule of ex-empt property. In re Sheridan (1983, BC DC Vt) 38 BR 52.

Page 120 11 USCS § 522

Debtor would not be allowed to amend schedule to claim exemption in interest in civil service retirement plan where trustee had conducted considerable administration to recover interest for benefit of estate and debtor had used non-exempt assets for personal reasons during pendency of case, and thus allowance of amendment would be prejudicial and unfair to trustee and creditors. In re Patterson (1986, BC ED Mo) 3 BAMSL 1899.

Where Chapter 11 debtors opted to claim exemptions under 11 USCS § 522(b)(1) as set forth in § 522(b)(4), debtors are not entitled to amend their exemptions to those allowed under state law pursuant to § 522(b)(2), over objection of creditor, where debtors have already received greater part of their exemptions under § 522(b)(1) and (4) through completed sale of their home, since such is not insignificant change but one which will dramatically charge distribution of sale proceeds to creditors who might have opposed sale of home and distribution of proceeds to debtors had they known of debtor's ultimate intentions. In re Shaffer (1988, BC ED Pa) 92 BR 632, 21 CBC2d 90.

Chapter 7 debtor may exempt proceeds from originally unscheduled prepetition personal injury claim although debtor first amended his exemptions to list such claim only after trustee had liqui-dated claim where trustee does not assert that debtor acted in bad faith or concealed property or that failure to list claim was intentional, and where there is no prejudice to creditors since notice of commencement of case mailed to creditors stated that this was no-asset case, trustee learned early in case at first meeting of creditors of existence of pending personal injury action, and proceeds from compromise of claim had not been distributed to creditors before debtor amended his exemption schedule; debtor's amended exemption may not be disallowed solely on ground that trustee relied upon original exemption schedule in administering estate; trustee is allowed reasonable compensa-tion and expenses for his efforts in liquidating debtor's personal injury action. In re Fournier (1994, BC DC Conn) 169 BR 282, CCH Bankr L Rptr P 76033.

Debtor/grantee's post-delivery alteration of deed by adding language "as tenants by the entirety with right of survivorship as at common law" had no effect on type of estate conveyed so that debtor and his wife did not, under Virginia law, own property by right of entireties, with result that it was not exempt under 11 USCS § 522(b)(2)(B). In re Scialdone (1995, BC ED Va) 197 BR 225.

Failure of debtor to disclose his personal injury claim until case was converted from Chapter 13 and Chapter 7 trustee stated in his opening remarks at creditors' meeting that debtors were obligated to disclose all assets and might lose their exemption rights or have their discharge denied or revoked if they failed to do so constituted bad faith, and debtor would not be allowed to amend exemptions schedule to assert exemption for lawsuit. In re Lundy (1998, BC ED Mich) 216 BR 609, 39 CBC2d 629.

Two months after filing bankruptcy, debtors received offer to sell their home for $ 150,000, which was summarily rejected as too low; and since debtors initially stated value was $ 80,000, when they claimed exemption of $ 0 under 11 USCS § 522(d)(1), amended homestead exemption was disallowed. In re Bauer (2003, BC DC Minn) 291 BR 127, 40 BCD 265, affd (2003, BAP8) 298 BR 353, 41 BCD 255, CCH Bankr L Rptr P 78918.

Where debtors sabotaged Chapter 7 bankruptcy trustee's efforts to sell their house by posting appraisals, list of defects, and crime statistics in order to chill offers from prospective buyers, debt-ors' amendment, on eve of sale of house, to increase exemption under California law was in bad faith and trustee's objection to amended exemption under 11 USCS § 522(l) was sustained due to debtors' bad faith; debtors' scorched earth policy showed that they had not complied with their du-

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ties under 11 USCS 521(3) of cooperating with trustee in administration of estate. In re Rolland (2004, BC CD Cal) 317 BR 402.

When debtors sought to claim their "wild card" exemption under 11 USCS § 522(d)(5) in pro-ceeds of sale of certain real estate, court determined that only way for them to specifically claim asset of estate was to file amendment to Schedule C under Fed. R. Bankr. P. 1009 within next 30 days. In re Goucher (2007, BC MD Pa) 378 BR 445.

Where debtor had attempted to claim as exempt payments that she received under policy of dis-ability insurance under Minn. Stat. § 550.39, but bankruptcy court sustained Chapter 7 Trustee's ob-jection, holding that statute violated Minn. Const. art. I, § 12, debtor's amended exemption claiming that payments were exempt under different statute, Minn. Stat. § 550.37, subd. 24, debtor's amend-ment was not made in bad faith; bad faith in context of amending exemption required concerted in-tent to delay, frustrate, or prevent bankruptcy estate from realizing value of subject assets; this was not shown in instant case. In re Reiland (2008, BC DC Minn) 382 BR 779.

Where debtor, in her claim to exempt payments that she received under policy of disability in-surance, had listed value of asset as "unknown," failure to specify value did not invalidate claim of exemption; given that total value would have been based on projected length of term of disability--actuarially determined, medically predicted, or otherwise--for reduction to present value, given complexities of asset, requiring debtor to do so for initial bankruptcy schedule would have been un-fairly burdensome. In re Reiland (2008, BC DC Minn) 382 BR 779.

D.Objections

1.Generally 55. Generally

Absent timely filed objection under Bankruptcy Rule 4003 within 30 days after creditors' meet-ing or filing of amendment to exemption list, property claimed by debtor as exempt under 11 USCS § 522 is exempt, and no provision of Code provides that failure to object is excused where debtor's exemption claim is not advanced in good faith or where claimed exemption has only questionable basis; in present case, proceeds from settlement of tort action are exempt, where debtor claimed them as exempt and trustee never filed timely objection, even though trustee notified debtor's coun-sel through correspondence that settlement proceeds were property of estate. Taylor v Freeland & Kronz (1991, CA3 Pa) 938 F2d 420, 22 BCD 633, 25 CBC2d 167, CCH Bankr L Rptr P 74067, affd (1992) 503 US 638, 118 L Ed 2d 280, 112 S Ct 1644, 92 CDOS 3363, 92 Daily Journal DAR 5260, 22 BCD 1396, 26 CBC2d 487, CCH Bankr L Rptr P 74513A, 6 FLW Fed S 194 (criticized in In re Thompson (2001, BC WD Okla) 263 BR 134) and (criticized in In re Patterson (2002, BC DC Colo) 275 BR 578) and (criticized in In re Lang (2002, BC SD Fla) 276 BR 716, 48 CBC2d 1291, 15 FLW Fed B 143) and (criticized in Novak v Woodin (In re Woodin) (2003, BC DC Conn) 294 BR 436, 50 CBC2d 1109) and (criticized in In re Sacred Heart Hosp. (1995, BC ED Pa) 186 BR 891).

Unless there is timely objection from party in interest, any property claimed as exempt by debtor, regardless of whether claimed exemption is valid, is automatically exempt under 11 USCS § 522. In re Hyman (1992, CA9) 967 F2d 1316, 92 CDOS 5323, 92 Daily Journal DAR 8504, 23 BCD 153, CCH Bankr L Rptr P 74706.

When trustee believed that claimed exemption under 11 USCS § 522(d)(5) was proper, there was no need for her to object to debtors' valuation of property in manner prescribed by Fed. R. Bankr. P. 4003(b). Lewandowski v Lim (In re Lewandowski) (2008, ED Mich) 386 BR 643.

Page 122 11 USCS § 522

Timely raised objections to Chapter 7 debtors' claimed exemptions on ground that property con-stituted partnership property rather than personal property of debtors renders it unnecessary for creditors to renew objection when same items are claimed exempt under amendments. In re Indvik (1990, BC ND Iowa) 118 BR 993, 23 CBC2d 948.

Settlement of creditor's objection to Chapter 11 debtors' claimed exemptions cannot be approved under Bankruptcy Rule 9019 where creditor has undertaken obligation to prosecute objections to debtors' claimed exemptions on behalf of general creditor body, but having done so, it seeks to compromise that litigation in return for $ 1750,000 payment to itself alone; creditor objecting to ex-emption does so for benefit of all creditors and it should not be permitted to abdicate responsibilities to creditors that are similar to trustee's, by sacrificing potential benefits it might win for general creditor body in order to obtain private benefit solely for itself; furthermore, settlement fails best interest of estate test because there is absolutely no correspondence between what is being given in connection with settlement and what might be received if objections to debtors' claimed exemptions are fully litigated. In re Krizmanich (1992, BC ND Ind) 139 BR 456, 22 BCD 1374.

56. Standing to object

Trustee is proper party in interest under 11 USCS § 522(l) to file objections to household ex-emptions claimed by debtors where, in objecting to claim exemptions, trustee was not using avoid-ing powers of 11 USCS § 544, but was acting as representative of state under 11 USCS § 323, with capacity to sue and be sued and trustee's duty to collect property of state inevitably involved deter-mining what property is exempt. First Nat. First Nat'l Bank v Norris (1983, CA11 Ala) 701 F2d 902, 10 BCD 473, 8 CBC2d 1078 (criticized in In re Betz (2002, BC DC Mass) 273 BR 313).

Trustee, as designated representative of Chapter 7 estate, 11 USCS § 323(a), is party in interest" entitled to oppose exemption claims under 11 USCS § 522(l); to extent there are joint creditors, on proper objection by party in interest, entireties exemption claim would be invalid ab initio. Edmon-ston v Murphy (In re Edmonston) (1997, CA1 Mass) 107 F3d 74, 37 CBC2d 780, CCH Bankr L Rptr P 77303.

Although creditor legally possessed claim having bought claim of debtors' former attorney, and therefore is legally entitled to object to debtors' claims of exempt property, creditors' bad faith in obtaining to claim and filing objection merely to gain advantage in state court litigation results in claim being disallowed and thus creditor is not party in interest entitled to object under 11 USCS § 522(1). In re Keyworth (1985, DC Colo) 47 BR 966, 12 BCD 1137, CCH Bankr L Rptr P 70314.

State is party of interest and has standing to object to claim of exempt property since question of what is or what is not exempt property is inextricably interwoven with duties of trustee to collect property of estate. In re Brooks (1981, BC SD Ohio) 12 BR 22, CCH Bankr L Rptr P 68230 (super-seded by statute as stated in In re Lester (1992, SD Ohio) 141 BR 157).

As administrative claimant who received award of compensation after conversion to chapter 13, former chapter 7 trustee had necessary financial interest to be considered party in interest under 11 USCS § 522(l) and thus had standing to object to debtors' claimed exemptions. In re Barnes (2002, BC ED Cal) 275 BR 889 (criticized in In re Greenfield (2003, BC SD Cal) 289 BR 146).

Chapter 7 trustee could continue to object to debtor's claimed homestead exemption even though matter had been converted from Chapter 7 proceeding to Chapter 13 proceeding because trustee was

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creditor of estate and case could potentially be converted back to Chapter 7 proceeding at some point. In re Landahl (2006, BC MD Fla) 338 BR 920.

Chapter 7 trustee did not have authority to object to debtors' claimed exemption in their home-stead on behalf of domestic support obligation (DSO) creditors scheduled in proceedings; if DSO creditors sought to collect amounts owed to them, they needed to do so on their own behalf. In re Duggan (2007, BC MD Fla) 21 FLW Fed B 14.

In context of 11 USCS § 522(l) and Fed. R. Bankr. P. 4003(b), "party in interest" is person enti-tled by law to enforce substantive right. In re Tofani (2007, BC DC Mass) 365 BR 338.

Trustee has standing to object to debtor's claim of exemptions. Moss v Block (In re Moss) (2001, BAP8) 266 BR 697, affd (2002, CA8) 289 F3d 540, 39 BCD 144.

In 11 USCS § 522 matter, Chapter 13 debtors had standing to exercise trustee avoiding powers for benefit of estate. Houston v Eiler (In re Cohen) (2004, BAP9) 305 BR 886, 52 CBC2d 737, 53 UCCRS2d 148 (criticized in Gilliam v Bank of Am. Mortgage, L.L.C. (In re Gilliam) (2004, BC DC Kan) 52 CBC2d 1735).

57. Sufficiency of objection

Trustee objected properly to claimed homestead exemption under 11 USCS § 522(l) where, al-though trustee did not specifically claim that debtors had overstated their homestead exemption, trustee did object to undervaluation of homestead property and requested further relief as court deemed just and proper; where objection to claim exemption is filed trustee should be able to raise any arguable ground, even if it was not specifically set forth in objection. First Nat'l Bank v Norris (1983, CA11 Ala) 701 F2d 902, 10 BCD 473, 8 CBC2d 1078 (criticized in In re Betz (2002, BC DC Mass) 273 BR 313).

Trustee's application for appraisal of property debtors claim as exempt, although termed mere request for clarification of statutory provisions governing value of exemptions, is in fact objection to exemption claim, which, to be timely, must be filed within 15 day limit applicable to objections to exemption claim which could have been made on basis of information reflected in debtors' schedules, as provided by former Rule 403, and such application is barred were not brought within such time limit. In re Walsh (1980, BC DC Dist Col) 5 BR 239, 6 BCD 793, 2 CBC2d 815, CCH Bankr L Rptr P 67970 (criticized in In re Richardson (2001, BC SD Ala) 280 BR 717).

Trustee's objection to debtor's homestead exemption is not timely filed where filing occurred af-ter bar date set in notice to creditors and where trustee did not apply for extension of time; objection on minute report is not appropriate procedure for perfecting formal objection to exemption; trustee must make application to court and request hearing on issue so that final determination regarding exemption can be entered. In re Thomas (1983, BC SD NY) 27 BR 367.

Chapter 7 trustee's unadorned statement that Ohio exemption statute was inapplicable to IRA's claimed as exempt was not sufficient to rebut presumption of prima facie validity in absence of fur-ther detail; in view of fact that over $ 300,000 was at issue, court would grant trustee 30 days to file amended objection providing clear and detailed factual basis for challenge to exemption claims, ex-cept as to one account to which trustee was time-barred from objecting. In re Long (2001, BC SD Ohio) 260 BR 859.

Chapter 7 trustee's motion for order requiring debtor to turn over federal and state income tax refunds adequately provided debtor with written and timely notice, for purposes of Fed. R. Bankr.

Page 124 11 USCS § 522

P. 4003(b), of trustee's intent to object to her claimed exemption of EIC and was construed as objec-tion to claimed exemption. In re Tatum-Charlemagne (2006, BC ND Ohio) 368 BR 654.

58. Procedure to object

Since court has ruled that creditor on joint debt can proceed against entireties property owned by debtor and nondebtor spouse, and claimed as exempt by debtor, proper procedure is to file objection under Bankruptcy Rule 4003 to claim of exemption under 11 USCS § 522 rather than seek lift of stay to pursue remedy in state court, and since proper procedure was uncertain, creditor's motion to lift stay will be considered timely filing of objection. In re Grosslight (1985, CA6 Mich) 757 F2d 773, 12 CBC2d 525, CCH Bankr L Rptr P 70332.

District court did not err in reversing bankruptcy court's decision admitting into evidence bank records of debtors' undisclosed account where bankruptcy trustee filed supplemental declaration at-taching bank account records of which trustee's attorney had no personal knowledge with respect to authenticity of records as required under Fed. R. Evid. 602; declaration by trustee's attorney did not satisfy Fed. R. Evid. 803(6) because requisite testimony was required to come from custodian of record or other qualified witness, and attorney's declaration did not constitute proper certification because it did not provide written notice or opportunity to challenge declaration as required by Fed. R. Evid. 902(11). Latman v Burdette (2004, CA9 Wash) 366 F3d 774, 52 CBC2d 639, CCH Bankr L Rptr P 80087, amd (2004, CA9 Wash) 2004 US App LEXIS 11231 and reprinted as amd (2004, CA9 Wash) 2004 US App LEXIS 11212.

Because Arizona homestead provision, Ariz. Rev. Stat. § 33-1101(C), unequivocally required debtors to reinvest proceeds from sale of their home in new homestead within 18 months in order to maintain exempt status, debtors could not have reasonably relied on Trustee's failure to provide no-tice that she had continued interest in proceeds as indication of permanent exemption. Gaughan v Smith (In re Smith) (2006, BAP9) 342 BR 801.

59. Notice

District Court did not err in finding that trustee's letters to Chapter 7 debtors, informing them that he was contemplating filing preferential and fraudulent transfer actions against them arising from their construction of home on premises owned by debtor husband's father, and informing them that they should file homestead declaration if they intended to claim residence as their homestead and that adversary proceeding seeking to recover value of house under either 11 USCS § 542 or 363 did not give debtors sufficient notice of trustee's intention to object to claimed homestead which would preclude dismissal of objection on timeliness grounds under Bankruptcy Rule 4003, because there is nothing in complaint or correspondence that would put debtors on notice that trustee ob-jected to their claimed homestead. In re Peterson (1990, CA8 Minn) 920 F2d 1389, 21 BCD 186, 24 CBC2d 525, CCH Bankr L Rptr P 73756.

Creditor's motion for relief from stay filed prior to first meeting of creditors operates as timely objection to claim of exemptions even though creditor did not file objection to claim of exemptions within time limit established by Bankruptcy Rule 4003(b) because: (1) debtor received actual notice of creditor's objection; (2) debtor has not been prejudiced; (3) steps taken were sufficient to bring issue before court in timely manner, with sufficient notice to interested parties; thus, creditor's ac-tion satisfies intent of Bankruptcy Rule 4003 that exemption questions be resolved early in bank-ruptcy proceedings. In re Starns (1985, SD Tex) 52 BR 405, 13 CBC2d 853.

Page 125 11 USCS § 522

Although "actual notice" may be substituted for formal objection to debtor's claimed exemption, that notice should at least be timely under Bankruptcy Rule 4003. In re Velis (1989, BC DC NJ) 109 BR 64, affd (1991, DC NJ) 123 BR 497, 21 BCD 591, affd in part and revd in part on other grounds (1991, CA3 NJ) 949 F2d 78, 22 BCD 414, 25 CBC2d 1362, 14 EBC 1922, CCH Bankr L Rptr P 74329, reh den (1991, CA3) 1991 US App LEXIS 30075 and (criticized in Reitmeyer v Gralka (In re Gralka) (1997, BC WD Pa) 204 BR 184, 37 CBC2d 490, CCH Bankr L Rptr P 77301).

Ohio Rev. Code Ann. § 2329.66(A)(12)(c) would ordinarily allow Ohio resident that was debtor in Chapter 7 bankruptcy to claim exemption of up to $ 5,000 for personal injury settlement, but debtor's claimed exemption under 11 USCS § 522(b)(2) was disallowed when trustee showed that debtor acted in bad faith in reporting personal injury settlement and other assets as part of her estate. In re Robinson (2003, BC SD Ohio) 292 BR 599.

Pursuant to interim Fed. R. Bankr. P. 4003(b), trustee's objection to debtor's claim of exemp-tions must be delivered or mailed to debtors and debtor's attorney within same 30-day period as re-quirement for filing; where trustee's objection is not delivered or mailed to appropriate parties within 30 days after first meeting of creditors has concluded, trustee's objection to debtors' claim of exemptions will be dismissed, and trustee will be barred from contesting validity of exemptions claimed under 11 USCS § 522; thus, trustee's objection was dismissed because although he had filed objection with court within 30 days after first creditor's meeting had concluded, as required under interim Fed. R. Bankr. P. 4003(b), trustee waited until 87 days after meeting to mail copy of objec-tion to debtors' attorney. In re Bush (2006, BC ED Wash) 346 BR 523.

60. Burden of proof

Debtor cannot premise objection to allowance of only half of homestead exemption on 11 USCS § 522(m) because section applies only to "joint case" and debtor's spouse and joint tenant is not also filing petition. In re Robinson (1984, DC Colo) 44 BR 292.

Under 11 USCS § 522, claimed exemption enjoys presumption of validity, and trustee has bur-den of challenging claim and burden of proof. In re Crump (1980, BC SD Fla) 2 BR 222, 5 BCD 1235, 1 CBC2d 378, CCH Bankr L Rptr P 67444.

Burden of proof is on objecting creditors, pursuant to Bankruptcy Rule 4003(c), to show that items initially claimed exempt by Chapter 7 debtors are partnership property. In re Indvik (1990, BC ND Iowa) 118 BR 993, 23 CBC2d 948.

Under Rule 4003, thirty-day period for objecting to exemptions commences at conclusion of "first" first meeting of creditors and not at conclusion of any subsequent meetings that may be held as consequence of conversion of case from one chapter to another; therefore, convening of subse-quent meeting of creditors following conversion of debtor's case from Chapter 13 to Chapter 11 did not trigger new thirty-day period for objecting to exemptions; this conclusion is bolstered by self-executing language of 11 USCS § 522(l). In re Page (1999, BC WD Mich) 240 BR 548, 42 CBC2d 2013, CCH Bankr L Rptr P 78027 (criticized in In re Mims (2000, BC DC NJ) 249 BR 378) and (criticized in Thurmond v Copeland (In re Copeland) (2004, BC ND Ga) 2004 Bankr LEXIS 1828).

As party objecting to Chapter 7 debtors' claim of exemption, trustee has burden of proving that exemption is improper. Shelley v Kendall (In re Shelley) (1995, BAP9 Cal) 184 BR 356, 95 CDOS

Page 126 11 USCS § 522

5654, 95 Daily Journal DAR 9605, adopted, affd (1997, CA9) 110 F3d 68, reported at (1997, CA9) 109 F3d 639, 97 CDOS 2162, 97 Daily Journal DAR 4007.

61. Miscellaneous

Election of remedies doctrine did not bar bankruptcy trustee from further seeking to surcharge debtors' wild card exemption of 11 USCS § 522(d)(5) based on trustee's previous election under 11 USCS § 727(a) to seek denial of discharge for misconduct because denial of discharge and subse-quent surcharge were not repugnant and inconsistent remedies; trustee sought to deny discharge based on her view that debtors had made material false statements on their bankruptcy schedules by failing to account for sale of vehicle and boat two days before filing, and trustee also sought sur-charge to protect creditors and to maximize value of bankruptcy estate. Latman v Burdette (2004, CA9 Wash) 366 F3d 774, 52 CBC2d 639, CCH Bankr L Rptr P 80087, amd (2004, CA9 Wash) 2004 US App LEXIS 11231 and reprinted as amd (2004, CA9 Wash) 2004 US App LEXIS 11212.

Where siblings, who were referred to as creditors, objected to debtor's claimed state homestead exemption under 11 USCS § 522(B), their claims were properly barred under principles of claim preclusion due to their prior state court claims as they should have waged their constructive state law claims in prior state court proceedings when they were ripe; further, claim preclusion was ap-propriate as creditors waged state law objection to state law exemption. McGarry v Chew (In re Chew) (2007, CA1 Mass) 496 F3d 11.

11 USCS § 522(b)(1) did not operate to bar Ch. 7 trustee from filing timely objections to two debtors' claimed exemptions after their case was converted from Ch. 13 proceeding, even though prior Ch. 13 trustee had not filed any objections and property had, therefore, automatically become exempted under § 522(b)(1). 11 USCS § 348(f)(1)(A) specifically provided that any exempted prop-erty that remained within debtor's possession or control was brought back into estate when debtors' Ch. 13 case was converted, and thus that property was subject to Ch. 7 trustee's objections. Wiggins v Frank (In re Wiggins) (2006, MD Pa) 341 BR 501.

Although Bankruptcy Court has power to render declaratory relief under Bankruptcy Code, trus-tee's objection to debtors' claim of exempt property is not proper procedural vehicle to present such claim, since, while such objection has been treated as contested matter under Bankruptcy Rules, it has traditionally been viewed solely as method whereby trustee fulfills obligation to determine whether exemptions are lawfully claimed and allowable; although correct procedural method of presenting claim for declaratory relief in Bankruptcy Court has not been established, Bankruptcy Court will require that traditional federal procedure be adhered to, and will require filing of appro-priate complaint for declaratory relief from party requesting relief in matter. In re Spencer (1980, BC SD Cal) 7 BR 458, 7 BCD 555.

Collateral attack on exemptions by means of application for appraisal outside period for objec-tions is barred. In re Wiesner (1984, BC WD Wis) 39 BR 963.

Although debtor's filing chapter 11 petition was in bad faith where she knew that she had no in-come and no assets to fund plan of reorganization, setting aside her claim of exemption of $ 100,000 on homestead was too harsh sanction. In re Elia (1996, BC DC Ariz) 198 BR 588.

Where debtor broke into gas station that had been secured by trustee and sold property on hand with intent to hinder and delay trustee, after being told that that debtor could not operate station, and trustee had also objected to debtors' claim of exemption in gas station under 11 USCS § 522(1), gas

Page 127 11 USCS § 522

station was still property of estate and debtor's claim that debtor had right to retake possession of station was meritless; debtor was denied discharge under 11 USCS § (a)(2)(B). Taunt v Patrick (In re Patrick) (2003, BC ED Mich) 290 BR 306.

Trustee's objection to debtors' exemptions was overruled because married debtors were entitled to claims of exemption under Fla. Const. art. X, § 4, since husband met requirement of domicile in Florida, notwithstanding fact that he was not physically present for 180 days prior to Chapter 7 fil-ing date, where he never established residence in any other state, at all times he considered himself to be citizen of Florida, he was registered to vote there and never registered to vote in any other state, his automobiles were registered in Florida, he held Florida driver's license, which was only driver's license he had ever had, and wife stayed in North Carolina to take care of sick relative dur-ing relevant time period. In re Dwyer (2004, BC MD Fla) 305 BR 582, 17 FLW Fed B 91.

Chapter 7 debtors could not claim unliquidated proceeds from personal injury lawsuits exempt from their bankruptcy estates because Mo. Rev. Stat. § 513.427 and prior state case law were not sufficient grounds for such exemptions; absent showing of specific state statutory provision, or fed-eral provision other than 11 USCS § 522, that would allow for such exemption, trustee's objections to exemption would be sustained. In re Mahony (2007, BC WD Mo) 374 BR 717.

Bankruptcy court lacked jurisdiction to consider trustee's exemption objection where no live controversy existed in debtor's Chapter 13 case because (1) parties agreed that decision in appeal as to merits of exemption order would have had no impact on debtor's Chapter 13 case, (2) bankruptcy court erred in determining that 30-day objection period under Fed. R. Bankr. P. 4003(b) would not have recommenced in event that debtor's Chapter 13 case was ever converted to case under Chapter 7, (3) there was split of authority on issue of how 30-day deadline set forth in Fed. R. Bankr. P. 4003(b) operated when Chapter 13 case was converted to Chapter 7, (4) Bankruptcy Appellate Panel for Tenth Circuit adopted minority view and held that time to object to claimed exemptions under Fed. R. Bankr. P. 4003(b) recommenced when Chapter 13 case was converted to Chapter 7, and (5) accordingly, it was unnecessary for bankruptcy court to resolve exemption objection given that, but for potential conversion of case to Chapter 7, its resolution would have had no effect in Chapter 13 case. Campbell v Stewart (In re Campbell) (2004, BAP10) 313 BR 313, 52 CBC2d 1229 (criticized in In re Fonke (2005, BC SD Tex) 321 BR 199).

2.Time Limits for Objections

a.In General 62. Generally

Trustee may not contest validity of claimed exemption under 11 USCS § 522 after Bankruptcy Rule 4003(b) 30-day period has expired, and no extension is sought, even though debtor had no colorable basis for claiming exemption. Taylor v Freeland & Kronz (1992) 503 US 638, 118 L Ed 2d 280, 112 S Ct 1644, 92 CDOS 3363, 92 Daily Journal DAR 5260, 22 BCD 1396, 26 CBC2d 487, CCH Bankr L Rptr P 74513A, 6 FLW Fed S 194 (criticized in In re Thompson (2001, BC WD Okla) 263 BR 134) and (criticized in In re Patterson (2002, BC DC Colo) 275 BR 578) and (criticized in In re Lang (2002, BC SD Fla) 276 BR 716, 48 CBC2d 1291, 15 FLW Fed B 143) and (criticized in Novak v Woodin (In re Woodin) (2003, BC DC Conn) 294 BR 436, 50 CBC2d 1109).

Burden is on trustee to object in timely manner to any improper exemption claims. Allen v Green (In re Green) (1994, CA11 Ala) 31 F3d 1098, 31 CBC2d 1449, CCH Bankr L Rptr P 76098, 8 FLW Fed C 606.

Page 128 11 USCS § 522

Bankruptcy Court was without jurisdiction to grant trustee extension of time to file objections to Chapter 7 debtors' claimed exemptions after expiration of 30-day period prescribed by Bankruptcy Rule 4003(b), although trustee filed motion for extension prior to expiration of 30-day period. Stoulig v Traina (In re Stoulig) (1995, CA5 La) 45 F3d 957 (criticized in Block v Moss (In re Moss) (2001, BC WD Mo) 258 BR 391).

Court order fixing deadline for filing of objections to Chapter 7 debtor's claim of exempt prop-erty under 11 USCS § 522 is enforceable. In re Reich (1985, BC ED Mich) 54 BR 995, 13 BCD 953, 13 CBC2d 988.

Chapter 7 debtor cannot use 11 USCS § 522 and Bankruptcy Rule 4003 to acquire homestead exemption when either or both judicial or consensual lien attaches prior to homestead exemption right; hence, such judicial lien creditor does not have burden to object to homestead exemption claim within time allowed under Bankruptcy Rule 4003 and may raise objection to exemption claimed as defense to 11 USCS § 522(f) lien avoidance proceeding. In re Keenan (1989, BC DC Colo) 106 BR 239, 6 Colo Bankr Ct Rep 303.

Despite fact that Bankruptcy Rule 1019(2) fails to retrigger time frame within which objection to claim of exemption must be filed, Chapter 7 trustee should have opportunity to do so after con-version from Chapter 13 when facts discovered warrant, provided that trustee files objection within 30 days of conclusion of creditors' meeting. In re Lyle (1994, BC MD Fla) 166 BR 972, 30 CBC2d 2102, 8 FLW Fed B 43, affd, cause dismd sub nom Weissman v Carr (In re Weissman) (1994, MD Fla) 173 BR 235, 8 FLW Fed D 457 (criticized in DiBraccio v Ferretti (In re Ferretti) (1999, BC SD Fla) 230 BR 883) and (criticized in In re Fonke (2005, BC SD Tex) 321 BR 199).

Under Fed. R. Bankr. P. 4003(b), where Chapter 7 debtor's first meeting of creditors under 11 USCS § 341 was adjourned and had never been concluded and closed, Chapter 7 trustee's objections to exemptions were timely. Pineo v Bogan (In re Bogan) (2003, BC WD Pa) 302 BR 524.

Chapter 7 trustee's objections to debtor's exemptions were timely filed after case was converted to case under Chapter 7 because bankruptcy case started in Chapter 11 with no creditors' committee and debtor as only estate representative. In re Koss (2005, BC DC Mass) 319 BR 317.

If Fed. R. Bankr. P. 4003(b) were interpreted to create right to object to previously exempted property, it would modify substantive right created for debtor by 11 USCS § 522(c), which elimi-nates liability of exempt property for prepetition debts, by subjecting protected property to prepeti-tion liability; such effect is prohibited because it would result in rule abridging substantive right provided by Bankruptcy Code in violation of 28 USCS § 2075; accordingly, because statutory pro-visions appearing to recommence objection deadline are ambiguous, and because any new deadline would violate substantive right granted under Code, deadline to object to exemptions does not re-commence upon conversion of case from chapter 7 to chapter 13. In re Fonke (2005, BC SD Tex) 321 BR 199.

Bankruptcy Court is persuaded that case-by-case approach is most appropriate to determine what action is necessary to conclude meeting of creditors, and accordingly, to determine when time limit begins for filing objections to exemptions, when meeting is continued to unspecified date be-cause such approach affords trustee discretion in complicated cases yet restrains trustee's ability to indefinitely postpone meeting of creditors; under this construction of rule, trustee may continue 11 USCS § 341(a) examination only while there are legitimate grounds for believing that further inves-

Page 129 11 USCS § 522

tigation will prove beneficial or when circumstances surrounding case require meeting be contin-ued. In re Cherry (2006, BC SD Tex) 341 BR 581.

Fed. R. Bankr. P. 4003(b) provides new opportunity to file objection to exemptions whenever new meeting of creditors is scheduled as consequence of case's conversion from one chapter to an-other; where debtor converted his Chapter 13 case to case under Chapter 7 after his plan had been confirmed, Chapter 7 trustee was not time-barred under Fed. R. Bankr. P. 4003(b) from filing ob-jection within 30 days of § 341 meeting of creditors in Chapter 7 case. In re Brown (2007, BC WD Mich) 375 BR 362.

It is well-established that debtor may claim property exempt pursuant to 11 USCS § 522(b) and that, absent timely objection, property is exempt under § 522(l) regardless of validity of claimed exemption; timeliness of objection to debtor's claim of exemption is not addressed in § 522(l) or anywhere else in Bankruptcy Code, but rather, it is set forth in Fed. R. Bankr. P. 4003(b). Campbell v Stewart (In re Campbell) (2004, BAP10) 313 BR 313, 52 CBC2d 1229 (criticized in In re Fonke (2005, BC SD Tex) 321 BR 199).

63. Former Rule 403 time limits

Creditors are barred from seeking to satisfy state judgment on entireties property after debtor's discharge when debtor claimed property as exempt under 11 USCS § 522 and creditors did not then object--despite absence of any definite rule in interim period between 1978 Code and old Rule 403 and 1984 Code and new Rule 4003, which limited time for objection to exemptions--because debtor's discharge is final determination of exempted property. In re Dembs (1985, CA6 Mich) 757 F2d 777, 13 BCD 592, 12 CBC2d 591, CCH Bankr L Rptr P 70330.

Fifteen-day time limit of former Bankruptcy Rule 403(c) for filing of objections to trustee's re-port of allowance or disallowance of debtor's claims of exemptions does not survive passage of Bankruptcy Code, because 11 USCS § 522(1) does not require any such trustee's report; rather, ob-jection must be made within 30 days after creditor's meeting, under new Rule 4003. In re Dembs (1985, CA6 Mich) 757 F2d 777, 13 BCD 592, 12 CBC2d 591, CCH Bankr L Rptr P 70330.

Trustee's filing of objection to debtor's exemption claim 18 days after he became qualified does not require dismissal of objection because of procedural deficiency, notwithstanding provision of Rule 403 that trustee must file report within 15 days after becoming qualified, since Bankruptcy Code has done away with requirement of report, and since, even under former Bankruptcy Act, fail-ure to file report disallowing debtor's claim of exemption did not constitute automatic allowance of exemption. In re Cunningham (1980, BC DC Mass) 5 BR 709, 6 BCD 863, 2 CBC2d 1095.

11 USCS § 522 supersedes former Bankruptcy Rule 403(c), which specifies time within which to object to debtor's claim of exemption, since § 522 does not specify time for filing objections to debtor's claim of exemption. In re Kinney (1983, BC MD Fla) 30 BR 346.

64. Unclear claim of exemptions

Chapter 7 debtors' exemption in tax refund was properly claimed under Ohio exemption for tax refunds where they made it clear on their schedules that they were each claiming exemption in tax refund; however, debtors' attempt to claim $ 400 wild-card exemption which merely stated "other property" did not sufficiently claim exemption, and thus strict time constraints of Taylor were not applicable until schedules were clarified or trustee was otherwise put on notice of precise nature of debtors' claim of exemption; once trustee had notice that debtor wife was claiming exemption in tax

Page 130 11 USCS § 522

refunds, as indicated in his application for appointment of attorney, trustee was required to object within 30 days, pursuant to Bankruptcy Rule 4003, and having failed to do so, trustee is precluded from challenging exemption. Gilbert v Zimmer (1993, BC SD Ohio) 154 BR 705.

Although debtors may exempt "disability income" in claimed amount of $ 1,000 per month due to trustee's failure to timely object to such exemption, amounts in excess of $ 1,000 are not exempt, where schedules do not contain any list of property which includes any reference to "lump sum" or "annuity," and debtors' subsequent oral disclosure at creditors' meeting, that $ 1,000 listed as dis-ability income came from annuity, purchased as result of settlement of personal injury lawsuit, and that this annuity had at least one lump-sum component, did not put trustee on notice of precise na-ture of debtors' claim of exemption and did not commence running of 30-day period under Bank-ruptcy Rule 4003(b) in which trustee had to object. Foster v Moore (In re Moore) (1994, BC SD Ohio) 175 BR 13, 32 CBC2d 840, CCH Bankr L Rptr P 76309.

65. Amended exemptions

Chapter 7 debtor's homestead exemption is limited to $ 45,000 under California as claimed in debtor's original exemption schedule rather than his entire one-half interest in property as listed in amended schedule, and trustee's failure to object to original schedule did not cause either entire property or debtor's joint tenancy interest to become exempt, where trustee timely objected to broad amended claim. Seror v Kahan (In re Kahan) (1994, CA9 Cal) 28 F3d 79, 94 CDOS 3587, 94 Daily Journal DAR 6715, CCH Bankr L Rptr P 75890, amd (1994, CA9 Cal) 94 CDOS 5474 and re-printed as amd (1994, CA9 Cal) 94 Daily Journal DAR 10031 and cert den (1995) 513 US 1150, 130 L Ed 2d 1067, 115 S Ct 1100.

Chapter 7 trustee's objection to debtor's amended homestead exemption claim was timely where filed within 30 days of filing of amended schedule, although trustee did not object to debtor's initial exemption schedule; although debtor contends that amended schedule did not reopen time to object because it was merely clarification of original schedule, amended schedule differed significantly from initial schedule by claiming higher exemption amount, and his initial exemption claim is to be read as limited to "value claimed exempt," namely $ 45,000, rather than as broad exemption claim that covered his undivided one-half interest in property; further, although debtor argues that his ini-tial schedule claimed entire property as exempt, noting that encumbrances on property exceed stated fair market value, his argument is premature, because bar against forced sale under California law depends upon actual sale price, not value listed on his asset schedule, and argument is irrelevant to amount of his homestead. Seror v Kahan (In re Kahan) (1994, CA9 Cal) 28 F3d 79, 94 CDOS 3587, 94 Daily Journal DAR 6715, CCH Bankr L Rptr P 75890, amd (1994, CA9 Cal) 94 CDOS 5474 and reprinted as amd (1994, CA9 Cal) 94 Daily Journal DAR 10031 and cert den (1995) 513 US 1150, 130 L Ed 2d 1067, 115 S Ct 1100.

As matter of course debtor should be allowed to amend his exemption claims under 11 USCS § 522 and Bankruptcy Rule 1019 to include newly found property if case has not been closed; then any interested party can object to exemption amendment within 15 days from date amendment is filed; if someone does object, court is to hold hearing on notice to all interested parties in order to resolve issues raised on objections; if no one objects, amended exemption is allowed. Armstrong v Hursman (1988, DC ND) 106 BR 625, 19 BCD 1495.

Creditor's objection to homestead exemption is not timely filed where creditor did not file within 30 days after conclusion of meeting of creditors and did not timely seek extension; debtor's

Page 131 11 USCS § 522

amendment of exemption schedule to affect other property cannot increase time in which creditor may object to homestead exemption. In re Gullickson (1984, BC WD Wis) 39 BR 922.

Creditors' objections to Chapter 7 debtors' amendments to claimed exemptions, filed after con-version from Chapter 12, are not timely, regardless of whether Bankruptcy Rule 4003's 30-day time period from amendment of exemption schedules applies or whether 30 days runs from Chapter 7 creditors' meeting, where creditors, although filing objections to original claimed exemptions, filed no objections to additional items claimed; because creditors failed to object, additional items claimed are exempt, despite creditors' arguments that because they objected to initial claims of ex-emption on basis of ownership, debtors were on notice of their position; merely because creditors have objected to exemption of original items claimed exempt on ownership grounds does not permit them to ignore time limit for objecting to additional items not previously claimed. In re Indvik (1990, BC ND Iowa) 118 BR 993, 23 CBC2d 948.

Trustee's objection to Chapter 7 debtor's exemption in real property cannot be sustained where trustee failed to object within 30 days as required under Bankruptcy Rule 4003; although debtor amended his schedules to exempt automobile, and trustee asserts that objection period did not start to run until debtor filed amendment, claimed exemption for real property on amended schedule ap-peared exactly as it had on original filing months earlier; amendment does not open all other claims to objection. In re Hickman (1993, BC ND Ohio) 157 BR 336.

Because debtor asserted exemption of $ 853.95 in property, to which no objection was filed, debtor's exemption were allowed in that amount. In re Morgan (2003, BC DC Md) 299 BR 118.

66. Particular objections

Late filing of objections to trustee's report of exempt property did not prevent consideration of objections in light of physical incapacity of attorney, lack of surprise to trustee or prejudice to ad-ministration of estate, and fact that litigated vehicle remained with bankrupt at all times. In re Sisemore (1979, CA5 Tex) 602 F2d 742, 5 BCD 847, 21 CBC 215, CCH Bankr L Rptr P 67239.

Creditor cannot challenge grant of exemption in entireties property where it failed to object to claimed exemption in Bankruptcy Court at appropriate time under 11 USCS § 522(l) and Bank-ruptcy Rule 4003(b); furthermore, court cannot challenge Indiana entireties exemption statute as unconstitutional where creditor failed to raise issue before Bankruptcy Court and noted it only in perfunctory manner in District Court. In re Hunter (1992, CA7 Ind) 970 F2d 299, 27 CBC2d 536, CCH Bankr L Rptr P 74764.

Creditor's failure to object to debtor's claim of exemption in annuity which was assigned to creditor prepetition does not prevent creditor from challenging validity of exemption where assign-ment was valid, and since debtor's lack of interest in assigned property does not establish proper claim of exemption, there was no need for creditor to object--having transferred his property interest to creditor, debtor cannot claim, as exempt, property that he does not own. First Bank v Sloma (In re Sloma) (1995, CA11 Ala) 43 F3d 637.

Under Bankruptcy Rule 4003, Chapter 7 trustee cannot attack debtor wife's claimed good-faith homestead exemption under 11 USCS § 522 in tax refund after discharge and 1 year after first meet-ing of creditors where exemption appears to be valid under Virginia law. Bass v Hall (1987, WD Va) 79 BR 653.

Page 132 11 USCS § 522

Trustee's application for appraisal of property debtors claim as exempt, although termed mere request for clarification of statutory provisions governing value of exemptions, is in fact objection to exemption claim, which, to be timely, must be filed within 15 day limit applicable to objections to exemption claim which could have been made on basis of information reflected in debtors' schedules, as provided by Rule 403, and such application is barred were not brought within such time limit. In re Walsh (1980, BC DC Dist Col) 5 BR 239, 6 BCD 793, 2 CBC2d 815, CCH Bankr L Rptr P 67970 (criticized in In re Richardson (2001, BC SD Ala) 280 BR 717).

Trustee's objection to debtor's homestead exemption is not timely filed where filing occurred af-ter bar date set in notice to creditors and where trustee did not apply for extension of time; objection on minute report is not appropriate procedure for perfecting formal objection to exemption; trustee must make application to court and request hearing on issue so that final determination regarding exemption can be entered. In re Thomas (1983, BC SD NY) 27 BR 367.

Debtor is entitled to homestead property exemption despite objections of creditor where order setting meeting of creditors provides that any objection to debtor's claim of exemptions must be filed within 15 days and no objection was filed for over 4 months so that objection was untimely within meaning of 11 USCS § 522(l). In re Blakely (1983, BC WD La) 29 BR 354.

Trustee's objection to debtor's homestead exemption claim is timely filed even though objection was not made until case was closed where debtor is clearly not entitled to exemption, where there is no indication of improvements to property since closing of case or that debtor has otherwise detri-mentally relied upon trustee's previous inaction, and where time bar recited in court order is ex-pressly subject to extension. In re Penland (1983, BC ED Tenn) 34 BR 536, CCH Bankr L Rptr P 69486.

Trustee's untimely objection to Chapter 7 debtors' claimed exemption in ERISA-qualified re-tirement plan will not be considered where Chapter 7 debtors acted in good faith in seeking to ex-empt ERISA-qualified retirement plan because law was unclear at time of asserted exemption as to whether ERISA preempted state exemption law, and Eight Circuit has subsequently determined that ERISA does not preempt state-law exemption; furthermore, debtors have established their good-faith belief that funds sought to be exempt were reasonably necessary for their support where debt-ors have 3 dependent children, debtor husband is in need of continued expensive medical treat-ments, debtors have no savings and their monthly expenses exceed their income by $ 300. In re Esterlein (1992, BC ED Mo) 136 BR 212.

Chapter 7 Trustee properly continued 11 USCS § 341 meeting where he announced date of ad-journed meeting less than 30 days after initial meeting, properly notified all parties and creditors of adjournment 33 days after meeting, and concluded § 341 meeting within four months of initial meeting; accordingly, Trustee's objection to debtor's claimed exemptions filed eight days after con-clusion of § 341 meeting was timely. In re Cherry (2006, BC SD Tex) 341 BR 581.

Debtor waived his right to challenge Chapter 7 Trustee's allegedly improper continuation of 11 USCS § 341 meeting where neither debtor nor his attorney objected to continuance, and debtor co-operated with Trustee during entire time; accordingly, Chapter 7 Trustee's objection to debtor's claimed exemptions was timely. In re Cherry (2006, BC SD Tex) 341 BR 581.

In case converted from Chapter 13 to Chapter 7, exempted property is brought back into estate, as long as it remained in possession of debtor or under his or her control; Chapter 7 trustee, is there-

Page 133 11 USCS § 522

fore. allowed to file objections thereto, until 30 days after conclusion of post-conversion 11 USCS § 341 meeting. In re Bace (2007, BC SD NY) 364 BR 166.

Where debtors failed to reinvest proceeds from sale of their home in new homestead within 18 months, as required under Ariz. Rev. Stat. § 33-1101(C), bankruptcy court incorrectly found that Trustee failed to timely object to exemption or to take any action to preserve right to object. At time petition was filed, claimed homestead exemption was valid and Trustee had no legal basis to object to exemption. Gaughan v Smith (In re Smith) (2006, BAP9) 342 BR 801.

b.Effect of Failure to File Timely Objection 67. Generally

Bankruptcy trustee who, after debtor filed schedule of exempt property pursuant to 11 USCS § 522(l) and claimed exemption therein for proceeds of pending employment discrimination lawsuit, failed to object to that claim within 30 days as required under Bankruptcy Rule 4003(b) is barred from contesting validity of exemption in subsequent action against debtor's attorneys to recover proceeds from settlement of lawsuit, regardless of whether debtor had colorable statutory basis for claiming exemption. Taylor v Freeland & Kronz (1992) 503 US 638, 118 L Ed 2d 280, 112 S Ct 1644, 92 CDOS 3363, 92 Daily Journal DAR 5260, 22 BCD 1396, 26 CBC2d 487, CCH Bankr L Rptr P 74513A, 6 FLW Fed S 194 (criticized in In re Thompson (2001, BC WD Okla) 263 BR 134) and (criticized in In re Patterson (2002, BC DC Colo) 275 BR 578) and (criticized in In re Lang (2002, BC SD Fla) 276 BR 716, 48 CBC2d 1291, 15 FLW Fed B 143) and (criticized in Novak v Woodin (In re Woodin) (2003, BC DC Conn) 294 BR 436, 50 CBC2d 1109).

In analyzing whether untimely objections to claimed exemptions should be considered, court must determine whether debtor had good-faith statutory basis for claimed exemption because such approach best effectuates policies underlying Bankruptcy Rules 4003(b) and 9006(b)(3); in present case, Chapter 7 debtors had good-faith statutory basis for claiming homestead exemption in resi-dence situated on real property owned by debtor husband's father, even though Bankruptcy Court eventually determined that debtors were required to own real property on which residence was lo-cated, because plain language of statute does not require debtor to own land on which house is lo-cated and modern cases exist granting homestead exemptions to individuals who did not own land on which house was located; furthermore, trustee's actions indicate that, at best, he was unsure whether to object to claimed exemption, and therefore, Bankruptcy Court properly struck trustee's objection as untimely. In re Peterson (1990, CA8 Minn) 920 F2d 1389, 21 BCD 186, 24 CBC2d 525, CCH Bankr L Rptr P 73756.

Trustee is not entitled to turnover where trustee's objection to claimed exemptions filed more than 30 days after first meeting of creditors was untimely under Bankruptcy Rule 4003(b) as was turnover motion; where no objections to exemption are filed, property claimed as exempt is in fact exempt, and this finalization of exemptions effectively accepts debtor's valuation of his or her inter-est in property claimed as exempt within scope and dollar value of applicable exemption statute. In re Okoinyan (1991, BC SD Fla) 135 BR 691.

Where debtors scheduled stock valued at $ 1.00 as exemption, trustee's failure to object to such exemption did not revest title to stock in debtors by operation of law thirty days after conclusion of meeting of creditors; rather, debtors' exemption interest in stock entitled them to not more than $ 1.00. In re DeSoto (1995, BC DC Conn) 181 BR 704, 33 CBC2d 902, CCH Bankr L Rptr P 76521.

Trustee was not legally required to abandon property, where total amount of liens against it and exemptions claimed by debtor exceed its scheduled value as of filing date, and trustee failed to

Page 134 11 USCS § 522

make timely objection to debtor's claimed exemptions, since trustee was under no obligation to ob-ject, where there was appropriate statutory basis for exemption and amount claimed was within statutory limits; debtor may compel abandonment if trustee should fail to sell property after reason-able time that was of no benefit to estate. In re Heflin (1997, BC WD Mich) 215 BR 530, 38 CBC2d 1701.

Debtor cannot properly claim exemption in property while at same time denying any interest in that property; Bankruptcy Courts have authority under 11 USCS § 105 (a) to consider untimely ex-emption objection where necessary to prevent abuse of process, and thus could consider untimely objection and disallow homestead exemption where debtor denied any interest in homestead prop-erty. In re Montanez (1999, BC ED Mich) 233 BR 791, 41 CBC2d 1727.

Although personal injury claim scheduled by Chapter 13 debtors at value of one dollar but ulti-mately settled for over $ 46,000 could have been property of estate pursuant to 11 USCS §§ 541 and 1306(a), settlement became exempt under Bankruptcy Rule 4003(b) and 11 USCS § 522(l) when no party objected to debtors' claim of exemption within thirty days of § 341 meeting; settlement could not be treated as "disposable income" under 11 USCS § 1325(b) because it was conclusively ex-empted under § 522(l) and thus protected from liability to prepetition creditors pursuant to § 522(c). In re Graham (2001, BC MD Fla) 258 BR 286, 45 CBC2d 905, 14 FLW Fed B 165 (criticized in In re Launza (2005, BC ND Tex) 2005 Bankr LEXIS 1017).

Where debtors in bankruptcy listed market value of term life insurance policy as zero and amount of their exemption as zero, this information did not sufficiently put Chapter 7 Trustee on notice that they claimed exemption exceeding amount provided by state law; thus, trustee's failure to initially object to claim of exemption did not bar trustee from attempting to administer asset be-cause trustee had no basis to object to claim of exemption and debtors were entitled to claim life insurance proceeds as exempt, but only as prescribed by applicable state law. Lekas v Mann (In re Lekas) (2003, BC DC Ariz) 299 BR 597.

Where debtor declared certain property exempt and no party in interest objected, property be-came exempt under 11 USCS § 522(l) and was no longer part of debtor's bankruptcy estate; there-fore, property was no longer protected by automatic stay of 11 USCS § 362 or by discharge injunc-tion, and creditor's attempt to impose constructive trust on that property was outside bankruptcy court's jurisdiction. Cousatte v Lucas (In re Lucas) (2004, BC DC Kan) 307 BR 703, 52 CBC2d 982.

While 11 USCS § 522(l) conditions exemption on lack of objection, section sets no deadline for when party must object; this deadline is instead supplied by Fed. R. Bankr. P. 4003(b). In re Fonke (2005, BC SD Tex) 321 BR 199.

Assuming that attorney had standing to seek revocation of Chapter 13 debtor's discharge, attor-ney's basis for revocation, that debtor's exemption was fraudulent, was untimely; attorney could have objected to claimed exemption within time allowed under Fed. R. Bankr. P. 4003. In re Rodri-gues (2007, BC DC Mass) 370 BR 467.

Trustee's failure to object to exemption does not waive estate's right to any sum in excess of al-lowed limit; by simply agreeing to valid claim of exemption, estate is not forced to abandon valu-able asset. In re Bronner (1992, BAP9 Cal) 135 BR 645, 22 BCD 953.

Page 135 11 USCS § 522

Fed. R. Bankr. P. 4003(b)'s 30-day period is strictly interpreted in conjunction with 11 USCS § 522(l) to bar any objections not made within that period of time. Campbell v Stewart (In re Camp-bell) (2004, BAP10) 313 BR 313, 52 CBC2d 1229 (criticized in In re Fonke (2005, BC SD Tex) 321 BR 199).

68. Absolute right to exemption

Unless there is timely objection from party in interest, any property claimed as exempt by debtor, regardless of whether claimed exemption is valid, is automatically exempt under 11 USCS § 522. In re Hyman (1992, CA9) 967 F2d 1316, 92 CDOS 5323, 92 Daily Journal DAR 8504, 23 BCD 153, CCH Bankr L Rptr P 74706.

Chapter 11 debtors' exemption in livestock and crops could not be denied in absence of timely objection, even though exemption lacked legal basis in state law. FDIC v Coones (In re Coones) (1993, CA10 Wyo) 996 F2d 250, CCH Bankr L Rptr P 75349, cert den (1994) 510 US 1041, 126 L Ed 2d 651, 114 S Ct 684.

Failure to file timely objection to exemption is absolute bar to consideration of merits of objec-tion; where trustee filed his objection to Chapter 7 debtor's exemption within 30 days of debtor's filing of amended exempt property list, as required under Bankruptcy Rule 4003(b), court can con-sider merits of debtor's supplemental schedule of exempt property. In re Yonikus (1993, CA7 Ill) 996 F2d 866, 29 CBC2d 114, CCH Bankr L Rptr P 75276 (criticized in In re Daniels (2001, BC ED Mich) 270 BR 417) and (criticized in In re Robinson (2003, BC SD Ohio) 292 BR 599) and (criti-cized in In re Rolland (2004, BC CD Cal) 317 BR 402).

Use of equitable powers, under 11 USCS § 105(a), to sustain creditor's belated objection to Chapter 13 debtor's claimed exemption in potential wrongful garnishment cause of action would be inconsistent with operation of 11 USCS § 522(l), Bankruptcy Rule 4003(b), and Supreme Court's interpretation of these provisions, where creditor missed explicit 30-day deadline for filing objec-tions, and § 105(a) "does not allow Bankruptcy Court to override explicit mandates of other sections of Bankruptcy Code." Coie v Sadkin (In re Sadkin) (1994, CA5 Tex) 36 F3d 473, 32 CBC2d 575, CCH Bankr L Rptr P 76188, reh den (1994, CA5 Tex) 1994 US App LEXIS 36124.

Even assuming that Chapter 7 debtor's claimed exemption of potential wrongful garnishment cause of action is without colorable basis, striking debtor's exemption claim, pursuant to Bankruptcy Rule 9011, would still not be warranted, where creditor's objection to claimed exemption was filed well past 30-day deadline of Bankruptcy Rule 4003(b), since even if disputed exemption is wholly without merit and devoid of statutory basis, claim is exempt under 11 USCS § 522(l) because of late objection. Coie v Sadkin (In re Sadkin) (1994, CA5 Tex) 36 F3d 473, 32 CBC2d 575, CCH Bankr L Rptr P 76188, reh den (1994, CA5 Tex) 1994 US App LEXIS 36124.

Chapter 7 trustee's motion to sell business equipment that debtor had claimed as exempt from bankruptcy on her Schedule C was properly denied where she had listed equipment's full value on her Schedule B, indicated her intent to exempt her entire interest in property by claiming exemption of same full value on her Schedule C, and trustee had neither filed timely objection under Fed. R. Bankr. P. 4003 nor requested extension before 30-day deadline had passed. In re Reilly (2008, CA3 Pa) 534 F3d 173.

Failure to challenge Chapter 13 debtor's claimed exemption of residence within 30 days allowed by Bankruptcy Rule 4003(b) precluded any later challenge to exemption, including challenge based

Page 136 11 USCS § 522

on attempted distinction between existence and effect of exemption. Great Southern Co. v Allard (1996, ND Ill) 202 BR 938 (criticized in In re Thompson (2001, BC WD Okla) 263 BR 134).

Bankruptcy Court will not examine merits of claimed exemption if objection thereto is not filed within strict time constraints set forth in Bankruptcy Rules 4003 and 9006. In re Napier (1991, BC SD Miss) 134 BR 1.

Exemption need not have apparent legal basis to overcome untimely objection under Bank-ruptcy Rule 4003; even if exemption were required to have apparent legal basis, such requirement would be satisfied in instant case because pension plan appears to qualify as exempt property under 11 USCS § 510(d)(10)(E) to extent reasonably necessary for support of debtor and any of his de-pendents, and debtor's assertion that entire amount is reasonably necessary is not outside realm of good faith, given that meaning of "reasonably necessary" is unsettled and subject to court's discre-tion. In re Levitt (1992, BC DC Mass) 137 BR 881 (criticized in Smith v Kennedy (In re Smith) (2000, CA9 Cal) 221 F3d 1101, 2000 CDOS 6581, 2000 Daily Journal DAR 8721, 36 BCD 150, CCH Bankr L Rptr P 78240) and (criticized in Premier Capital, Inc. v DeCarolis (In re DeCarolis) (2001, BAP1) 259 BR 467) and (criticized in In re Koss (2005, BC DC Mass) 319 BR 317).

Chapter 7 debtor's claim of exemption in 1984 in IRA fund to which trustee did not timely ob-ject is allowed and Chapter 7 trustee is directed to return fund moneys, along with all interest accu-mulated thereon, to debtor, but debtor's request for compound interest or other damages is denied inasmuch as debtor had it in his power to precipitate this issue at time of trustee's seizure of account but delayed until 1992 in taking effective action; applying "middle-ground" approach, which in-volves determining whether debtor had good-faith statutory basis for claimed exemption, debtor's assertion in 1984 that his IRA account was exempt did have colorable or good-faith basis in law ex-isting at time, since opinion that IRAs are not exempt had not been rendered at that time, and due to uncertainty of law regarding exemptibility of IRAs from property of estate prior to that decision, trustee had burden to object to debtor's claim of exemption and obtain ruling thereon, but trustee not only failed to object, he also took almost 2 years to take any adverse action with respect to property claimed as exempt; prior to that time, debtor had no way of knowing that trustee took issue with debtor's claim of exemption regarding IRA funds, and during that time debtor was entitled to make his future plans on assumption that IRA account was exempt; even if trustee's action in seizing ac-count moneys was equivalent to objection, objection was untimely. In re Riso (Chapter 7) (1994, BC DC NH) 170 BR 484.

If bad faith and prejudice to creditors may be found in circumstances where debtor disputes that asset is property of estate and thus fails to claim exemption, intentional concealment of asset raises heightened concerns regarding good faith. In re Grogan (2003, BC DC Utah) 300 BR 804 (criti-cized in In re Rolland (2004, BC CD Cal) 317 BR 402).

Debtors acted with intent to conceal proceeds of personal injury settlement that were bankruptcy estate assets and debtors' conduct and amended schedules established debtors' bad faith; accord-ingly, debtor's state exemption was disallowed and they were ordered to turnover settlement pro-ceeds to trustee for distribution to estate. In re Grogan (2003, BC DC Utah) 300 BR 804 (criticized in In re Rolland (2004, BC CD Cal) 317 BR 402).

Although amendments to bankruptcy schedules, pursuant to Fed. R. Bankr. P. 1009, to claim exemption may be disallowed for either bad faith or prejudice to creditors, egregious facts of this case resulted in clear and convincing evidence of both bad faith and prejudice to creditors of estate.

Page 137 11 USCS § 522

In re Grogan (2003, BC DC Utah) 300 BR 804 (criticized in In re Rolland (2004, BC CD Cal) 317 BR 402).

Bankruptcy court does not have authority to allow late objection to exemption, even if debtors do not have valid legal basis for claiming exemption, nor can it extend time to object after it has ex-pired; where trustee discovered that debtors' residence was owned by wife alone, and not husband and wife jointly, after time for filing objections to exemptions had passed, trustee was not entitled to recover overpayment of homestead exemption. In re Rolfes (2004, BC ED Tenn) 307 BR 59.

Trustee's objections to debtor's list of exempt property, which were not filed until after case was converted from chapter 13 to chapter 7, were untimely under Fed. R. Bankr. P. 4003; because debtor properly filed exemptions without objection, property was deemed exempt pursuant to 11 USCS § 522(l), vested in debtor, and was not recaptured by estate upon conversion. In re Fonke (2005, BC SD Tex) 321 BR 199.

Where trustee did not timely file objection to debtor's exemptions, they were deemed allowed. In re Stone (2005, BC ND Iowa) 329 BR 860.

Pursuant to 11 USCS § 522, debtor makes election as to whether to exempt property and whether to use § 522(b)(2) or (b)(3); if the debtor "elects" § 522(b)(2) in Nevada, or any other opt-out state, and if party timely objects, then he is denied exemption; but if there is no timely objection, property is exempt even if there is no basis for claiming exemption. In re Virissimo (2005, BC DC Nev) 332 BR 201, CCH Bankr L Rptr P 80385.

Although trustee did not timely object to bankruptcy debtors' claim of homestead exemption in real property with mobile home in which debtors' resided, debtors were not entitled to exemption even though objection to exemption was barred since property was not owned by debtors and thus debtors had no interest in property which they attempted to exempt. In re LaVelle (2005, BC DC Idaho) 350 BR 505.

Chapter 7 debtor was entitled to homestead exemption under N.Y. C.P.L.R. § 5206(a) because no objection was filed with respect to debtor's claim of homestead exemption within time limits set forth under Fed. R. Bankr. P. 4003(b). In re Novak (2006, BC ED NY) 354 BR 611.

Bankruptcy court could not approve Chapter 7 trustee's proposed settlement of selling debtors' interest in property to property's co-owners where trustee failed to file objection to debtors' claimed exemption in property within 30-day period established by Fed. R. Bankr. P. 4003(b), and thus, property was no longer part of bankruptcy estate; court reached this result in spite of possibility that debtors may have misstated property's value because if trustee had question as to accuracy of prop-erty's valuation, she had duty to conduct timely investigation. Olson v Anderson (In re Anderson) (2006, BC WD Mich) 357 BR 452.

Chapter 7 debtor's claimed exemption of child tax credit (CTC) was allowed because trustee failed to object, despite having notice that debtor was claiming CTC portion of her federal income tax refund as exempt, pursuant to Ohio Rev. Code Ann. § 2329.66(A)(11). In re Tatum-Charlemagne (2006, BC ND Ohio) 368 BR 654.

Attempt by holder of judgment lien on property owned by Chapter 7 debtor and asserted by debtor to be exempt homestead under state law to assert belated objection to amount claimed by debtor was rejected because bankruptcy court lacked power to extend deadlines imposed by in 11

Page 138 11 USCS § 522

USCS § 522(i) or Fed. R. Bankr. P. 4003(b) where, as here, no objection was timely filed. In re Caudill (2007, BC SD Tex) 58 CBC2d 1231.

Where Chapter 7 Trustee's objection to debtors' claimed exemption in their vehicle pursuant to Wyo. Stat. Ann. § 1-20-106(a)(iv) (2006) was untimely under Fed. R. Bankr. P. 4003(b), 11 USCS § 522(g) could not "save" Trustee from failing to timely object where Trustee did not "avoid" lien; instead, Trustee's counsel convinced creditor to release lien, and by pursuing this course, Trustee failed to preserve lien for estate. Kuhnel v Russell (In re Kuhnel) (2006, BAP10) 346 BR 528.

Where Chapter 7 Trustee's objection to debtors' claimed exemption in their vehicle pursuant to Wyo. Stat. Ann. § 1-20-106(a)(iv) (2006) was untimely under Fed. R. Bankr. P. 4003(b), Trustee's reliance on In re Duncan as creating exception to time limit was misplaced; in that case, although trustee had filed untimely objection to claimed exemption, trustee subsequently filed adversary pro-ceeding claiming that debtor had fraudulently transferred asset in order to create exemption. Kuhnel v Russell (In re Kuhnel) (2006, BAP10) 346 BR 528.

Although bankruptcy court applied improper standard in disapproving settlement agreement en-tered into by trustee and owners of certain real property, under facts of case, court's use of wrong standard was harmless error; court's conclusion that settlement was invalid because property was exempt was correct. Olson v Anderson (In re Anderson) (2007, BAP6) 377 BR 865.

Debtor's disability insurance payments were exempt from creditors' garnishment because credi-tors did not object to debtor's claimed exemption within 30-day period of Fed. R. Bankr. P. 4003(b); further, under 11 USCS § 522(c), debtor's disability insurance payments were protected from gar-nishment by creditors. Kancilia v Pearson (2008, Colo) 187 P3d 542.

69. Effect on avoiding liens

11 USCS § 522(g) is such that it precludes exemptions in recovered property even beyond time limit imposed by Fed. R. Bankr. P. 4003(b); trustee acting under 11 USCS § 522(g) is not contesting exemption per se, but rather is asserting fact that he or she has set aside debtor's voluntary transfer (Fed. R. Bankr. P. 4003(b) is not defiled because unless and until trustee successfully avoids trans-fer, debtor is entitled to exemption). Kuhnel v Kuhnel (In re Kuhnel) (2007, CA10) 495 F3d 1177, CCH Bankr L Rptr P 80981.

Fed. R. Bankr. P. 4003(b) did not bar trustee's objection to debtors' claimed exemption in their truck because debtors' exemption was precluded by 11 USCS § 522(g); 11 USCS § 522(g) objection did not need to be timely because statute specifically prohibited debtor from claiming exemption in voluntarily transferred property recovered by trustee. Kuhnel v Kuhnel (In re Kuhnel) (2007, CA10) 495 F3d 1177, CCH Bankr L Rptr P 80981.

Even though scheduled exemption is effective under 11 USCS § 522(l) in absence of creditor's timely objection, creditor is not prevented from arguing that debtor lacks substantive entitlement to exemption under 11 USCS § 522(b) within context of motion to avoid lien under 11 USCS § 522(f)(1)(A). In re Chinosorn (2000, BC ND Ill) 243 BR 688 (criticized in In re Mukhi (2000, BC ND Ill) 246 BR 859, CCH Bankr L Rptr P 78151) and revd, remanded (2000, ND Ill) 248 BR 324, 43 CBC2d 1786, CCH Bankr L Rptr P 78185 (criticized in In re Thompson (2001, BC WD Okla) 263 BR 134) and (criticized in In re Patterson (2002, BC DC Colo) 275 BR 578) and (criticized in Schoonover v Karr (2002, SD Ill) 285 BR 695, CCH Bankr L Rptr P 78748) and (ovrld in part by In re Schoonover (2003, CA7 Ill) 331 F3d 575, CCH Bankr L Rptr P 78862).

Page 139 11 USCS § 522

City was entitled to defend its lien avoidance action by challenging debtors' homestead exemp-tion, even though City did not file timely exemption or provide excuse for its failure to do so, since to hold otherwise would deny City due process, defeat settled expectations of secured creditors, and foster unnecessary litigation over exemptions. In re Patterson (2002, BC DC Colo) 275 BR 578.

11 USCS § 541(d) did not prevent trustee from exercising his avoidance powers under 11 USCS § 544 to cut off unperfected lien against vehicle, and trustee, as hypothetical lien creditor, would prevail under state law against equitable, unperfected lien claimant; further, as between debtor and trustee, trustee must prevail under 11 USCS § 522, since property that was voluntarily transferred by debtor, recovered by trustee, and preserved under 11 USCS § 551 cannot be exempted; thus, where trustee sold vehicle for less than creditor's claim, no exempt portion remained in proceeds from sale of vehicle, and avoided purchase money security interest was preserved for benefit of estate. Lewis v Hare (In re Richards) (2002, BC DC Colo) 275 BR 586, 39 BCD 101.

Chapter 13 debtor had no standing to assert avoidance powers under fraudulent transfer provi-sions of 11 USCS § 548(a) and, since property was commercial, foreclosure sale purchasers could still use 11 USCS § 522(l) to challenge validity of exemption in opposition to avoidance under 11 USCS § 522(h), even if time for filing objections to debtor's claim of exemption had passed under 11 USCS § 522(l) and Fed. R. Bankr. P. 4003(b). Ryker v Current (In re Ryker) (2004, BC DC NJ) 315 BR 664.

Debtors' motion to reopen their Chapter 7 case to assert avoidance of lien in farm equipment under Iowa Code § 627.6 (11) was granted, over objections of one of creditors, because debtors' at-torney had set forth some reasons for not addressing issue in timely manner, it was undisputed that lien avoidance under Iowa Code § 627.6(11) would have been appropriate if it had been timely, and creditor had not established that it was prejudiced by delay when it had not made any attempts to recover equipment. Vaske (2006, BC ND Iowa) 339 BR 489.

While no objections had been filed to debtor's claim of homestead exemption and it was thus exempt under 11 USCS § 522(l), because debtor had waited 17 months to file his motion to partially avoid lien to assert his homestead exemption, and appeared to have side deal with foreclosure sale buyer to detriment of creditor, motion was denied as precluded by laches. In re Kelly (2006, BC ND Ill) 350 BR 778.

E.Fraudulent Conduct as Bar to Exemption


Surcharge against debtors' wild card exemption of 11 USCS § 522(d)(5) did not exceed bank-ruptcy court's equitable powers because it prevented what would otherwise have been fraud on bankruptcy court and creditors as result of debtors' non-disclosure of monies that should have been listed on bankruptcy schedules and available for their creditors. Latman v Burdette (2004, CA9 Wash) 366 F3d 774, 52 CBC2d 639, CCH Bankr L Rptr P 80087, amd (2004, CA9 Wash) 2004 US App LEXIS 11231 and reprinted as amd (2004, CA9 Wash) 2004 US App LEXIS 11212.

Debtor may not claim as exempt property which he knowingly concealed and failed to disclose to trustee, even if property would have been exempt had it been properly scheduled and claimed. Sheehan v Lincoln Nat'l Life (2001, ND W Va) 257 BR 449, affd (2002, CA4 W Va) 283 F3d 199, CCH Bankr L Rptr P 78614.

Page 140 11 USCS § 522

Fraudulent concealment of asset may result in forfeiture of debtor's right to exempt asset from bankruptcy estate. Sheehan v Lincoln Nat'l Life (2001, ND W Va) 257 BR 449, affd (2002, CA4 W Va) 283 F3d 199, CCH Bankr L Rptr P 78614.

Issue of debtor's intent is question of fact or inference to be drawn by bankruptcy court from facts; bad faith is generally determined from totality of circumstances. Sheehan v Lincoln Nat'l Life (2001, ND W Va) 257 BR 449, affd (2002, CA4 W Va) 283 F3d 199, CCH Bankr L Rptr P 78614.

Bankruptcy court will deny and dismiss trustee's request for denial of exemption under 11 USCS § 522(d) where alleged actual fraud is unrelated to exemptions. In re Ayers (1982, BC MD Tenn) 25 BR 762.

Assets concealed by debtor, and property recovered by trustee which was fraudulently conveyed by debtor are barred from exemption under 11 USCS § 522. In re Roberts (1987, BC WD Pa) 81 BR 354.

Where, as here, state law does not provide for denial of homestead exemption for fraudulent conduct, including arson, appropriate sanction is denial of discharge; thus, Chapter 7 debtor may claim Virginia homestead exemption in proceeds from sale of debtor's homestead property which is subject to judgment lien in favor of insurer arising from debtor's arson, where real property which is subject of claimed exemption is not property which insurer insured or property which was subject of arson by debtor. Rockingham Mut. Ins. Co. v Beahm (In re Beahm) (1995, BC WD Va) 177 BR 839, 7 Fourth Cir & Dist Col Bankr Ct Rep 522.

Chapter 7 debtor did not conceal his age discrimination cause of action so as to bar claiming proceeds of judgment as exempt where debtor testified he did not know cause of action should be listed as asset and that his bankruptcy attorney knew about lawsuit from "day one" and where, when trustee objected, debtor amended his preconversion Chapter 13 plan to provide for submission of nonexempt amount of any recovery to Chapter 13 trustee for distribution to creditors. In re Williams (1996, BC MD Ga) 197 BR 398. Unpublished Opinions

Unpublished: Trustee need not have gotten court order avoiding transfer nor even have filed formal adversary proceeding to recover property in question, but some action to recover property is necessary before 11 USCS § 522(g) will operate to deny debtor exemption in voluntarily transferred but reconveyed property. Silagy v Marzilli (In re Hunter) (2008, BC ND Ohio) 2008 Bankr LEXIS 1510.

71. Under particular circumstances

Bankruptcy Court did not err in concluding that Chapter 7 debtor fraudulently concealed exis-tence of workers' compensation award, and debtor's protest of innocent misunderstanding is insuffi-cient to overturn such clear factual analysis by Bankruptcy Court, and therefore exemption was properly denied. In re Yonikus (1993, CA7 Ill) 996 F2d 866, 29 CBC2d 114, CCH Bankr L Rptr P 75276 (criticized in In re Daniels (2001, BC ED Mich) 270 BR 417) and (criticized in In re Robin-son (2003, BC SD Ohio) 292 BR 599) and (criticized in In re Rolland (2004, BC CD Cal) 317 BR 402).

Chapter 13 debtor may not claim exemption under 11 USCS § 522 of his interest in entireties property which was transferred by debtor and his nondebtor spouse 5 days before bankruptcy be-

Page 141 11 USCS § 522

cause (1) debtor's interest was extinguished 5 days before filing by transfer, (2) property was delib-erately transferred in attempt to avoid consequences of bankruptcy, and (3) equitable principles should estop debtor from claiming exemption. In re Rotunda (1985, WD Pa) 55 BR 386.

Debtor's action to invalidate judgment and promissory note, brought in to delay execution on creditor's judgment lien, in order to gain time to sell property and repay debt, does not constitute fraudulent act barring debtors from subsequently claiming exemption in homestead where done without intent to defraud creditors. In re Natale (1980, BC ED Pa) 5 BR 454, 6 BCD 784, 2 CBC2d 875, CCH Bankr L Rptr P 67700.

Debtor's entitlement to a $ 10,000 exemption under state law entitles debtor to exempt $ 3,052.15 on deposit in bank account where objecting creditor does not prove funds in question were fruit or instrumentality of crime or that debtor fraudulently concealed funds both before and after bankruptcy filing. In re Hanson (1984, BC DC ND) 41 BR 775.

Funds on deposit in bank account which are last remaining funds traceable to sale of debtors' home are not exemptible under 11 USCS § 522(g) because they were obtained by fraud in that debt-ors represented to creditors that they would not receive any proceeds from sale of their home. In re Bidlofsky (1985, BC ED Mich) 57 BR 883.

Judgment creditor's allegations that debtor has fraudulently failed to schedule certain property in which creditor claims security interest is no basis for refusing avoidance, under 11 USCS § 522(f)(1), of creditor's judgment liens on debtor's homestead. In re Magosin (1987, BC ED Pa) 75 BR 545, 16 BCD 476.

Although debtors' misleading and fraudulent actions in misidentifying size of their homestead and later partitioning tract containing residence in such manner as to render nonexempt portion val-ueless could result in total denial of exemption, debtors will be allowed to claim fair share of pro-ceeds from sale of their residence since issues in this case have not been directly addressed by court construing Florida law and one court, in dicta, indicated that debtor had great leeway in selecting shape of his homestead. In re Englander (1992, BC MD Fla) 156 BR 862, affd (1996, CA11 Fla) 95 F3d 1028, 10 FLW Fed C 399, cert den (1997) 520 US 1186, 137 L Ed 2d 682, 117 S Ct 1469.

Chapter 7 debtor's sale of vehicle and use of proceeds to make deposit on lease of new vehicle was not with intent of converting nonexempt property into exempt property or in fraud of creditors where debtor's exemption in motor vehicle remained same and estate was not diminished by trans-action. In re Ayre (1993, BC CD Ill) 158 BR 123.

Exemption under 11 USCS § 522 was disallowed for failure to disclose true value of asset at fil-ing or to amend debtor's schedules to accurately reflect value of judgment after reasonable opportu-nity for further investigation or discovery on part of his counsel. In re Kelley (2000, BC ND Ala) 254 BR 44.

Chapter 13 debtor's original Chapter 7 schedules stated he owned no real property, but after trustee inquired as to any transfers of assets, debtor disclosed his interest in 80 acres, which he later valued at $ 15,000 and amended his schedules to claim as exempt under 11 USCS § 522(d); bank-ruptcy court held that due to debtor's fraudulent concealment of real property, exemption in acreage was denied, and amendment of schedule under Fed. R. Bankr. P. 1009(a), to claim exemption, was also denied. In re Terry (2002, BC WD Ark) 279 BR 240.

Page 142 11 USCS § 522

Debtors' failure to disclose $ 10,000 tax refund as asset was intentional concealment, not just oversight, given it was their only non-exempt asset, they had filed their tax return prior to their bankruptcy petition and were aware of refund, and they spent money prior to Chapter 7 trustee's discovering asset; accordingly, asset should be turned over to trustee completely and debtors denied any exemption in asset. In re Colvin (2003, BC ED Mich) 288 BR 477, 91 AFTR 2d 611.

Bankruptcy court denied any and all exemptions in estate because of debtor's embezzlement from debtor's employer during pendency of case; embezzlement was exceptional circumstance in which bad faith of debtor was clearly demonstrated and allowance of any exemption in known property of estate would constitute further abuse of bankruptcy process. Pineo v Bogan (In re Bogan) (2003, BC WD Pa) 302 BR 524.

11 USCS § 105 allowed bankruptcy court to disallow debtor's exemption on account of any post petition bad acts provided trustee could prove them. In re Koss (2005, BC DC Mass) 319 BR 317.

Where bankruptcy debtors sold their house and disclosed sale and claimed portion of sale pro-ceeds as exempt, but debtors amended their filings to disclose additional proceeds which debtors also claimed as exempt after trustee demanded more information concerning proceeds, debtors' bad faith concealment of additional proceeds precluded their claim of exemption. In re Salvucci (2006, BC DC Mass) 339 BR 279.

Chapter 7 debtors were required to turn over personal property that they failed to initially dis-close in their schedules and were denied exemption in property, even though property would have otherwise been exempt, because debtors acted in bad faith by waiting nine months after filing of original petition to amend their schedules to add unscheduled assets, despite fact that they were aware of omissions on filing date. In re Evinger (2006, BC WD Ark) 354 BR 850.

Where Chapter 7 trustee claimed that debtor's purchase from his company of two parcels of property, which were titled with he and his wife as tenants by entireties, were fraudulent transfers, claim was rejected because properties were purchased with money borrowed using exempt property as collateral, and, alternatively, there was no showing that company was insolvent at time of trans-fer, that purchase price was inadequate, or that purchase price somehow ended back up in debtor's pocket. In re Mathews (2007, BC MD Fla) 360 BR 732, 20 FLW Fed B 249.

Committee's objection under 11 USCS § 522(o) to homestead exemption was sustained because debtor used proceeds from May 2006 sale of his homestead, which were nonexempt under Tex. Prop. Code Ann. § 41.001(c), to make property improvements within 10 years of filing for bank-ruptcy in July 2006; facts that debtor was only person occupying homestead, did not disclose im-provements on his statement of financial affairs, concealed tax refund check, and was insolvent were some of 13 badges of fraud showing that he intended to deplete proceeds to prevent committee from recovering on its judgment obtained five months before he began improvements. In re Presto (2007, BC SD Tex) 376 BR 554.

Objection under 11 USCS § 522(q)(1)(B)(ii) to debtor's homestead exemption was sustained be-cause debtor's ex-wife was awarded half of any potential tax refund, Tex. Fam. Code Ann. § 9.011(b) created fiduciary duty and constructive trust upon debtor's receipt of tax refund proceeds, and debtor intentionally concealed proceeds by failing to give ex-wife her half at time of petition date. In re Presto (2007, BC SD Tex) 376 BR 554.

Page 143 11 USCS § 522

Where Chapter 7 debtor purchased home with his wife as tenants by entireties, debtor was enti-tled to exempt his interest under state law and 11 USCS § 522(b)(3)(B), and § 522(o) did not apply to limit debtor's exemption due to fraud because, by its own provisions, § 522(o) did not address exemption claims asserted under § 522(b)(3)(B). Dillworth v Hinton (In re Hinton) (2007, BC MD Fla) 378 BR 371, 21 FLW Fed B 40.

Where debtor had not disclosed pre-petition workers' compensation claim and had never in-formed her bankruptcy counsel, special counsel, or trustee of settlement, settlement was not exempt under 11 USCS § 522 or state law. Wood v Premier Capital, Inc. (In re Wood) (2003, BAP1) 291 BR 219, CCH Bankr L Rptr P 78834. Unpublished Opinions

Unpublished: In case in which Chapter 7 debtors had engaged in deception and active conceal-ment of value of their real property, which constituted bad faith, appellate court affirmed district court's affirmation of bankruptcy court's denial of debtors' motion to amend their exemptions to claim state exemptions instead of federal exemptions they had claimed under Bankruptcy Code. In re Unruh (2008, CA5 Tex) 2008 US App LEXIS 2616.

Unpublished: Where elderly Chapter 7 debtor and his wife repeatedly changed their positions as to whether they would agree to sell their interests in their home or obtain refinancing and buy out estate's interest, surcharge against debtor's homestead exemption for attorneys' fees and costs in-curred due to delay was not warranted because, although debtor's actions did not speak well of debtor and were unacceptable level of game playing and delay, they were still not within scope of express fraud that would warrant surcharge. In re Sinclair (2006, BC CD Cal) 2006 Bankr LEXIS 9.

Unpublished: Where Chapter 7 trustee claimed that debtor lost right to exempt certain otherwise exempt funds when she fraudulently transferred funds to her sister-in-law, court could not categori-cally hold that debtor retained right to exempt monies because nothing in record indicated when monies were fully reconveyed to debtor, nor when sister-in-law or debtor first became aware that trustee was preparing to bring action to avoid transfer. Silagy v Marzilli (In re Hunter) (2008, BC ND Ohio) 2008 Bankr LEXIS 1510.

2.Conversion of Nonexempt Assets Into Exempt Assets 72. Generally

Chapter 7 debtors may claim exemptions under 11 USCS § 522, because debtor's conversion of nonexempt property to exempt property on eve of bankruptcy for express purpose of placing that property beyond reach of creditors, without more, will not deprive debtor of exemption to which he otherwise would be entitled. Hanson v First Nat'l Bank (1988, CA8 SD) 848 F2d 866, 17 BCD 1195, 19 CBC2d 247, CCH Bankr L Rptr P 72317.

Chapter 7 debtors may claim exemption under 11 USCS § 522, because absent extrinsic evi-dence of fraud, debtor's mere conversion of nonexempt property to exempt property, even while in-solvent, is not evidence of fraudulent intent as to creditors. Hanson v First Nat'l Bank (1988, CA8 SD) 848 F2d 866, 17 BCD 1195, 19 CBC2d 247, CCH Bankr L Rptr P 72317.

Under 11 USCS § 522(b)(2), conversion of nonexempt property for purpose of placing property out of reach of creditors, without more, will not deprive debtor of exemption to which he would otherwise be entitled. Norwest Bank Nebraska, N.A. v Tveten (1988, CA8 Minn) 848 F2d 871, 17 BCD 1205, 19 CBC2d 287, CCH Bankr L Rptr P 72316, reh den, en banc (1988, CA8) 1988 US

Page 144 11 USCS § 522

App LEXIS 11321 and (criticized in Murphey v Crater (In re Crater) (2002, BC DC Ariz) 286 BR 756, 49 CBC2d 1829).

Desire to convert assets into exempt forms by itself does not constitute fraud, but rather, extrin-sic evidence of fraudulent intent is required to establish fraud. In re Johnson (1989, CA8 Minn) 880 F2d 78, 19 BCD 1033, 21 CBC2d 498, CCH Bankr L Rptr P 73028.

Indicia of fraud necessary to find fraudulent use of exemption include conduct intentionally de-signed materially to mislead or deceive creditors about debtors' position or to use credit to buy ex-empt property, converting very great amount of property, or existence of conveyances for less than adequate consideration; finding of fraudulent intent, or lack thereof, is crucial in determining whether conversion of nonexempt property on eve of bankruptcy is ground for setting aside exemp-tion--extrinsic evidence of fraud must exist. In re Armstrong (1991, CA8 Neb) 931 F2d 1233, 21 BCD 1262, CCH Bankr L Rptr P 73927, reh, en banc, den (1991, CA8) 1991 US App LEXIS 11174 and reh den (1991, CA8) 1991 US App LEXIS 12276.

Chapter 7 debtors' exemption is properly upheld under 11 USCS § 522, despite allegation that debtors converted nonexempt assets into exempt assets on eve of bankruptcy, where there is no ex-trinsic evidence of fraud as transfers were made for adequate consideration. In re Armstrong (1991, CA8 Neb) 931 F2d 1233, 21 BCD 1262, CCH Bankr L Rptr P 73927, reh, en banc, den (1991, CA8) 1991 US App LEXIS 11174 and reh den (1991, CA8) 1991 US App LEXIS 12276.

Chapter 7 debtors' exemption will be upheld under 11 USCS § 522, despite contention that debt-ors transferred property precisely for purpose of taking advantage of statutory exemption, because if transfer is legitimate under established state law, intent to effect such transfer is merely intent to ex-ercise valid right, rather than intent to defraud. In re Armstrong (1991, CA8 Neb) 931 F2d 1233, 21 BCD 1262, CCH Bankr L Rptr P 73927, reh, en banc, den (1991, CA8) 1991 US App LEXIS 11174 and reh den (1991, CA8) 1991 US App LEXIS 12276.

Under Bankruptcy Code, as under former Bankruptcy Act, debtor is permitted to convert nonex-empt property into exempt property before filing bankruptcy petition, and such eleventh-hour prac-tice is not fraudulent as to creditors, absent more than such act itself, and permits debtor to make full use of exemptions to which he is entitled. In re Ford (1980, BC DC Md) 3 BR 559, 6 BCD 202, 1 CBC2d 840, CCH Bankr L Rptr P 67429, affd (1981, CA4 Md) 638 F2d 14, 3 CBC2d 549, CCH Bankr L Rptr P 67768 and (superseded by statute as stated in In re Bell-Breslin (2002, BC DC Md) 283 BR 834) and (criticized in In re Spears (2004, BC WD Mich) 308 BR 793).

Debtor does not act in bad faith when converting nonexempt assets to exempt assets on eve of filing bankruptcy petition. In re James (1983, BC DC SD) 31 BR 67.

Debtor may convert non-exempt property into exempt property on eve of bankruptcy without necessarily committing fraud upon his creditors; such conversions are only fraudulent to extent that exempt property was obtained as result of fraudulent conduct. In re Saunders (1984, BC ND Ohio) 37 BR 766.

Under 11 USCS § 522 it is perfectly proper and indeed may be good planning, for debtor to convert non-exempt assets into those which are exempt, even on eve of bankruptcy; however, under 11 USCS § 548(a), same transfer may be avoidable if specified conditions are met. In re Oliver (1984, BC DC Mass) 38 BR 407.

Page 145 11 USCS § 522

Prebankruptcy transfer of property from nonexempt to exempt status is not badge of fraud and is not automatically prohibited; such transfer is approved method of prebankruptcy planning. In re Levine (1984, BC SD Fla) 40 BR 76, 10 CBC2d 876.

Mere act of debtor of converting property from nonexempt to exempt status immediately prior to bankruptcy, without more, is neither badge of fraud nor prohibited by Bankruptcy Code; thus, such conversion of assets does not affect debtor's right to exemptions under 11 USCS § 522. In re Blum (1984, BC SD Fla) 41 BR 816, 12 BCD 259, CCH Bankr L Rptr P 70009.

Despite fact that debtors made numerous transfers of nonexempt property just prior to filing and purchased exempt property with cash from these transfers, objector to exemptions has burden of proving fraudulent intent; legislative history of 11 USCS § 522 indicates that such transfers do not by themselves constitute fraud. In re Butts (1984, BC DC ND) 45 BR 34, 12 BCD 633.

Debtor may convert nonexempt property into exempt property on eve of bankruptcy under 11 USCS § 522, as long as it is not done with intent to conceal assets or hinder, delay, or defraud credi-tors. In re Holt (1988, BC WD Ark) 84 BR 991, affd (1988, WD Ark) 97 BR 997, affd (1990, CA8 Ark) 894 F2d 1005, 22 CBC2d 337, CCH Bankr L Rptr P 73239.

Generally, debtor's conversion of nonexempt property to exempt property on eve of bankruptcy is not fraudulent per se; extrinsic evidence of fraud must be present to invalidate exemption. In re Summers (1988, BC DC Or) 85 BR 121.

Under 11 USCS § 522, Chapter 7 debtor may convert his non-exempt property into exempt property. In re Brown (1988, BC DC Hawaii) 88 BR 280, 17 BCD 1296, 19 CBC2d 387 (criticized in Deglin v Keobapha (In re Keobapha) (2002, BC DC Conn) 279 BR 49, 39 BCD 182, 48 CBC2d 485).

Preponderance of evidence is appropriate standard of review in action brought under 11 USCS § 522(o). In re Lacounte (2005, BC DC Mont) 342 BR 809, CCH Bankr L Rptr P 80653.

Preponderance of evidence is appropriate standard of review in action brought under 11 USCS § 522(o); because Congress elected to draft 11 USCS § 522(o) with language that is identical to that used in 11 USCS § 548(a)(1)(A) and § 727(a)(2), case law under 11 USCS § 548(a)(1)(A) and § 727(a)(2) provides instructive guidance with respect to 11 USCS § 522(o). In re Lacounte (2005, BC DC Mont) 342 BR 809, CCH Bankr L Rptr P 80653. 73. Homestead exemption

Where there was no intent to defraud in Chapter 7 debtor's payoff of mortgages on house and dissolution lien in favor of his ex-wife, debtor is entitled to homestead exemption and amount of money involved in this exemption is irrelevant to determination of whether debtor intended to de-fraud his creditors, as there is no dollar limit on homesteads in Minnesota; however, remand is nec-essary for Bankruptcy Court to determine with respect to exemptions for musical instruments and life insurance whether facts, including amounts involved, show fraud warranting denial of discharge under 11 USCS § 727(a)(4) in conversion of nonexempt assets into these exempt items. In re John-son (1989, CA8 Minn) 880 F2d 78, 19 BCD 1033, 21 CBC2d 498, CCH Bankr L Rptr P 73028.

Bankruptcy court's finding of sufficient extrinsic evidence of intent to defraud based on "badges of fraud" approach was not clearly erroneous, where ninety-year-old debtor, who had been recently named defendant in personal injury suit with claimed damages well in excess of his liability insur-

Page 146 11 USCS § 522

ance, converted his non-exempt property into exempt property in form of house valued at $ 135,000, into which he moved from assisted care facility, in radical departure from his previous lifestyle, after which he immediately filed bankruptcy. Jensen v Dietz (In re Sholdan) (2000, CA8 Minn) 217 F3d 1006, CCH Bankr L Rptr P 78216 (criticized in Murphey v Crater (In re Crater) (2002, BC DC Ariz) 286 BR 756, 49 CBC2d 1829).

Where Chapter 13 debtor is entitled under Texas state exemption provisions to claim as home-stead some portion of property sought to be recovered by trustee as fraudulent conveyance, trustee may not enforce equitable lien on property in spite of fact that debtor's machinations in transferring property between himself and corporation in which he is sole shareholder may have been prompted by desire to remove assets from execution by creditors. In re Moody (1987, SD Tex) 77 BR 566, affd (1989, CA5 Tex) 862 F2d 1194, CCH Bankr L Rptr P 72633, reh den (1989, CA5) 1989 US App LEXIS 3526 and cert den (1992) 503 US 960, 118 L Ed 2d 209, 112 S Ct 1562.

Pursuant to 11 USCS § 522(d), trustee's objections to debtors' claim of homestead exemption would be sustained and debtors' motion to dismiss denied where debtors attempted to shift their po-sition from nonexempt to exempt and from federal to state by unseasonably filed documents and amendments after administration of estate was well under way in order to circumvent trustee's ad-ministration and liquidation of estate for benefit of all creditors. In re Myers (1982, BC ED Cal) 17 BR 410, CCH Bankr L Rptr P 68663.

Debtor's prepetition liquidation of savings account to satisfy mortgages on property claimed in homestead exemption under 11 USCS § 522(b)(2) is not fraudulent because both Minnesota law and Bankruptcy Code allow conversion of non-exempt to exempt property as long as debtors in fact use property as homestead, there was fair consideration, assets converted were nonbusiness assets, and trustee can prove no actual fraud. In re Olson (1984, BC DC Minn) 45 BR 501, 11 CBC2d 1077.

Under appropriate circumstances, constructive trust may be imposed as lien upon homestead property where fraudulently obtained proceeds can be traced and can be shown to have been used in purchase or construction of homestead property, notwithstanding homestead character of property; however, relief in such cases is limited to funds actually traced and does not preclude debtor from claiming as exempt remaining untainted equity. In re Mart (1987, BC SD Fla) 75 BR 808.

Chapter 7 debtors' conduct in converting non-exempt assets to exempt asset via paydown on principal amount of their mortgage on homestead property on attorney's advice for admitted pur-poses of removing property from reach of creditors was improper and trustee will be granted equi-table lien on debtors' homestead to secure payment of sum of $ 21,000 which was amount con-verted. In re Spoor-Weston, Inc. (1992, BC ND Okla) 139 BR 1009, affd without op (1993, CA10 Okla) 13 F3d 407, reported in full (1993, CA10 Okla) 1993 US App LEXIS 33662.

When debtor's right to exemption is challenged on grounds that debtor converted nonexempt property into exempt property, it is appropriate to inquire into circumstances surrounding transfer, as there is substantial and respectable authority to support denial of debtor's right to exemptions upon showing by extrinsic evidence that debtor converted nonexempt property into exempt property with specific intent to defraud his or her creditors; showing that conversion of nonexempt asset into exempt asset for specific purpose of placing asset out of reach of creditors is sufficient to deprive debtor of his right to claim property as exempt; Chapter 11 debtors will be denied their exemption in paid up annuities and their homestead where it is clear that systematic conversion of assets was undertaken by debtors in order to protect these assets from claim of creditor who had obtained

Page 147 11 USCS § 522

judgment against debtor and who was no doubt ready to undertake whatever steps were necessary to obtain satisfaction of its judgment. In re Schwarb (1992, BC MD Fla) 150 BR 470, CCH Bankr L Rptr P 75135, 7 FLW Fed B 8.

Chapter 7 debtors who incurred substantial indebtedness in their home state of Wisconsin moved to Florida, converted their nonexempt assets into property that is exempt under Florida law, and then filed Chapter 7 in Florida in order to take advantage of Florida's liberal exemption laws are not entitled to homestead exemption to extent that debtors achieved benefit greater than their enti-tlement under Wisconsin law where debtors' actions suggest concerted effort to defeat ability of ex-isting creditors to be paid moneys owed them by maximizing exemption protections offered under Florida law; under Wisconsin law, debtors would have been entitled to $ 40,000 exemption in pro-ceeds of sale of their home and thus they will be allowed to exempt $ 40,000. In re Coplan (1993, BC MD Fla) 156 BR 88, 17 EBC 1125, CCH Bankr L Rptr P 75341, 7 FLW Fed B 160 (criticized in In re Young (1999, BC MD Fla) 235 BR 666, 12 FLW Fed B 249).

Objecting creditor has not demonstrated that debtor acted with specific intent to defraud his creditors by prepetition conversion of nonexempt assets to exempt, although debtor, within days of entry of judgment against him, relocated to Florida which has more generous exemption laws than Tennessee, which is where debtor previously resided, and although debtor purchased homestead within days of entry of judgment against him, where there was evidence that debtor had planned on Florida retirement for many years before doing so, debtor was, in fact, of retirement age at time he purchased Florida residence, debtors placed their Tennessee home on market with anticipation that they would purchase home in Florida, debtors purchased home only after tough negotiations with seller, it was not unusual for debtors to purchase homes with cash, debtors did not attempt to con-ceal purchase of home, and purchase occurred more than 18 months prior to bankruptcy filing. In re Hill (1994, BC ND Fla) 163 BR 598, 30 CBC2d 1233, 7 FLW Fed B 369.

When debtor's right to exemption is challenged on grounds that debtor converted nonexempt property to exempt property it is appropriate to inquire into circumstances surrounding transfer; in present case, although facts support inference that debtors embarked upon elaborate strategy to pre-vent creditor from recovering on note and guarantee by disappearing, successfully preventing credi-tor from finding them, and using all available funds to purchase their homestead, placing all funds out of reach of creditor, facts also permit inference that debtors believed that surrender of 2 store locations was satisfactory resolution of claims against creditor and that they embarked on extended journey for innocent reason of enjoying their well-deserved retirement, and inasmuch as creditor must prevail by preponderance of evidence, debtors cannot be found to have fraudulently converted nonexempt assets into exempt assets which would deprive them of right to exempt homestead prop-erty. In re Snape (1994, BC MD Fla) 166 BR 184, CCH Bankr L Rptr P 75915A, 8 FLW Fed B 31.

Chapter 7 debtors' homestead exemption is disallowed to extent of conversion of nonexempt as-sets, where 2 days prior to bankruptcy filing and after consultation with their attorney, debtors sold their nonexempt automobile which was free of liens and used portion of proceeds to make mortgage payments, which constituted intentional hindrance or delay of creditors and was, therefore, fraudu-lent under Florida law. In re Thomas (1994, BC MD Fla) 172 BR 673, 32 CBC2d 312 (criticized in In re Wilbur (1997, BC MD Fla) 206 BR 1002, CCH Bankr L Rptr P 77355, 10 FLW Fed B 281) and (criticized in Key Bank v Jost (In re Jost) (1998, CA11 Fla) 136 F3d 1455, 11 FLW Fed C 1145).

Page 148 11 USCS § 522

Chapter 7 debtors' down payment of $ 66,043.59 cash on purchase of residence less than ten months before their bankruptcy filing, which resulted in approximately $ 65,000 of equity in resi-dence, constituted transfer of non-exempt assets to exempt assets with intent to hinder, delay, or de-fraud debtors' creditors, thus forfeiting debtors' homestead exemption under Florida law to extent of their use of non-exempt assets to purchase residence, where circumstances of case made it apparent that debtors undertook well considered and carefully orchestrated series of maneuvers for purpose of shielding their assets from creditors; in addition, fact that debtors had foresight to begin process of transferring assets approximately 18 months prior to filing did not alter conclusion that debtors improperly shielded their assets from creditors. In re Bandkau (1995, BC MD Fla) 187 BR 373 (criticized in In re Young (1999, BC MD Fla) 235 BR 666, 12 FLW Fed B 249).

Trustee's avoidance powers could not defeat debtors' homestead exemption under following cir-cumstances: (a) assuming trustee avoided April 2003 mortgage either as preference or as fraudulent transfer, mortgage would have been preserved for benefit of estate, 11 USCS § 551; (b) because mortgage was voluntary transfer, debtors would not have been able to exempt any such property recovered by trustee, 11 USCS § 522(g); (c) avoidance of mortgage, however, would not have de-feated debtors' claim of exemption in equity in their home; (d) debtors would have retained home-stead subject to mortgage held by trustee, and (e) debtors' homestead exemption claim appeared to be limited to their equity in property. Sergeant v G.R.D. Invs. L.L.C. (In re Schaefer) (2005, BC ND Iowa) 331 BR 401.

In Chapter 13 case, homestead exemption under Minn. Stat. § 510.01 was denied under 11 USCS § 522(o) because evidence showed that debtor sold property obtained from proceeds of line of credit in order to pay down that same debt; this was done with intent to hinder, delay, or defraud creditors, and court examined badges of fraud in making its decision. In re Maronde (2005, BC DC Minn) 332 BR 593, CCH Bankr L Rptr P 80394.

Chapter 13 debtors' homestead exemption was reduced by $ 42,500 and plan confirmation de-nied because debtors violated 11 USCS § 522(o) by selling $ 42,500 in nonexempt assets and apply-ing proceeds to their home mortgage only months before they filed their bankruptcy petition--period of time when they were admittedly insolvent and contemplating bankruptcy. In re Lacounte (2005, BC DC Mont) 342 BR 809, CCH Bankr L Rptr P 80653.

Chapter 13 debtors homestead exemption was reduced by $ 42,500 and plan confirmation de-nied because debtors violated 11 USCS § 522(o) by selling $ 42,500 in nonexempt assets and apply-ing proceeds to their home mortgage only months before they filed their bankruptcy petition, during period of time when they were admittedly insolvent and contemplating bankruptcy. In re Lacounte (2005, BC DC Mont) 342 BR 809, CCH Bankr L Rptr P 80653.

Trustee's objection under 11 USCS § 522(o)(4) to that portion of Chapter 7 debtors' claimed homestead exemption that was acquired less than month before debtors filed bankruptcy, in part through exchange of non-exempt property, was denied because trustee had not established that debtors acted with intent to hinder, delay, or defraud creditors; debtors made exchange to assist one debtor's mother with estate planning, and debtors did not attempt to conceal transaction during bankruptcy proceedings. In re Agnew (2006, BC DC Kan) 355 BR 276.

Recording of homestead exemption declaration is not analogous to types of transfers of nonex-empt property that are covered under 11 USCS § 522(o), and mere fact that debtor files homestead declaration within 10 years of filing for bankruptcy protection does not bring debtor within §

Page 149 11 USCS § 522

522(o)(4); filing homestead declaration is essentially nothing more than taking advantage of exemp-tion available under state law. In re Lyons (2006, BC DC Mass) 355 BR 387.

Chapter 7 debtor's action in filing homestead exemption declaration pursuant to Mass. Gen. Laws Ann. ch. 188, § 1, less than 10 years before he filed his bankruptcy petition did not bring him within exemption limitations set out in 11 USCS § 522(o) because recording of exemption declara-tion did not constitute sale or transfer of property, which was required to come within purview of § 522(o). In re Lyons (2006, BC DC Mass) 355 BR 387.

Where Chapter 7 trustee argued that borrowing of money against parcel of property, which loan proceeds were deposited into joint checking account of debtor and his wife and then used to pay off their homestead mortgage, was fraudulent transfer of non-exempt property to exempt property in violation of Fla. Stat. § 222.30(2) and 11 USCS § 522(o), claim was rejected because parcel was owned by debtor and his wife as tenants by entireties, and debtor merely transferred exempt prop-erty into other exempt property; fact that debtor alone signed loan documents and that loan proceed checks were made out to debtor solely did not make loan proceeds non-exempt. In re Mathews (2007, BC MD Fla) 360 BR 732, 20 FLW Fed B 249.

Where Chapter 7 debtor obtained several large cash advances from his credit cards when he had no ability to repay them and transferred some of that money within one year of filing bankruptcy to pay off secured line of credit on his home, and to improve his home, debtor's conduct warranted re-duction of debtor's homestead exemption pursuant to 11 USCS § 522(o). Turner v Keck (In re Keck) (2007, BC DC Kan) 363 BR 193.

Chapter 7 debtor's homestead exemption was reduced pursuant to 11 USCS § 522(o) by amount of funds used by debtor's wife to help purchase property that could be traced to debtor's sale of non-exempt stock because conversion of nonexempt assets into exempt asset was made with intent to hinder, delay, or defraud creditors, based on existence of 11 badges of fraud, including that (1) transfer of proceeds to wife was to insider, (2) transfer was concealed, (3) value received for stock was not reasonably equivalent to value of stock, (4) debtor was insolvent at time of transfer, (5) transfer was substantially all of debtor's assets, and (6) transfer was done just prior to filing of debtor's bankruptcy petition. In re Sissom (2007, BC SD Tex) 366 BR 677.

Where court determined that debtor's homestead exemption had to be reduced pursuant to 11 USCS § 522(o) by amount of funds used to help purchase property that could be traced to sale of nonexempt stock, appropriate remedy was to grant trustee equitable lien on debtor's homestead in amount of reduction, and give debtor and his wife 120 days to pay off lien or trustee would be per-mitted to foreclose his lien. In re Sissom (2007, BC SD Tex) 366 BR 677.

Debtor was entitled to take homestead exemption as claimed pursuant to Kan. Stat. Ann. § 60-2301 (2005) and 11 USCS § 522(o), although he had used nonexempt assets of $ 240,000 to pay down his mortgage and thus increased value of exemption, but had not done so with fraudulent in-tent. In re Anderson (2008, BC DC Kan) 386 BR 315.

74. Life insurance exemption

Although it is not fraudulent per se for insolvent debtor to convert nonexempt property into ex-empt property on eve of bankruptcy, debtor who, while insolvent, liquidated all nonexempt assets, collected accounts receivable, paid off certain favored creditors, and bought paid up life insurance policy through lump-sum payment, will not be entitled to exemption on insurance where, under

Page 150 11 USCS § 522

state law, no exemption is created when premium payment is made with intent to defraud creditors; fact that transaction between debtor and insurance company is bona fide, i.e., fair consideration is given in exchange for insurance policy, does not mitigate against conclusion that debtor intended to defraud creditors by placing property in exempt status. In re Mehrer (1980, BC ED Wash) 2 BR 309, 5 BCD 1240, 22 CBC 301.

Sale of nonexempt properties by debtors on eve of bankruptcy and use of proceeds obtained from sale to enhance values of exempt properties is not fraudulent act where funds obtained from liquidation of nonexempt properties were used to repay loan obtained by them against cash surren-der value of life insurance policy; repayment of legitimate obligation prior to commencement of bankruptcy case is not fraudulent; fact that debtors replaced heat pump and air handler unit in resi-dence does not operate as forfeiture of debtors' right to claim residence exempt as homestead. In re Russell (1982, BC MD Fla) CCH Bankr L Rptr P 69538.

Chapter 7 debtors have fraudulently converted nonexempt property to exempt property under Oregon opt-out provisions on eve of bankruptcy by repaying loan on life insurance policy where: (1) debtors were insolvent at time of repayment; (2) debtors admit that sole reason for making re-payment was to shelter assets from creditors and maximize exemptions, not to protect dependents; (3) repayment was made 6 days before bankruptcy filing; and (4) after repayment, debtors are left with less than $ 5,000 in nonexempt assets to satisfy scheduled unsecured claims in excess of $ 150,000. In re Summers (1988, BC DC Or) 85 BR 121.

75. Annuity exemption

When debtor's right to exemption is challenged on grounds that debtor converted nonexempt property into exempt property, it is appropriate to inquire into circumstances surrounding transfer, as there is substantial and respectable authority to support denial of debtor's right to exemptions upon showing by extrinsic evidence that debtor converted nonexempt property into exempt property with specific intent to defraud his or her creditors; showing that conversion of nonexempt asset into exempt asset for specific purpose of placing asset out of reach of creditors is sufficient to deprive debtor of his right to claim property as exempt; Chapter 11 debtors will be denied their exemption in paid up annuities and their homestead where it is clear that systematic conversion of assets was undertaken by debtors in order to protect these assets from claim of creditor who had obtained judgment against debtor and who was no doubt ready to undertake whatever steps were necessary to obtain satisfaction of its judgment. In re Schwarb (1992, BC MD Fla) 150 BR 470, CCH Bankr L Rptr P 75135, 7 FLW Fed B 8.

Trustee has failed to establish that debtors forfeited exemption in annuity to which they other-wise would be entitled by converting nonexempt assets into cash to purchase exempt annuity where record is devoid of any evidence of imminent threat of levy, attachment, garnishment, or execution on judgment just prior to debtors' conversion of assets. In re Swecker (1993, BC MD Fla) 157 BR 694, CCH Bankr L Rptr P 75434, 7 FLW Fed B 221.

Chapter 13 debtor acted with intent to hinder, delay, or defraud creditors by placing proceeds from sale of her business into exempt annuities where debtor purchased annuities on date of sale closing, one month prior to bankruptcy filing, debtor's lack of knowledge about terms of annuities indicates that, rather than trying to insure that she could continue to pay living expenses, debtor was attempting to place proceeds of land sale out of reach of her creditors, debtor failed to list sale of property on bankruptcy schedules, debtor understands bankruptcy process and is aware of effect of

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placing funds into annuities, and debtor testified that one reason for purchasing annuities was to protect funds from her creditors. In re Mackey (1993, BC MD Fla) 158 BR 509, 7 FLW Fed B 260.

Under Wis. Stat. § 815.18(3)(j) and (10), chapter 7 debtor was entitled to exempt $ 136,000 in retirement-related annuities that she purchased on eve of bankruptcy with her non-exempt property; though she thereby placed her assets beyond creditor's reach, she did so to provide for her retire-ment, and there was no extrinsic evidence of fraud. In re Vangen (2005, BC WD Wis) 334 BR 241.

76. Other particular exemptions

Trustee is entitled to automobile purchased with nonexempt assets subsequent to filing of bank-ruptcy petition since nonexempt assets may not be converted into exempt assets under 11 USCS § 522(d)(2) once case has been commenced. In re Ayers (1982, BC MD Tenn) 25 BR 762.

Chapter 7 debtor is entitled to claimed exemptions, even though exempt property was purchased with nonexempt funds on eve of bankruptcy, where none of exempt items were purchased with funds procured from secured creditor and there has been no showing of actual intent to defraud. In re Barash (1986, BC DC Kan) 69 BR 231.

Debtor is entitled to convert nonexempt property into exempt property under 11 USCS § 522 up until filing of bankruptcy petition and this practice is not fraudulent per se; but when conversion is intended to defeat interests of creditors, such exemptions may be denied to extent of any fraudulent conduct; fraudulent intent by debtor is not established by delay in depositing funds received from sale of produce, immediate withdrawal of funds after depositing checks, procurement of cashier's check from proceeds, and conversion of nonexempt business assets to exempt personal assets, all done while debtor was insolvent. In re Elliott (1987, BC MD Fla) 79 BR 944, 16 BCD 922.

Debtor did not fraudulently convert non-exempt stocks to exempt ones, where his entire pattern of investing with his wife was by tenancy by entirety, even after creditor's claim arose, and was not marked by secrecy. In re Allen (1996, BC MD Fla) 203 BR 786, 10 FLW Fed B 141.

Chapter 7 trustee could not use 11 USCS § 522(o) to prevent debtor's claim of exemption to cer-tain consumer goods purchased on eve of bankruptcy because § 522(o) only applied to real or per-sonal property that debtor used as residence or claimed as homestead. In re Sissom (2007, BC SD Tex) 366 BR 677.

F.Valuation of Exempt Property 77. Generally

Where property is sold during pendency of appeal from lien avoidance action for amount con-siderably in excess of value mentioned in debtors' complaint and where there is no suggestion that property increased in value after date of bankruptcy filing, court should use sale price of property for determining fair market value; fair market value of property is important factor under 11 USCS § 522(f) because extent to which lien impairs valid exemption depends on amount of debtor's equity in property. Fitzgerald v Davis (1984, CA4) 729 F2d 306, 11 BCD 968, CCH Bankr L Rptr P 69737.

Where debtor attaches precise dollar value to interest he is claiming under Virginia homestead exemption and does not amend that value upward within amount allowed under Virginia homestead law, debtor's exemption for that interest is limited to precise value debtor listed as exempt, regard-less of trustee's failure to object to exemption. Addison v Reavis (1993, ED Va) 158 BR 53, 5 Fourth Cir & Dist Col Bankr Ct Rep 903, affd without op sub nom Ainslee v Grablowsky (In re

Page 152 11 USCS § 522

Grablowsky) (1994, CA4 Va) 32 F3d 562, reported in full (1994, CA4 Va) 1994 US App LEXIS 20701.

Value of property for purpose of determining exemption is fair market value as of date of filing of petition, as provided by 11 USCS § 522; however, in determining fair market value, Bankruptcy Court must take into account all considerations which might reasonably affect valuation of property, including fact that purpose of valuation under exemption provisions is to determine whether prop-erty is subject to liquidation by trustee because it is in excess of specified monetary amounts, so that, for purpose of exemption, value should be liquidation value of property, rather than price that seller in ordinary market, and under no obligation to sell, might obtain. In re Walsh (1980, BC DC Dist Col) 5 BR 239, 6 BCD 793, 2 CBC2d 815, CCH Bankr L Rptr P 67970 (criticized in In re Richardson (2001, BC SD Ala) 280 BR 717).

In determining value of property in proceeding under 11 USCS § 522(f), fair market value is to be determined and such determination is not thereafter to be reduced by any expenses or costs which might be incurred in sale of such property. In re Nellis (1981, BC DC Conn) 12 BR 770.

Both federal and state exemptions are to be determined as of date of filing of petition and value of property claimed as exempt for purposes of 11 USCS § 522(f) is fair market value as of that date and value should not include post-filing appreciation. In re Tarrant (1982, BC DC Alaska) 19 BR 360, 9 BCD 413, CCH Bankr L Rptr P 68747.

Fair market value referred to in 11 USCS § 522(a) does not mean liquidation value but price which could be obtained under normal business conditions by reasonably able and conscientious business person. In re Henderson (1982, BC DC NM) 33 BR 149, 11 BCD 101, CCH Bankr L Rptr P 69419.

Valuation of medical equipment exempted by joint Chapter 7 debtors as tools of trade is not based on replacement cost or going concern value because creditor who holds security interest in equipment is not in medical business, thus it is commercially reasonable to use wholesale value. In re Reeder (1986, BC DC Colo) 60 BR 312.

Valuation of property in divorce decree cannot be binding on Bankruptcy Court since 11 USCS § 522(a)(2) requires that property claimed as exempt must be valued as of date petition is filed. In re Sanderfoot (1988, BC ED Wis) 83 BR 564, 18 CBC2d 598, CCH Bankr L Rptr P 72212, revd on other grounds (1988, ED Wis) 92 BR 802, affd (1990, CA7 Wis) 899 F2d 598, 20 BCD 651, 22 CBC2d 780, CCH Bankr L Rptr P 73322, revd, remanded on other grounds (1991) 500 US 291, 114 L Ed 2d 337, 111 S Ct 1825, 91 CDOS 3705, 91 Daily Journal DAR 6028, 21 BCD 1160, 24 CBC2d 841, CCH Bankr L Rptr P 73964, on remand, remanded on other grounds (1991, CA7 Wis) 943 F2d 679, CCH Bankr L Rptr P 74292.


Although creditors failed to object to debtors' claimed exemption in their personal residence, this did not prevent creditors from challenging debtors' valuation of exemption when they defended against debtors' motion to avoid judicial lien pursuant to 11 USCS § 522(f)(1) because creditors did

Page 153 11 USCS § 522

not challenge propriety of exemption, only value. Conner v Wrobel (In re Conner) (2003, BC WD Pa) 300 BR 644.

11 USCS § 522(p)(1)'s $ 125,000 cap does not only apply to property purchased within 1,215 days of bankruptcy petition as plain language of statute applies to any property interest that was ac-quired. In re Greene (2006, BC DC Nev) 346 BR 835 (criticized in Rogers v Wallace (In re Rogers) (2006, ND Tex) 2006 US Dist LEXIS 75826).

78. Deduction for transaction costs

There is no reduction in fair market value of Chapter 7 debtor's residence for cost of transfer taxes and broker's commission prior to calculating amount available for debtors' claimed exemp-tions under 11 USCS § 522(d)(1) and (d)(5), and thus amount for mortgagee's judicial liens after deduction of nonavoidable mortgages and debtors' exemptions, because to allow such reduction in effect is to avoid all or part of judicial liens by modifying accepted meaning of fair market value, particularly where, in this case, debtors intend to remain in residence, thus making it doubtful there will be any actual transfer taxes or broker's fee. In re Clendennen (1986, BC WD Pa) 67 BR 909.

Where Chapter 13 debtor is choosing to claim exemption in property without liquidating, no transaction costs are contemplated, and, thus, where debtor seeks to avoid liens absent liquidation, she is not entitled to deduct transaction costs from creditor's valuation of property; 11 USCS § 522(a)(2) specifically mandates that fair market value be used for purposes of any valuation. In re Windfelder (1988, BC ED Pa) 82 BR 367.

Where bankruptcy court determined that debt in nature of alimony was nondischargeable, bank-ruptcy granted debtor's ex-spouse relief from stay to pursue collection, but noted that ex-spouse could not attempt to satisfy alimony award from any asset that debtor had properly exempted pursu-ant to 11 USCS § 522. Collins v Tielsch (In re Tielsch) (2003, BC WD Pa) 299 BR 114.

79. Hearing

Bankruptcy Court will set up valuation hearing to determine value of property scheduled by debtors as exempt, upon request of either debtors or creditors, where parties cannot agree upon valuation of respective exempt items. In re Lyon (1980, BC DC Kan) 6 BCD 343, 2 CBC2d 561.

Valuation hearing is required within deadline provided in Bankruptcy Rule 4003(b) where it is necessary to value property in order to measure exemption claim; however, when objection goes only to nature of exemption claim, or when exemption claim is to liquidated monetary amount well within exemption's monetary limitations, no valuation of property is implicated or required. In re DeSoto (1995, BC DC Conn) 181 BR 704, 33 CBC2d 902, CCH Bankr L Rptr P 76521.


Where Chapter 7, 11 USCS §§ 701 et seq., debtors claimed $ 4,000 exemptions pursuant to 11 USCS § 522(d) for two lawsuits, and their trustee did not object pursuant to Fed. R. Bankr. P. 4003(b) at subsequent creditors' meeting held pursuant to 11 USCS § 341, when they later claimed that full value of suits was exempted, settlement of suits was properly upheld as their explanation-that $ 4,000 was expected value-was dubious, and such was implausible full valuation; trustee's reading of exemption was not objectively unreasonable, and remainder of $ 100,000 settlement that trustee unilaterally negotiated properly became estate property pursuant to 11 USCS § 541. Bar-roso-Herrans v Lugo-Mender (In re Barroso-Herrans) (2008, CA1 Puerto Rico) 524 F3d 341, CCH Bankr L Rptr P 81233.

Page 154 11 USCS § 522

Lawsuits two debtors and company they owned filed against Puerto Rico Aqueducts and Sewer Authority, alleging breach of contract, were not completely removed from bankruptcy estate by ex-emptions debtors claimed under 11 USCS § 522(d)(5) because exemptions covered only part of claims debtors made in their lawsuits, and remaining value in lawsuits was property of bankruptcy estate. Barroso Herrans v Lugo Mender (2007, DC Puerto Rico) 364 BR 463.

In valuing exemption amount that debtor may take in mineral interest not claimed as having any value in schedule filed with debtor's petition, debtor must measure his exemptions claimed in min-eral rights by deducting from value one-half of value of real estate together with amount of royalties debtor has received and will have received at time trustee sells mineral rights to private buyer or debtor buys them from trustee. In re Schumacher (1982, BC ED Mo) 1 BAMSL 699.

Neither estimated value used by Chapter 7 debtors in preparing their bankruptcy schedules nor valuation placed on home in state court dissolution judgment is binding on debtors in determining value of property for purposes of motion to avoid lien under 11 USCS § 522(f) because admission in schedule filed in bankruptcy proceeding, like other admissions, may be corrected or explained by debtor and is not res judicata either as to creditors or debtor; where evidence was presented that home had declined in value after dissolution judgment due to structural damage and debtors' ap-praiser testified that property was worth $ 46,000, debtors have sustained burden of establishing that value of property is $ 46,000; with that valuation, there is insufficient equity in home above amount of mortgage to allow for former spouse's lien of $ 3,500 in addition to $ 7,500 homestead exemp-tion of debtor husband and therefore, former spouse's lien impairs exemption, regardless of whether debtor wife may claim additional exemption if she does not hold title to property. In re Boggess (1989, BC SD Ill) 105 BR 470, 21 CBC2d 1015.

Chapter 7 debtors are not entitled to 41 percent of value of entire crop just because that is way they described property in which exemption was claimed, where, since debtors control information placed on their bankruptcy schedules, any ambiguities must be construed against them; by focusing on description of property in which exemption was claimed, without any consideration for value of claimed exemption, debtors attempt to create ambiguity with regard to just what it was they claimed as exempt--41 percent of crop or $ 5,950--and they then proceed to resolve this ambiguity in their favor, rather than against them as law requires. In re Sherbahn (1994, BC ND Ind) 170 BR 137.

Debtors' assigning of zero value to residence and other property claimed as exempt under Mary-land statutes did not remove debtors' equity in that property, if any, from property of estate; debtors' claimed exemption which assigned "unknown" value to assets claimed as exempt under Maryland law would not be allowed since where exemption is subject to dollar limitation, some dollar value must be assigned to property claimed as exempt. In re Forti (1998, BC DC Md) 224 BR 323, 10 Fourth Cir & Dist Col Bankr Ct Rep 593, 40 CBC2d 1025.

11 USCS § 522(p)(1) cap applied to Chapter 7 debtor's claimed homestead exemption where debtor had elected to exempt property for purposes of § 522(p)(1) simply by claiming exemption rather than choosing not to claim exemption. In re Greene (2006, BC DC Nev) 346 BR 835 (criti-cized in Rogers v Wallace (In re Rogers) (2006, ND Tex) 2006 US Dist LEXIS 75826).

11 USCS § 522(p)(1) limited Chapter 7 debtor's claimed homestead exemption to $ 125,000 where debtor had acquired homestead interest in property when he started to live on property and that had occurred well within 1,215 days of bankruptcy filing. In re Greene (2006, BC DC Nev) 346 BR 835 (criticized in Rogers v Wallace (In re Rogers) (2006, ND Tex) 2006 US Dist LEXIS 75826).

Page 155 11 USCS § 522

Debtor's claimed exemption in homestead under Fla. Const. art. X, § 4 that was made in debtor's property within 1215 days before filing bankruptcy, but that was made in property that debtor and his wife had owned since 1995, was not subject to $ 125,000 cap set forth in 11 USCS § 522(p) be-cause debtor and his wife had previously claimed homestead exemption in their Tallahassee resi-dence; § 522(p) cap did not apply to interest transferred between residences that were both in same state. Venn v Reinhard (In re Reinhard) (2007, BC ND Fla) 377 BR 315, 21 FLW Fed B 52. Unpublished Opinions

Unpublished: Though testimony offered by real estate appraiser retained by creditor of Chapter 7 debtor to substantiate creditor's objection to debtor's valuation of her interest in real estate in which exemption was claimed pursuant to 11 USCS § 522 was credible as far as it went, testimony from debtor's real estate appraiser was generally accorded more weight because debtor's appraiser had not only viewed exterior and adjoining cell phone tower and fire station but had also had access to interior of residence; moreover, "comparables" utilized by debtor's appraiser were, in court's view, more consistent with subject property than those proposed by creditor's real estate appraiser. In re Stromer (2006, BC DC NJ) 2006 Bankr LEXIS 4089.

V.COLLECTION OF PREPETITION DEBT FROM EXEMPT PROPERTY 81. Gener-ally

Creditor's right to foreclose on mortgage survives or passes through bankruptcy pursuant to 11 USCS § 522(c). Johnson v Home State Bank (1991) 501 US 78, 115 L Ed 2d 66, 111 S Ct 2150, 91 CDOS 4334, 91 Daily Journal DAR 6694, 21 BCD 1293, 24 CBC2d 1171, CCH Bankr L Rptr P 73993, on remand, remanded (1991, CA10) 940 F2d 609 and (criticized in In re Kirchner (1997, BC WD Wis) 216 BR 417, 32 BCD 9, 39 CBC2d 537).

Although state law specifies which and to what extent assets may be exempt, federal law pre-scribes manner in which exemptions may be allowed and declares in 11 USCS § 522(c) which claims are not affected by exemption; fact that debtor may be allowed exemption under state law does not mean that asset is immediately available to debtor without performance of further adminis-trative duties on part of trustee in accordance with federal law. In re Kaufman (1986, SD NY) CCH Bankr L Rptr P 71578.

Trustee will not be directed immediately to turn over to Chapter 7 debtor allowed $ 10,000 homestead exemption where debtor has not established that trustee has concluded duties of investi-gating all aspects of debtor's financial condition and ascertaining if exemption is subject to nondis-chargeable alimony, maintenance, or support claim with respect to which allowed exemption would continue to be liable under 11 USCS § 522(c)(1); trustee will be permitted reasonable time in which to perform her administrative duties. In re Kaufman (1986, SD NY) CCH Bankr L Rptr P 71578.

11 USCS § 522(c)(1) providing that exempt property can be used to pay certain prepetition debts such as those for nondischargeable tax, alimony and child support obligations preempts state home-stead exemption law so that state exemption is inoperative against claims for nondischargeable tax, alimony and child support obligations. In re Gregory (1997, SD Tex) 214 BR 570, 97-2 USTC P 50750, 80 AFTR 2d 6768.

Debtor may avoid creditor's security interest lien on their exempted property under 11 USCS § 522(c) regardless of any alleged impropriety or wrongdoing, i.e., fraud, on behalf of debtor with

Page 156 11 USCS § 522

respect to underlying debt. In re Haupt (1981, BC ED Pa) 16 BR 118, 5 CBC2d 1005, CCH Bankr L Rptr P 68546.

Security of creditor is preserved despite debtor's claim of exemptions under 11 USCS § 522(c)(2). In re Hamilton (1982, BC DC Del) 22 BR 560.

Operation of 11 USCS § 541 vests title even to properly exempt property in Chapter 7 trustee, and thus prior law compelling trustee to turn over exempt assets to debtor, who retained title, is in-applicable, and trustee may retain exempt property in estate, but trustee may not necessarily be enti-tled to hold distribution of exempt assets to final distribution under 11 USCS § 726; rather, various subsections of 11 USCS § 704 require only that trustee satisfy himself that exempt assets are not subject to some unavoidable claim such as tax claim under 11 USCS § 523(a)(1); where, as here, debtor has been divorced, Chapter 7 trustee is entitled to hold Chapter 7 debtor's homestead exemp-tion until trustee is satisfied within reasonable time that exempt assets are not subject to superior rights, including claims for alimony or support under 11 USCS § 522(c)(1). In re Kaufman (1986, BC SD NY) 68 BR 391, 15 BCD 273.

Trust fund tax liability of individual Chapter 7 debtor who is "responsible person" for unpaid wage taxes of his corporation is nondischargeable under 11 USCS § 523 and proceeds of debtor's homestead exemption remain liable to satisfy debt under 11 USCS § 522(c)(1). In re Clate (1987, BC WD Pa) 69 BR 506.

Provision of 11 USCS § 522(c)(1) expressly provides that only 2 types of debt, certain tax claims and alimony and support, may be paid out of proceeds of exempt property; hence nondis-chargeability of debt on account of debtor's fraud under 11 USCS § 523(a) does not impair protec-tion afforded to exempt property, nor does it impair debtor's right to claim his exemptions in first instance, and therefore it also follows that judicial lien based upon nondischargeable claim is also available, otherwise protection envisioned by § 522(c) would fail; in such circumstances when judgment lien is avoided, judgment holders are free to obtain postpetition execution against debtor's nonexempt after-acquired property. In re Ewiak (1987, BC WD Pa) 75 BR 211, 17 CBC2d 117, CCH Bankr L Rptr P 71883.

Chapter 7 debtor's avoidance of liens which impair his right to exemptions is wholly unaffected by nature of debt secured by liens; even if debtor is personally obligated after bankruptcy discharge to pay nondischargeable debt, debtor still holds right to exemptions provided by 11 USCS § 522. In re Sullivan (1988, BC SD Iowa) 83 BR 623.

Valid, perfected judicial liens which precede bankruptcy survive and are enforceable after bank-ruptcy, under 11 USCS §§ 506(d) and 522(c)(2); discharge does not prevent postpetition enforce-ment of valid liens; secured creditor may proceed to enforce lien, as in rem action, and is not barred by injunctive terms of 11 USCS § 524. In re Hermansen (1988, BC DC Colo) 84 BR 729, 18 CBC2d 952.

Debtors may plan their bankruptcies to take full advantage of exemption laws, and upon dis-charge debtors may do whatever they wish with their exempt property. In re Cilek (1990, BC WD Wis) 115 BR 974, 11 UCCRS2d 937.

Determination of types of debts that remain collectible after bankruptcy from exempt property is controlled by federal rather than state law, and state law will be enforced only to extent consistent with federal law; baseline against which impairment of exemptions is measured under 11 USCS §

Page 157 11 USCS § 522

522(f) is not exemption to which debtor is entitled, but one to which debtor "would have been enti-tled" but for lien in question; in present case, even though homestead would not apply against judgment creditor under Kentucky law because it existed prior to time when debtor acquired home-stead property, lien is avoidable because debtor would have been entitled to nearly full amount of allowable homestead exemption, but for judgment creditor's lien. In re Conyers (1991, BC ED Ky) 129 BR 470, CCH Bankr L Rptr P 74109.

If Chapter 7 debtor should sell homestead, proceeds from sale would be subject to execution by claimant only to extent provided under state law, while 11 USCS § 522(c) would require that pro-ceeds obtained from sale of entire property be set aside as exempt in bankruptcy despite fact that homestead claim may exceed that allowed by state law. In re Karrer (1994, BC ND Iowa) 183 BR 177.

Interaction of 11 USCS §§ 522(c) and 524(a)(3) protects entire value of community property homestead claimed exempt that passes through bankruptcy; exempt portion cannot be reached after bankruptcy as this is prohibited by § 522(c); if value of house increased after bankruptcy because of market conditions or because debtor reduced outstanding mortgage, this increase in value could be considered after-acquired community property protected by discharge under § 524(a)(3). In re Schmiedel (1999, BC ED Wis) 236 BR 393.

Maine's homestead exemption statute, Me. Rev. Stat. Ann. tit. 14, § 4422(1), limiting exemption to amount against single category of lien claim, conflicted with 11 USCS § 522(c)'s limitation of debts that exempt property could be called upon to pay; creditor's judicial lien was, therefore, avoided. Dubois v Fales (In re Dubois) (2004, BC DC Me) 306 BR 423.

Chapter 7 trustee's objections to debtor's exemptions and his motion to sell automobile were de-nied because 11 USCS § 522(c)(1) did not provide for disallowance of exemptions or liquidation of exempt property merely because debtor owned nondischargeable domestic support obligation. In re Covington (2006, BC ED Cal) 56 CBC2d 1110.

82. Tax debt or liens

Pursuant to 11 USCS § 522(c)(2)(B), property otherwise exempted from bankruptcy estate re-mains subject to properly filed federal tax lien, including that portion of lien securing tax penalties; fact that debtor may be able to exempt property subject to tax lien, pursuant to 11 USCS § 522(h) or 11 USCS § 724(a), does not mean that debtor can remove lien itself, or that portion of it which se-cures penalty. DeMarah v United States (In re DeMarah) (1995, CA9 Cal) 62 F3d 1248, 95 CDOS 6490, 95 Daily Journal DAR 11085, 33 CBC2d 1744, CCH Bankr L Rptr P 76607, 76 AFTR 2d 5997, 95 TNT 167-13.

Without deciding whether 11 USCS § 522(c) immunizes exempt property from setoff, bank-ruptcy court erred in permitting debtor to exempt her 1997 federal income tax overpayment which IRS setoff against her unpaid 1993 tax liability which had been discharged in bankruptcy under 11 USCS § 727, since debtor was not entitled to refund, where her tax liability was greater than her overpayment; thus, tax refund did not become property of estate and could not be exempted under 11 USCS § 522. IRS v Luongo (In re Luongo) (2001, CA5 Tex) 259 F3d 323, 38 BCD 43, 2001-2 USTC P 50527, 88 AFTR 2d 5752.

Lien and subsequent levy by IRS on Chapter 7 debtor's property for assessment of additional taxes do not remove proceeds from sale of property from debtor's bankruptcy estate, and proceeds

Page 158 11 USCS § 522

are subject to valid tax lien under federal law and may not be exempted under Kentucky homestead exemption under 11 USCS § 522. Davenport v United States (1991, WD Ky) 136 BR 125, 91-2 USTC P 50531, 71A AFTR 2d 4042 (criticized in Stanley v United States (1996) 35 Fed Cl 493, 96-1 USTC P 50273, 77 AFTR 2d 2027).

Although Congress desired to relieve debtor under 11 USCS § 522(f) of any impairment of his exemptions which arose by way of judicial lien, under 11 USCS § 522(c) it insulated exempt prop-erty from prepetition claims only to extent that they were not tax claims or certain other claims; since bankruptcy discharge does not therefore prevent enforcement of valid liens and taxes which are nondischargeable may be collected from exempt assets it would be futile to grant 11 USCS § 522(f) motions with regard to nondischargeable taxes and New York State Tax Commission may continue to enforce its lien against property and debtor. In re Sechrist (1981, BC WD NY) 9 BR 862, 7 BCD 464.

Avoided judicial liens may not be preserved for benefit of estate and applied to homestead ex-emption before IRS statutory lien which arose after avoided judicial lien because to do so would thwart 11 USCS § 522(c)(2)(B) which provides that validly filed tax liens are exempted from avoid-ance. In re Bernstein (1986, BC DC Vt) 62 BR 545.

Tax lien attaches to and is secured by all debtor's assets, including property debtor has exempted under state or federal exemptions under 11 USCS § 522. In re Mikrut (1987, BC WD Wis) 79 BR 404, 87-2 USTC P 9661, 60 AFTR 2d 5965.

Where notice of tax lien is properly filed, provisions of 11 USCS § 522(c)(2)(B) prohibit Chap-ter 13 debtors from using powers otherwise available to them under 11 USCS § 522(h) to avoid tax lien on personal property they have claimed exempt under 11 USCS § 522(b)(2). In re Ridgley (1987, BC DC Or) 81 BR 65.

Pursuant to 11 USCS § 522(c)(2), debtors may not exempt personal residence in order to avoid statutory tax lien which has attached to property. Verma v First United Fed. (In re Verma) (1987, BC WD Pa) 91 BR 17, 87-2 USTC P 9630, 60 AFTR 2d 5787.

Even though Chapter 7 debtors' tax liabilities for tax years 1984 through 1986 are dischargeable, federal tax liens for those years remain enforceable against exempt assets of debtors' estate and from any assets acquired prepetition, because property exempted under 11 USCS § 522 remains liable after case for any prepetition debt secured by tax lien, notice of which is properly filed; but even if notice of tax lien has not been properly filed, IRS lien is not avoidable under § 522(f) because tax lien is not nonpossessory, nonpurchase-money security interest, nor is it judicial lien, but rather it is nonavoidable statutory lien. In re Rench (1991, BC DC Kan) 129 BR 649, CCH Bankr L Rptr P 73960.

Issuance and service of notice of levy by IRS are tantamount to lien in favor of IRS against wages debtor has exempted under 11 USCS § 522, and because instant suit involves only debtor and IRS, with no third parties asserting interest in wages, court need not decide whether notice of levy transfers interest and whether notice of seizure is condition precedent to transfer; § 522(c) does not give IRS right to or claim against specific property but simply preserves right of IRS to collect non-dischargeable taxes or tax debt secured by tax lien from property so exempted, and where IRS has not properly filed tax lien, § 522(c)(2)(B) is unavailable as avenue of collection for IRS, but § 522(c)(1) is available to IRS in that taxes which IRS seeks to collect are nondischargeable under 11

Page 159 11 USCS § 522

USCS §§ 523(a)(1) and 507(a)(7). Hebermehl v United States ex rel. IRS (In re Hebermehl) (1991, BC DC Colo) 132 BR 651, 91-2 USTC P 50443, 71A AFTR 2d 4665, 93 TNT 254-22.

Discharge in bankruptcy only extinguishes debtor's personal liability on tax claim and does not prevent enforcement of valid tax claim and discharged taxes can be collected from exempt assets; in instant case, debtor beneficiary does not have property interest in withheld discretionary disburse-ments from testamentary spendthrift trust to which IRC § 6321 federal tax lien could attach and subsequent IRC § 6331 levy could be applied in order to satisfy tax liability. United States v Wilson (In re Wilson) (1992, BC ND Tex) 140 BR 400, 92-2 USTC P 50333, 71A AFTR 2d 4221.

Where Chapter 7 debtors have claimed their homestead as exempt asset, 11 USCS § 506(a) is not applicable and IRS lien may not be stripped down to value of property, even though IRS failed to file proof of claim; properly filed tax liens continue against exempt property unaffected by bank-ruptcy under 11 USCS § 522(c)(2)(B). Koppersmith v United States (1993, BC SD Tex) 156 BR 537.

Property exempted from bankruptcy estate, even under state law, is still subject to federal tax liens. In re Carlson (1995, BC ED Cal) 180 BR 593, 75 AFTR 2d 937, 95 TNT 30-18.

Chapter 11 debtor's declaration of her homestead as exempt property did not affect any valid liens against property; accordingly, prepetition tax liens filed by IRS against property of debtor were fully secured and were allowed as filed, where it was undisputed that tax liens were timely filed in same county where debtor's homestead and all her personal property was located. In re Carr (1995, BC MD Fla) 185 BR 892.

Exempt property is subject to tax lien, notice of which is properly filed. Tourville v IRS (In re Tourville) (1997, BC DC Mass) 216 BR 457, 97-2 USTC P 50976, 80 AFTR 2d 8294.

Federal tax liens could properly attach to Chapter 7 debtor's bank accounts, other exempt assets, and pension plan since 11 USCS § 522(c)(2)(B) provides for survival of tax liens on property ex-empted. Dinatale v United Stated (In re Dinatale) (1999, BC DC Md) 235 BR 569, 11 Fourth Cir & Dist Col Bankr Ct Rep 574, 34 BCD 783, 42 CBC2d 489, 23 EBC 2850, CCH Bankr L Rptr P 77973, 85 AFTR 2d 981.

Because debtor could exempt portion of her tax refund as Earned Income Credit benefits under Ky. Rev. Stat. Ann. § 205.220(3) and another portion under general exemption statute of Ky. Rev. Stat. Ann. § 427.160, and those exemptions were not subject to levy under 11 USCS § 522(c), Inter-nal Revenue Service was granted relief from automatic stay to offset only remaining amount of re-fund under 11 USCS § 553. In re Sharp (2002, BC ED Ky) 286 BR 627, 90 AFTR 2d 6095.

Bankruptcy court had jurisdiction and found that federal government was entitled to judgment in debtor's action to determine that debtor's tax liability was subject to tax lien and debtor could not avoid tax lien on property claimed exempt. Piper v United States (In re Piper) (2003, BC DC Mass) 291 BR 20, 41 BCD 25, CCH Bankr L Rptr P 78827, 2003-1 USTC P 50438, 91 AFTR 2d 1812.

Trustee's objection to homestead exemption based on exception for tax debts owed to IRS under 11 USCS § 522(c)(a) was denied because IRS had not chosen to assert its rights under 11 USCS § 522(c)(a) based on debtor's "941 tax debt" under 11 USCS § 507(a)(8)(C). In re Stone (2005, BC ND Iowa) 329 BR 860.

VI.KINDS OF PROPERTY EXEMPT

Page 160 11 USCS § 522


Property added to estate after commencement of proceeding under 11 USCS §§ 541(a)(3) through (a)(7) is "property of the estate" and can be claimed by debtor as exempt under 11 USCS § 522(b). In re Wilson (1982, CA11 Fla) 694 F2d 236, 9 BCD 1352, 7 CBC2d 895, CCH Bankr L Rptr P 68910.

Before exemption can be claimed, it must be property of estate. In re Yonikus (1993, CA7 Ill) 996 F2d 866, 29 CBC2d 114, CCH Bankr L Rptr P 75276 (criticized in In re Daniels (2001, BC ED Mich) 270 BR 417) and (criticized in In re Robinson (2003, BC SD Ohio) 292 BR 599) and (criti-cized in In re Rolland (2004, BC CD Cal) 317 BR 402).

Traceable assets are not exempt under 11 USCS § 522(d)(10). In re Williams (1995, BC WD Mich) 181 BR 298, 33 CBC2d 1118, affd (1995, WD Mich) 1995 US Dist LEXIS 17212.

Chapter 7 trustee's objection was denied, where trustee sought to prevent bankruptcy debtor from exempting from administration by trustee debtor's interest in single family residence owned by debtor and debtor's spouse (not in bankruptcy), as tenants by entireties; ruling sought by trustee would render 11 USCS § 522(b)(2)(B) nugatory. In re Greathouse (2003, BC DC Md) 295 BR 562, 92 AFTR 2d 5265.

84. Debtor's "interest" as equity in property

Phrase "debtor's interest" in 11 USCS § 522(d)(1) does not mean only debtor's equity, and it is broad term encompassing many rights of party. In re Maddox (1983, ND Ga) 27 BR 592, affd (1983, CA11 Ga) 713 F2d 1526, 9 CBC2d 568, CCH Bankr L Rptr P 69770.

Congress, in enacting 11 USCS § 522, did not intend word "interest", as used in provision per-mitting debtor's interest in household goods to be exempted, to be used interchangeably with word "equity", and it was not intention of Congress to allow debtor to exempt property only where debtor had equity in such property; rather, 11 USCS § 522 is to be construed as providing that only unen-cumbered portion of property, in other words, debtor's equity, is to be used for purpose of determin-ing when debtor has used up exemptions so that if debtor claims exemption in property in which he has no equity, there is no reduction in amount of exemptions. In re Van Gorkom (1980, BC DC SD) 4 BR 689, 6 BCD 541, 2 CBC2d 477.

Provisions of Bankruptcy Code in 11 USCS §§ 541, granting trustee all legal or equitable inter-ests of debtor in property, and 522, granting debtor right to claim exemption in certain property, represent departure from Bankruptcy Act, under which title to all property of debtor except exempt property vested in trustee; therefore, to be exemptable under 11 USCS § 522, portion of property must be unencumbered. In re Boteler (1980, BC SD Ala) 5 BR 408, 6 BCD 798.

Debtor's exemption rights in property subject to security interest is limited to equity which is amount by which value of property exceeds secured debt; thus, debtor's claim to exemption in mo-bile home is denied since debtor may exempt only equity in property subject to security interest and debtor has no equity in mobile home because unpaid balance of indebtedness exceeds its value. In re Morgan (1980, BC MD Tenn) 6 BR 701, 6 BCD 1202.

Debtor is entitled to homestead exemption under 11 USCS § 522(f)(1) to avoid judicial lien even though debtor has no equity interest in property where § 522(f) allows debtor to create equity by avoiding nonpossessory, non-purchase money liens and state homestead exemption statute makes

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no reference to debtor's equity interest. In re Farley (1982, BC ED Tenn) 19 BR 868, CCH Bankr L Rptr P 68692.

Debtor may claim exemption in property as to which he has no equity since 11 USCS § 522(d)(1) refers to "debtor's aggregate interest, not to exceed $ 7,500 in value, in real property"; debtor's interest in property is not extinguished by his lack of equity therein. In re Chesanow (1982, BC DC Conn) 25 BR 228.

Under 11 USCS § 522(d)(1) debtor may claim exemption in real property owned as joint tenant that exceeds his equity in property where his aggregate interest does not exceed statutory limit; debtor's aggregate interest in residence is not limited to equity in sense of excess of value over other liens; debtor's aggregate interest in residence includes right to possession, right to redeem after de-fault but prior to foreclosure, and right to make mortgage payments in future and thus create future equity. In re Ricks (1984, BC DC Dist Col) 40 BR 507, 11 BCD 1341, CCH Bankr L Rptr P 69945.

Under opt out provision of 11 USCS § 522 and Colorado courts' interpretation of state exemp-tions, debtors are only entitled to exemption to extent of their equity in mortgaged property, thus debtors can claim no exemptions where they have no equity. In re Holcomb (1985, BC DC Colo) 54 BR 59.

Chapter 7 debtors cannot claim certain consumer goods purchased from Sears to be exempt where Sears's purchase money security interest in goods is $ 400 more than stated retail value of goods purchased; equity in property is required to exempt all or portion of it and, if indebtedness exceeds value of goods, lack of equity forecloses use of 11 USCS § 522 exemptions. In re Orecchio (1985, BC DC NJ) 54 BR 685, 42 UCCRS 1438.

Bankruptcy court agreed with trustee's objection to debtor's exemption and found that debtor where court agreed that state Supreme Court's decision did not extend presumption of tenancy by entireties to all personal property; court sustained trustee's objection to debtor's claim of exemptions where debtor was unable to produce documentary proof of his intention to own personal property at issue by entireties. In re McAnany (2003, BC MD Fla) 294 BR 406, 16 FLW Fed B 152.

Bankruptcy court agreed with Chapter 7 trustee's argument that there was no prior intent on part of debtor and his non-debtor spouse to hold personal property by entireties; court sustained trustee's objection to debtor's claim of exemption. In re McAnany (2003, BC MD Fla) 294 BR 406, 16 FLW Fed B 152.

Debtor could not claim exemption in her engagement ring and wedding band as entireties prop-erty under Pennsylvania law because title to these items vested in debtor once she and her husband were married. Walsh v Gregorchik (In re Gregorchik) (2004, BC WD Pa) 311 BR 52.

With respect to eight subsections of 11 USCS § 522(d) that have monetary limitations (§ 522(d)(1), (2), (3), (4), (5), (6), (8), and one subpart of (11)), preferred rule is that in-kind exemp-tion of property from bankruptcy estate should not be granted; rather, exemptions should be limited by monetary amount set forth in statute. In re Cormier (2008, BC WD Mich) 382 BR 377.

85. "Wild card" and spillover exemptions

11 USCS § 522(d)(5) contemplates exemptions limited by maximum monetary amount; it does not provide for "in kind" exemptions. Lewandowski v Lim (In re Lewandowski) (2008, ED Mich) 386 BR 643.

Page 162 11 USCS § 522

11 USCS § 522(d)(5) exemption meant only that Chapter 7 debtors were entitled to recover first $ 7,500 from proceeds of sale of their property and that remaining proceeds were property of estate under 11 USCS § 541(a)(1); thus, bankruptcy court properly authorized trustee to sell property un-der 11 USCS § 363(b). Lewandowski v Lim (In re Lewandowski) (2008, ED Mich) 386 BR 643.

Spillover provided by 11 USCS § 522(d)(5) is to be given liberal construction, and may be ap-plied without limitation or restriction of any kind with regard to type of property which may be ex-empt under such section. In re Boozer (1980, BC ND Ga) 4 BR 524, 6 BCD 529, 2 CBC2d 435, CCH Bankr L Rptr P 67572.

Fact that community property interests are indivisible under California law does not invalidate any exemption claim not joined in by both debtors; only limitation on exemptions provided by 11 USCS § 522(d)(5) is that claims cannot total more than $ 7900. In re Smith (1980, BC SD Cal) 8 BR 375.

11 USCS § 522(d)(1) and (5) when used in conjunction allow debtor to exempt up to $ 7900 of equity in any property. In re Gagnon (1983, BC MD Pa) 26 BR 926.

Under California catch-all exemption provision, Chapter 7 debtors may exempt their interest in excess value of goods which are not fully exemptible under other provisions. In re Lucas (1986, BC SD Cal) 62 BR 949, 14 BCD 729, affd in part and revd in part on other grounds (1987, BAP9 Cal) 77 BR 242.

Vermont wildcard exemption statute which allows debtor to exempt aggregate interest in "any property," not to exceed $ 400 in value, plus up to $ 7,000 of any unused amount of other exemp-tions applies to real property. In re Christie (1992, BC DC Vt) 139 BR 612.

$ 850 wildcard exemption under 11 USCS § 522(d)(5) means that total of exemptions claimed may not exceed $ 850 rather than limiting exemption to $ 850 in any one asset. In re Burnett (1999, BC ED Ark) 241 BR 438.

Since plain language of 11 USCS § 522(d)(5) and its legislative history reflect congressional in-tent that federal wild card exemption apply to all types of property, not just types described in 11 USCS § 522(d), such exemption may be combined or stacked with other exemptions to protect any type of property. Vaillancourt v Granite Group (In re Vaillancourt) (2001, BC DC NH) 2001 BNH 10, 260 BR 66, 46 CBC2d 230.

Any property can be exempted under 11 USCS § 522(d)(5), provided that property is part of debtor's bankruptcy estate under 11 USCS § 541. In re Cohen (2001, BC DC NJ) 263 BR 724.

When debtor takes exemption in particular asset pursuant to 11 USCS § 522(d)(5), property claimed as exempt within meaning of 11 USCS § 522(l) is merely interest in property not to exceed specified value; accordingly, where value of asset exceeds amount of claimed exemption, asset as whole does not become exempt. Soost v NAH, Inc. (In re Soost) (2001, BAP8) 262 BR 68. Unpublished Opinions

Unpublished: Where debtor exempted pending tort action, which alleged violation of § 1983, malicious prosecution, and negligence, in connection with false arrest, trustee's objection to exemp-tion under 11 USCS § 522(d)(5) was sustained; debtor could only exempt recovery of lawsuit up to $ 9,288 because he had claimed other property, totaling $ 362, as exempt under § 522(d)(5). In re David (2004, BC DC Dist Col) 2004 Bankr LEXIS 2245.

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86.--Use for specific property

Bankruptcy court incorrectly ruled that a debtor must first take a homestead exemption in order to exempt up to $ 7,500 of unused amount of homestead exemption under wild card provision of 11 USCS § 522(d)(5) as wild card exemption allows exemption of unused amount of homestead ex-emption in order not to discriminate against non-homeowner, and case is remanded for determina-tion whether Chapter 7 debtor has interest in two lawsuits for which debtor claimed exemption and whether debtor is entitled to wild card exemption for them. Martin v Cox (In re Martin) (1998, CA8 Ark) 140 F3d 806.

Where debtors who filed joint petitions in two separate Chapter 7 cases were spouses who held property as tenants by entirety, each debtor's "aggregate interest" in property for purposes of exemp-tion under 11 USCS § 522(d)(5) was not limited to 50% of value of property, as bankruptcy filings did not sever tenancies; debtors in first case could therefore exempt unequal portions of stock port-folio; in second case, one debtor could exempt entire value of parcel of real estate and could exempt more than 50% of value of personal property owned by entireties. In re Brannon (2007, CA3 Pa) 476 F3d 170, CCH Bankr L Rptr P 80845.

Debtors may claim exemption in household goods in excess of $ 200 limit prescribed by 11 USCS § 522(d)(3) by use of spillover exemption provided for in 11 USCS § 522(d)(5), inasmuch as there is no limitation or restriction of any kind with regard to type of property which may be exempt under such spillover provision. In re Boozer (1980, BC ND Ga) 4 BR 524, 6 BCD 529, 2 CBC2d 435, CCH Bankr L Rptr P 67572.

Exemption provision of 11 USCS § 522(d)(5) must be liberally construed and words selected by Congress "any property" mean just that and this largesse variously described as "spillover, grub-stake, wildcard, and unfilled bin" includes $ 3,500.00 in income tax refunds and $ 7,500.00 remain-der owing on contract for deed in case of joint debtors who are each entitled to federal exemption of $ 7,900.00; although it may be argued that stacking of 2 exemptions is unjust and windfall to debt-ors and for some debtors such benefits may be unwarranted to others same relief may be essential element of fresh start envisioned by Congress. In re Schuler (1981, BC DC Mont) 13 BR 478, 7 BCD 503.

Debtor may aggregate $ 7500 exemption of 11 USCS § 522(d)(1) with $ 400 exemption of § 522(d)(5) without first applying exemption of § 522(d)(1) against debtor's residence, and debtor may use § 522(d)(5) to exempt any property, including insurance proceeds, up to $ 7900 limit; pur-pose of § 522(d)(5) is to equalize treatment between those who own their residences and those who rent. In re Hawley (1982, BC MD Pa) 24 BR 42, 6 CBC2d 1496.

Louisiana homestead exemption which limits exemption to real property is authorized under 11 USCS § 522(b)(1) notwithstanding allegation that it violates federal policy behind 11 USCS § 522(d)(5) to provide equal treatment to owners and nonowners of real property and therefore vio-lates supremacy clause of United States Constitution; Louisiana debtors who did not own real prop-erty will not be permitted to establish "wild card" exemption pursuant to 11 USCS § 522(d) in order to exempt their income tax refunds and utility deposits. In re Gauntt (1984, BC WD La) 36 BR 721.

Debtor may claim $ 750 tools-of-trade exemption under Illinois law and may exempt his excess equity of $ 850 pursuant to Illinois wild card provision, there being no evidence that Illinois legisla-ture intended to repeal tools-of-trade exemption by limiting exemptions to property used for per-sonal purposes; rather, combining 2 exemptions enhances debtor's opportunity to realize self-

Page 164 11 USCS § 522

sufficiency, which is goal of exemption statutes and thus debtor may avoid bank's nonpurchase money security interest in amount of $ 1600 which is extent that it impairs debtor's exemption. In re Allman (1986, BC CD Ill) 58 BR 790.

Assuming that Nebraska statute intends that only necessary items may be exempted as house-hold furnishings, Chapter 7 debtors' stereo and color television are not necessities and thus not ex-empt; however, debtors may exempt these items under "wild card" exemption, whose only limita-tion is that it does not apply to wages. In re Welborne (1986, BC DC Neb) 63 BR 23.

Chapter 7 debtors may, under 11 USCS § 522(d)(5), use unused portion of homestead exemp-tion to exempt pension monies paid postpetition. In re Magnus (1988, BC ED Pa) 84 BR 976, 17 BCD 632.

Debtors who valued tools of at maximum exempt amount under federal exemptions were not es-topped from amending schedule to include any excess value in their "wild card" exemption under 11 USCS § 522(d)(5). In re Henry (1995, BC ND Tex) 183 BR 748, 33 CBC2d 1545.

Upon filing bankruptcy, debtor's entire employee stock option became property of bankruptcy estate, and formula by which portion allocatable to post-petition efforts of debtor would be excluded from estate was not good law; debtor's claim of exemption could not stand, where option had some value as of filing, even though he could not yet exercise it, but he was out of "wild card" to shelter it; although trustee could have received entire stock option, bankruptcy court could only award her proportion of option for which she pleaded under prior case law. In re Dibiase (2001, BC WD Tex) 270 BR 673, 47 CBC2d 631.

Where debtor claimed as exempt his stock in several corporations undergoing bankruptcy reor-ganization and debtor listed value of claimed exemption (and market value of stock) as $ 10, and where trustee was concerned that, although stock was probably worthless, it might appreciate if corporations' reorganizations were successful, trustee could not prevail on claims that (1) exemption should be limited to amount debtor claimed; and (2) trustee was entitled to any post-petition appre-ciation in value of stock. Tidwell v Leskosky (In re Leskosky) (2002, BC MD Ga) 287 BR 295.

Chapter 7 trustee's objections to four exemptions claimed by Chapter 7 debtor were partially sustained since (1) debtor had claimed $ 2,000 exemptions under 11 USCS § 522(d)(5) with regard to one professional corporation and three limited liability companies; (2) after objections were filed, debtor agreed to waive two of his claimed exemptions and to amend his Official Bankr. Sched. C to reflect $ 6,000 exemption in company one and $ 2,000 exemption in company two; (3) because trustee did not object, debtor would be allowed to amend his schedule to reflect two agreed-upon exemptions; and (4) although debtor argued that his interest in company one should not remain as part of bankruptcy estate under 11 USCS § 541, because value of his interest in that asset was less than $ 6,000 exemption amount, court could not determine that issue because debtor had not pre-sented any evidence establishing what value of his interest in that asset was. In re McCabe (2006, BC DC Mass) 356 BR 314.

B.Entireties and Joint Property Exempt From Process


Maryland entireties property is not exempt under 11 USCS § 522(b)(2)(B) to extent of joint claims scheduled by individual Chapter 7 debtor spouse, thus trustee may administer entireties property for benefit of joint creditors under 11 USCS § 363(h); to allow individual debtor to exempt

Page 165 11 USCS § 522

entireties property and defeat joint creditor's claim entirely would also destroy creditor's claim against nonfiling spouse and recreate "legal fraud" practiced under 1898 Act. Sumy v Schlossberg (1985, CA4 Md) 777 F2d 921, 13 BCD 1237, 13 CBC2d 1213, CCH Bankr L Rptr P 70861.

Indiana exemption statute is intended to shield entirety property of debtor in bankruptcy from claims of creditors, including joint creditor, to greatest extent possible and it has in effect exempted entirety property, if listed by debtor, from debtor by bankruptcy trustee; exemption statute does not merely codify Indiana common-law practice of immunizing entirety property from execution by individual, as opposed to joint, creditors. In re Paeplow (1992, CA7 Ind) 972 F2d 730, 23 BCD 488, CCH Bankr L Rptr P 74795.

Interests of debtor and his wife in property as tenants by entirety is exempt under 11 USCS § 522(b)(2)(B) where wife did not file for bankruptcy, and both are not indebted to any common creditor. In re Lausch (1981, MD Fla) 16 BR 162, 6 CBC2d 59.

Bankruptcy Court, by ordering joint administration of separate petitions of husband and wife, may defeat exemption of each debtor's interest in property held by entirety to which he or she would be entitled as sole debtor in bankruptcy. D'Avignon v Palmisano (1982, DC Vt) 34 BR 796.

Chapter 7 debtor is entitled to 11 USCS § 522(b)(2)(B) exemption in property held as tenants by entirety with non-debtor spouse to extent that Rhode Island law provides that property held as ten-ants by entirety is immune from grasp of creditors until such time as debtor outlives nondebtor spouse; attachment of property may stand, but immediate levy may not go forward. In re Furkes (1986, DC RI) 65 BR 232.

In light of Virginia's strong common law rule defining nature of tenancy by entireties, exemp-tions may properly be claimed by both spouses when both are in bankruptcy, but no joint creditors are present, so that individual creditors for each debtor may not reach real property, because interest of other debtor acts to bar their claim; nor may trustee, acting as couple's joint creditor, administer entireties property under 11 USCS § 544. Thomas v Peyton (2001, ED Va) 274 BR 450, affd (2002, CA4 Va) 312 F3d 145, 49 CBC2d 1157, CCH Bankr L Rptr P 78750.

Properties held by debtor and her husband as tenants by entirety was part of bankruptcy estate, and bankruptcy court, thus, had jurisdiction to determine how properties should have been utilized to satisfy debts of debtor, and, because bankruptcy court looked to property that was in estate of debtor in any given case, fact that husband's bankruptcy proceeding was dismissed with prejudice was irrelevant; absent claim of exemption under Bankruptcy Code for estates by entirety, two prop-erties were properly included in bankruptcy estate of debtor and were subject to provisions of Bank-ruptcy Code that allowed debtor as debtor-in-possession to avoid deeds of trust as fraudulent con-veyances. Coleman v Cmty. Trust Bank, N.A. (In re Coleman) (2003, WD Va) 299 BR 780, 92 AFTR 2d 7145.

Exempt entireties property was free from any individual claims of creditors, and bankruptcy court was ordered to disregard any claims of scheduled creditors unless creditors made timely ob-jections to exemption under Fed. R. Bankr. P. 4003(b); in event of any such valid objection, joint creditors were entitled to reach entireties property subject only to separate state homestead exemp-tion. Spears v Boyd (In re Spears) (2004, WD Mich) 313 BR 212.

Page 166 11 USCS § 522

It would not be equitable for husband and wife debtors to retain entirety property as exemption under 11 USCS § 522(b)(2)(B) to detriment of creditors to whom they are indebted jointly. In re D'Avignon (1981, BC DC Vt) 34 BR 790, affd (1982, DC Vt) 34 BR 796.

Debtors may claim as exempt under 11 USCS § 522(b)(2)(B) that interest in entireties property which exceeds amount of joint obligations of debtor and non-debtor spouse. In re Hovatter (1982, BC DC Del) 25 BR 123.

Wife debtor is entitled to her interest in estate by entirety declared exempt under 11 USCS § 522(b)(2)(B) where no debts were incurred by wife and under local law, estate by entirety is pro-tected from sole creditors of either spouse; her interest in homestead premises as tenant by entirety may not be charged with obligations of her husband. In re Pauquette (1984, BC DC Vt) 38 BR 170.

11 USCS § 522(b)(2)(B) does not exempt nonhomestead entireties property in joint case, at least where there are joint obligations of debtors exceeding value of nonhomestead entireties property. In re Blum (1984, BC SD Fla) 39 BR 897, CCH Bankr L Rptr P 69878.

Debtor cannot simultaneously exempt real property owned by entireties under 11 USCS § 522(b)(2) and § 522(b)(1), as personal property, because exemptions are alternative and exclusive; thus, debtor must elect state exemption scheme to claim exemption as tenant by entireties. In re Lawson (1985, BC DC Vt) 45 BR 686, 12 BCD 818.

Individual Chapter 7 debtor's entireties property is not exempt under 11 USCS § 522(b)(2)(B) because Rhode Island Supreme Court has held creditors may attach, but not levy upon, entireties property, and thus Rhode Island does not shield entireties property from all "process." In re Gibbons (1985, BC DC RI) 52 BR 861, 13 BCD 705, 13 CBC2d 759, CCH Bankr L Rptr P 70745.

Trustee of Chapter 7 debtor wife may not sell properties held by debtor and husband by entire-ties, because under 11 USCS § 522(b)(2)(B) and Tennessee law, debtor's possessory interest in property held by entireties is immune from process; only debtor's survivorship interest may be sold. In re Hankins (1985, BC MD Tenn) 53 BR 18.

Debtor's claimed state law exemption of real estate held by entireties is of no effect as to joint creditor of debtor and spouse, since under state law entirety property was subject to execution on judgment against husband and wife for same obligation. In re Bonner (1986, BC ED Mo) 3 BAMSL 1825.

Chapter 7 debtor may claim entireties property as exempt from bankruptcy estate pursuant to 11 USCS § 522(b)(2)(B), if that property is immune from process under applicable nonbankruptcy law. In re Bialon (1986, BC WD Pa) 67 BR 451.

Under Ohio law, entireties property is not subject to process for debts of one spouse and pursu-ant to 11 USCS § 522(b)(2)(B), therefore, property held in estate by entireties is exempt property in bankruptcy case filed by individual spouse where debts scheduled are not joint marital debts but rather are debtor husband's individual debts with exception of mortgage debt on marital residence. In re Pernus (1992, BC ND Ohio) 143 BR 856, CCH Bankr L Rptr P 74832.

Looking to Maryland law, creditors' objections to joint Chapter 11 debtors' amended claim of exemptions in property they owned as tenants by the entirety are overruled; under 11 USCS § 522(b)(2)(B) and applicable state law, joint debtor spouses may exempt their equity in entireties property to extent that their equity in the property exceeds sum of all joint claims against both debt-ors. In re Ginn (1995, BC DC Md) 186 BR 898, 8 Fourth Cir & Dist Col Bankr Ct Rep 235.

Page 167 11 USCS § 522

If bankruptcy petition is filed after divorce, when property is no longer held in tenancy by en-tireties, that property is no longer entitled to exemption under 11 USCS § 522(b)(2)(B). Webster v Hope (In re Hope) (1999, BC DC Dist Col) 231 BR 403, 11 Fourth Cir & Dist Col Bankr Ct Rep 290.

Bankruptcy court found that trustee's objection to claim of exemption reflected that debtor and her spouse did not agree to sever estate during their divorce action, which was never finalized, and their conduct and manner that proceeds were held was not inconsistent with tenants by entireties in Virginia; thus, court overruled trustee's summary judgment motion on objection to claim of exemp-tion. In re Nagel (2003, BC ED Va) 298 BR 582.

Debtor's brokerage account was exempt under state law where account was held with debtor's husband as tenants by entireties; although account application showed that "joint tenancy" box was checked, box was checked by sales representative without debtor's consent as this was brokerage firm's standard operating procedure, and both debtor and her husband testified they held, and had always intended to hold, all of their assets as marital property. In re Bellwoar (2003, BC ED Pa) 299 BR 369.

Separate from 11 USCS § 522(d) exemptions, this special provision, § 522(b)(2)(B), is available to debtors who file in opt-out states like Illinois; even though it is federal exemption, it is clearly dependent on state law as entireties interest is exemptible only to extent such interest is exempt from process under applicable nonbankruptcy law, thus any contention that Illinois tenancy by en-tireties provision is not exemption statute must be rejected; by casting it as federal exemption, Con-gress has eliminated any inquiry into whether state legislature intended its tenancy by entirety stat-ute to be kind of exemption provision available to debtor in bankruptcy by operation of 11 USCS § 522(b)(2). In re Tolson (2005, BC CD Ill) 338 BR 359.


Where bankruptcy debtor transferred real property to debtor and debtor's spouse as tenants by entirety prior to filing bankruptcy, and trustee avoided fraudulent transfer and sold property, debtor was not entitled to homestead exemption under state law; debtor and spouse did not have separate interests in property under state law, undivided interest of debtor and spouse passed to estate upon bankruptcy filing, and thus 11 USCS § 522(g)(1) applied to bar debtor's homestead exemption based on debtor's fraudulent and voluntary transfer of property. Zubrod v Duncan (In re Duncan) (2003, CA10 Wyo) 329 F3d 1195, CCH Bankr L Rptr P 78863.

Where trustee argued that 11 USCS § 544(a)(2) allowed him to stand in shoes of IRS as creditor for purposes of reaching debtor's entireties property despite exemption that was created by 11 USCS § 522(b)(2), appellate court found that (1) it was clear from plain definitions of "extend" and "credit" that voluntariness of extension of credit was implicit in 11 USCS § 544(a)(2) and IRS was not voluntary creditor; (2) Congress did not intend bankruptcy trustee to wield extraordinary collec-tion powers of federal government; and (3) were trustee able to stand in shoes of IRS, conceivably no state law exemption would continue to exist, despite Bankruptcy Code's explicit recognition of exemptions under state law; thus, strong-arm clause of Bankruptcy Code, 11 USCS § 544(a)(2), did not vest trustee with rights and powers of IRS under federal tax laws to reach entireties property for benefit of debtor's individual creditors. Schlossberg v Barney (2004, CA4 Md) 380 F3d 174, CCH Bankr L Rptr P 80148, 94 AFTR 2d 5505.

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Bankruptcy court's allowance of exemption for property that debtor held with her spouse as ten-ants by entireties under 11 USCS § 522(b)(3)(B) was proper because (1) plain language of 23 Pa. Cons. Stat. § 4102, which codified "doctrine of necessaries," did not provide that creditor could execute on entireties property but stated expressly that creditor of debtor spouse could execute on "separate property" of nondebtor spouse under circumstances described; (2) while statute did not define "separate property," state legislature clearly knew how to distinguish between "separate property" and "entirety property" and how to make entireties property available to creditors in other contexts, and it chose not to provide for execution on entireties property in § 4102; (3) § 4102 did not impose joint and several liability on each spouse, but instead made spouse who incurred debt primarily liable and nondebtor spouse only secondarily liable; and (4) application of statute written as would not give rise to absurd or unreasonable results that it might justify departure from its plain language. In re O'Lexa (2007, CA3 Pa) 476 F3d 177, CCH Bankr L Rptr P 80843.

Chapter 7 debtor's fee simple interest, which she acquired by virtue of divorce and which be-came property of estate within meaning of 11 USCS § 541(a)(5)(B), is not entitled to any exemption claimed under 11 USCS § 522 in interest which debtor had "immediately before commencement of case as tenant by entirety", where exemption was fixed at time debtor filed her petition, and after filing, property ceased to be entireties property, since within 180 days of filing and pursuant to final decree of divorce, debtor acquired property as fee simple owner, and thus property was swept back into estate under § 541(a)(5)(B). Cordova v Mayer (In re Cordova) (1995, ED Va) 177 BR 527, affd (1996, CA4 Va) 73 F3d 38, 8 Fourth Cir & Dist Col Bankr Ct Rep 622, 34 CBC2d 1457, CCH Bankr L Rptr P 76755 (criticized in In re Martin (2001, BC MD Pa) 269 BR 119).

Bankruptcy Court's reliance on New Jersey law in sustaining creditor's objection to Chapter 11 debtor's claimed exemption under 11 USCS § 522(b)(2) of two New Jersey condominiums which debtor owned with spouse in tenancy by the entireties is affirmed; in considering issues pertaining to exemptions of real property, applicable state law is law of state in which property is located. Kap-lan v First Options of Chicago (1995, ED Pa) 189 BR 882, reh den, motion dismd (1996, ED Pa) 198 BR 91.

Entireties exemption under 11 USCS § 522(b)(2)(B) is not lost simply because joint creditor used portion of entireties property to satisfy its debt or because joint creditor is permitted to do so under applicable nonbankruptcy law; any equity remaining after joint creditor satisfies its debt con-tinues to be entireties property and exempt under § 522(b)(2)(B). In re Traurig (1983, BC SD Fla) 34 BR 325.

Trustee cannot defeat debtor's claim of entireties exemptions in toto merely because there was one joint, unsecured claim at time of filing; where amount of exemption under 11 USCS § 522(b)(2)(B) exceeds amount of claims on which debtor is liable, excess may be exempted. In re Sefren (1984, BC DC Md) 41 BR 747, CCH Bankr L Rptr P 70016.

There is no presumption under Florida law that personal property held by husband and wife is held by entireties; thus debtor's claim, without other proof, that household goods and furnishings are exempt because they were bought by joint funds for joint use of debtor and nondebtor wife, fails and half value of goods and furnishings must be surrendered to trustee, or trustee may liquidate goods and furnishings under 11 USCS § 363(h). In re Marchini (1984, BC SD Fla) 45 BR 187.

Under 11 USCS 522 property held as property by entireties can be exempted; however, joint tax refunds, despite practice of designating each spouse as co-payee, are not jointly owned, conse-

Page 169 11 USCS § 522

quently joint tax refunds do not constitute entireties property and thus cannot be exempted, rather refund is deemed to accrue to bankruptcy estate; furthermore, in order to determine each debtor's interest in refund, it is necessary to allocate refund in accordance with income of each debtor. In re Burch (1985, BC ED Mo) 3 BAMSL 1567.

Bank, joint creditor of debtor and nondebtor spouse, could have levied on property held as ten-ants by entireties by debtor and his wife, which property debtor claimed as exempt; thus exemptions exceed those allowed under Florida law and trustee is entitled to liquidate property under 11 USCS § 363(h) notwithstanding 11 USCS § 522(b)(2)(B). In re Bookman (1986, BC SD Fla) 57 BR 522.

Exemptions claimed by wife of Chapter 7 debtor on his behalf in his individual involuntary bankruptcy are denied insofar as they purport to exempt debtor's interest in property held as tenants by entirety from claims of joint creditors under 11 USCS § 522(b)(2)(B), where debtor was domi-ciled in Tennessee for greater part of 180 days prior to bankruptcy and, under Tennessee law, joint creditors can reach property held as tenants by entirety. In re Butcher (1986, BC ED Tenn) 63 BR 30.

Debtor may not claim exemption under 11 USCS § 522, in property that debtor claims is estate by entirety, where debtor's testimony that estate by entirety was intended is self-serving and is out-weighed by terms of purchase money mortgage and by fact that mortgage was received in payment for house owned and titled in debtor alone. In re Spatola (1986, BC SD Fla) 65 BR 49.

Debtor may not claim exemption under 11 USCS § 522 in 100 shares of stock in Florida corpo-ration as property held as tenant by entirety where single stock certificate has been executed to debtor alone and title to stock remains solely in debtor's name. In re Spatola (1986, BC SD Fla) 65 BR 49.

Chapter 7 debtors have interest as tenants by entirety in proceeds from foreclosure sale of their jointly owned property where assignee of property for benefit of creditors has, in effect, conceded that funds are property of debtors; wife's interest is valued at 50 percent where she has elected not to avail herself of Massachusetts common law exemptions prohibiting attachment of her interest but instead claims property as exempt under 11 USCS § 522. In re Paul (1986, BC DC Mass) 67 BR 342.

Where lease and individual guaranty created joint debt of Chapter 7 debtor and her nondebtor husband under Pennsylvania law that is not exempt from process under state law, debt does not qualify for exemption under 11 USCS § 522(b)(2)(B). In re Bialon (1986, BC WD Pa) 67 BR 451.

Debtor who owns dwelling and household goods with his wife in estate by entireties is entitled to claim state law exemptions under 11 USCS § 522 subject to right of creditors with lien against entireties property to proceed against entireties property; however, Bankruptcy Court should not permit creditor who has unsecured claim against both husband and wife to be prejudiced by dis-charge of husband-debtor; thus in order to prevent prejudice to such creditor either trustee will be permitted to collect from entireties' assets sufficient property to pay each creditor who has unse-cured claim against both husband and wife, or discharge will be stayed until creditors with claims against both spouses effect collection of such claims, and in order to facilitate collection of unse-cured creditor's claims, debtor may be ordered to file affidavit setting forth names of all prepetition creditors with claims against both spouses. In re Turner (1988, BC WD Pa) 81 BR 387.

Page 170 11 USCS § 522

Chapter 7 debtor's interest in her Massachusetts tenancy-by-entirety is not totally exempt under 11 USCS § 522(b)(2)(B) where debtor's interest is subject to attachment but not subject to levy or execution at this time, because debtor's right to possession cannot be interfered with unless and un-til; (1) property is sold; (2) debtor and her present spouse are divorced; or (3) debtor survives her spouse, at which time trustee will be free to enforce his interest in debtor's estate, therefore, debtor's exemption is limited by trustee's expectancy. In re McConchie (1988, BC DC Mass) 94 BR 245, CCH Bankr L Rptr P 72560.

Chapter 7 debtor did not have actual intent to hinder, delay, or defraud her creditor in violation of 11 USCS § 727(a)(2)(A) where she and her nondebtor husband transferred their entireties prop-erty on eve of bankruptcy filing because entireties property was exempt from claim of creditor, who was creditor of debtor only, not nondebtor spouse, under Virginia law and as such it would have been exempted from creditor's claim pursuant to 11 USCS § 522(b)(2)(B) had it come into debtor's estate; although creditor is correct in asserting that if debtor and her husband had not transferred their entireties property prepetition debtor's interest in property would have become part of her bankruptcy estate, debtor could have exempted her interest to extent it is exempt under Virginia law, which provides that entireties property is exempt from claim of either spouse's individual credi-tors, and although trustee could have sold entireties property and administered proceeds of sale for benefit of joint creditors he could not do so for benefit of debtor's individual creditors. T.R. Press, Inc. v Whitcomb (1992, BC ED Va) 140 BR 396, 4 Fourth Cir & Dist Col Bankr Ct Rep 388 (criti-cized in Zanderman, Inc. v Sandoval (In re Sandoval) (1998, CA4 Md) 10 Fourth Cir & Dist Col Bankr Ct Rep 579).

Funds held by trustee that were derived from liquidation of Chapter 7 debtors' entireties prop-erty shall be distributed to debtors' joint creditors, less administrative expenses and appropriate ex-emption and cannot be used to satisfy claim of creditor of debtor husband only; proceeds of entire-ties property are unavailable to satisfy claims creditors hold against one spouse, even when spouse who is not obligated to creditor has filed joint petition with spouse against whom creditor's claim applies. In re Mayes (1992, BC ED Mo) 141 BR 669.

Chapter 7 debtor's asserted exemption of his entire interest in entireties property is disallowed under 11 USCS § 522(b)(2)(B) to extent of any joint obligations owed by debtor and non-debtor spouse, where debtor claimed as exempt entire $ 145,000 value on entireties property having $ 70,000 joint debt; asserted exemption in entireties property is allowed to extent that value of debtor's interest in entireties property exceeds amount of joint debts owed. In re Maloney (1992, BC WD Pa) 146 BR 168, 27 CBC2d 1730.

Although Chapter 7 debtor asserts that trustee cannot file suit against her to rescind transfer that created entireties property because he did not object to her claim of exemption under 11 USCS § 522(b)(2)(B), trustee is not contesting debtor's right to claim § 522(b)(2)(B) exemption and until trustee successfully avoids transfer that created tenancy by entirety, debtor is entitled to exemption; requiring trustee to bring such action within 30-day claim exemption period would defeat purpose of much longer limitations period on trustee's avoiding powers provided in 11 USCS § 546(a); fur-thermore, even if Bankruptcy Rule 4003(b) were to be construed to apply, trustee's description of conveyance in his objection and his statement that he believes it can be avoided is sufficient "objec-tion" to comply with Rule and it was filed within 30-day period. In re Harry (1992, BC WD Va) 151 BR 735.

Page 171 11 USCS § 522

Where debtor has several creditors as to whom he is jointly liable with wife, then status of own-ership interest in property held with wife as tenants by entirety does not grant him exemption for that interest from bankruptcy estate. In re Cochrane (1995, BC DC Minn) 178 BR 1011.

Chapter 7 debtor and wife intended to hold checking accounts and tax exempt bonds as tenants by entireties, thus rendering checking accounts and bonds exempt from bankruptcy estate under 11 USCS § 522(b)(2)(B), where, after years of marriage, debtor and wife jointly deposited their monies into joint bank accounts; there were no creditor activities establishing that debtor or wife acquired any of their property, currently claimed as tenancy by entireties, for purpose of insulating any of it from creditors; and debtor testified that he informed his bank and broker that he wished to have ac-counts and bonds held so that he and his spouse were fully protected. Enterprise Fin. Corp. v Winn (In re Wincorp, Inc.) (1995, BC SD Fla) 185 BR 914, 9 FLW Fed B 98 (criticized in In re Bundy (1999, BC MD Fla) 235 BR 110).

Interest of Chapter 13 debtor/husband in limited liability company was as tenant in common so that he was not entitled to tenancy-by-entirety exemption under 11 USCS § 522(b)(2)(B) where arti-cles of organization were only evidence of ownership interests of debtor and his wife and articles, which provided that each member could transfer interest on consent of other members and that re-maining members could continue conducting business after one member's interest had been termi-nated, did not expressly demonstrate intent to hold interest in company in tenancy by entirety or even provide for right of survivorship, did not state percentage interest and did not state that debtor and his nondebtor spouse were husband and wife. In re Welty (1998, BC DC Wyo) 217 BR 907.

Properties held as tenancy by entireties by debtor and non-debtor spouse lost their exempt status under 11 USCS § 522(b)(2)(B) when they were conveyed as tenants in common to self-settled trust. In re Stanke (1999, BC WD Mo) 234 BR 439.

Personal property held as tenancy by entireties lost its exempt status and passed into bankruptcy estate upon death of debtor's spouse, subject to state's personal property exemption. In re Tharp (1999, BC MD Fla) 237 BR 213, 12 FLW Fed B 348.

Bankruptcy court inferred sufficient intent from husband and wife's agreement to terminate en-tireties tenancy and treat proceeds from sale of property as non-entireties property to disallow debt-ors' entireties exemption, making funds claimed in exemption available to trustee for distribution to both joint and non-joint creditors. Phillips v McCullen (In re McCullen) (1999, BC ED Va) 244 BR 73, 43 CBC2d 961.

Although there is nothing in Florida constitution or homestead and exemption statutes providing any exemption based on ownership by husband and wife as tenants by entireties, 11 USCS § 522(b)(2)(B) does recognize ownership immunity provided by common law which renders property held by spouses as tenants by entireties immune from process; automobile and bank funds were held by wife/debtor as joint tenant, rather than tenant by entireties, and were subject to administration by Chapter 7 trustee since Florida statute on ownership of vehicle as joint tenants applied even when co-owners were husband and wife and since bank's signature cars left no doubt that funds could be withdrawn by one signatory. In re Mastrofino (2000, BC MD Fla) 247 BR 330, 13 FLW Fed B 140.

For purposes of applying lien avoidance formula in 11 USCS § 522(f), debtor's interest in ten-ancy by entirety property should be valued at 100 per cent. In re Strandberg (2000, BC DC RI) 253 BR 584.

Page 172 11 USCS § 522

Even if tax refund was received because of earned income credit due to fact that non-debtor husband's children lived with debtor and her non-debtor husband, and debtor and her non-debtor husband had filed joint return, debtor had earned all of income and therefore refund was property of bankruptcy estate under 11 USCS § 541(a)(1), and was not held as tenants by entirety for exemption purposes under 11 USCS § 522(b)(2)(B) and Missouri law, because joint tax return did not effect change of ownership of property rights as between spouses. In re Walker (2002, BC WD Mo) 279 BR 544, 48 CBC2d 701, 90 AFTR 2d 5216.

In consolidated separate Chapter 7 cases wife successfully argued that only debtors' joint debts were payable out of sale proceeds of home that she held with her husband as tenant by entirety, and that sale proceeds could be used to pay creditor's administrative claim because remaining sale pro-ceeds were exempt property under 11 USCS § 522; because debtors held their former home as ten-ants by entirety, only creditors holding joint debts under state law could seek satisfaction from pro-ceeds of its sale. In re Eads (2004, BC WD Mo) 307 BR 219.

Chapter 7 trustee's attorney's fees and expenses were allowable administrative claims entitled to first priority for payment, but administrative expense claim was not joint debt; payment of adminis-trative claim out of exempt proceeds of property held in tenancy by entirety was impermissible un-der 11 USCS § 522(k). In re Eads (2004, BC WD Mo) 307 BR 219.

In spite of Chapter 7 trustee's objection to claimed exemptions of property owned by debtors pre-petition as tenants by entirety with their non-filing spouses, debtors were clearly eligible to take advantage of 11 USCS § 522(b)(2)(B) exemption; immediately before commencement of bank-ruptcy proceedings, debtors each held, as tenant by entirety, interest claimed as exempt under § 522(b)(2)(B). In re Spears (2004, BC WD Mich) 308 BR 793, revd, remanded (2004, WD Mich) 313 BR 212, 52 CBC2d 1356.

In action in which Chapter 7 trustee objected to claimed exemptions of property owned by debt-ors pre-petition as tenants by entirety with their non-filing spouses court, trustee's objections to 11 USCS § 522(b)(2)(B) exemptions was sustained to extent debtors contended that bankruptcy estate's interest in subject property continued to be held by bankruptcy estate as tenant by entirety. In re Spears (2004, BC WD Mich) 308 BR 793, revd, remanded (2004, WD Mich) 313 BR 212, 52 CBC2d 1356.

There was no dispute that debtor's domicile for purposes of 11 USCS § 522(b)(2)(A) was Illi-nois; therefore, under 765 Ill. Comp. Stat. 1005/1c, debtor could claim exemption to Illinois prop-erty which he held with his wife as tenants by entireties; however, Michigan properties were not homestead property of debtor and debtor could not claim exemptions in those properties under 11 USCS § 533(b)(2)(B). In re Giffune (2006, BC ND Ill) 343 BR 883.

Debtor was entitled to claim exemption under former 11 USCS § 522(b)(2)(B) to her interest in her residence because language of deed transfer clearly treated debtor and her husband as single en-tity holding undivided 50 percent interest and step-daughter holding other half interest; thus, there was clear intent to create tenancy by entireties rather than joint tenancy among three individuals. In re Weber (2006, BC DC Del) 346 BR 346.

Debtor's claim of exemption for residential property owned by tenancy by entireties under 11 USCS § 522(b)(2)(B) was impermissible as it related to joint creditors; degree of immunity provided to tenancy by entirety property interest is incorporated into § 522(b)(2)(B) by applicable nonbank-ruptcy law, in instant case is Michigan law, which provides that entireties property is not exempt

Page 173 11 USCS § 522

from process by joint creditors in satisfaction of joint debts owed by husband and wife. In re Guzior (2006, BC ED Mich) 347 BR 237.

Under 11 USCS § 522(b)(3)(b), Chapter 7 trustee was denied voidable preference under 11 USCS § 547(b)(4)(A) to recover pre-petition payment made to creditor from joint bank account held in tenancy by entireties where there were no joint creditors with valid claims against debtor and his non-filing spouse and there was no evidence that account contained only debtor's funds or that funds were placed in joint account for sole purpose of immunizing them from claims of creditors. Tardif v MBNA Am. Bank, N.A. (In re Kepley) (2006, BC MD Fla) 352 BR 526, 20 FLW Fed B 34.

Bankruptcy court found it was inequitable to allow separately filing spouses to retain ownership of their real property held as tenancy by entireties as exemption under 11 USCS § 522(b)(3)(B), to detriment of their joint creditors, by quirk of filing separate petitions. In re Stewart (2007, BC MD Fla) 20 FLW Fed B 339.

Where Chapter 7 debtor owned stock in company jointly with his wife until they received pro-ceeds from merger of company into another company, and stock certificate identified owner as debtor and his wife as joint tenants with right of survivorship, one-half of proceeds was property of bankruptcy estate because debtor and his wife did not own stock as tenants by entireties. In re Mathews (2007, BC MD Fla) 360 BR 732, 20 FLW Fed B 249.

Household goods and furnishings owned by Chapter 7 debtor and his wife were not property of bankruptcy estate because debtor and his wife owned items as tenants by entireties; trustee pre-sented no evidence that any of household belongings claimed as exempt were purchased outside term of marriage, no evidence that non-marital funds were used to acquire property claimed as ex-empt, and no evidence that joint ownership between debtor and his wife was not intended. In re Mathews (2007, BC MD Fla) 360 BR 732, 20 FLW Fed B 249.

Boat slip jointly owned by Chapter 7 debtor and his wife was not property of bankruptcy estate because debtor and his wife owned slip as tenants by entireties; because deed was titled jointly in names of debtor and his wife, there was presumption that slip was owned as tenants by entireties, and trustee presented no proof to rebut presumption. In re Mathews (2007, BC MD Fla) 360 BR 732, 20 FLW Fed B 249.

Mutual fund account jointly owned by Chapter 7 debtor and his wife was property of bank-ruptcy estate because debtor and his wife did not own account as tenants by entireties; by checking joint tenant box on account application form, and not checking tenants by entirety box, debtor and his wife expressly disclaimed tenancy by entireties form of ownership. In re Mathews (2007, BC MD Fla) 360 BR 732, 20 FLW Fed B 249.

Pursuant to 11 USCS § 522(b)(3)(B), Florida real property that is owned by Florida-domiciled debtor is exempt from administration as property of debtor's bankruptcy estate, regardless of when debtor became Florida domiciliary, if immediately before commencement of bankruptcy case debtor held tenancy by entireties interest in Florida real property with his or her spouse; only way that bankruptcy trustee can reach such exempt Florida real property is if trustee can trace fraudulent conveyance into property or if there are joint debts owed by both debtor and spouse. In re Schwarz (2007, BC SD Fla) 362 BR 532, 20 FLW Fed B 265.

Chapter 7 trustee's objection to Chapter 7 debtor's exemption claim for his Florida residence was overruled; although trustee was correct that pursuant to 11 USCS § 522(b)(3)(A), debtor could not

Page 174 11 USCS § 522

claim homestead exemption for residence under Florida law, because debtor had not lived in Florida for two years before filing his bankruptcy petition, debtor could nevertheless claim residence as ex-empt asset under § 522(b)(3)(B) because he owned residence with his wife, he had acquired tenancy by entireties interest in residence before he filed his bankruptcy petition, residence was exempt from process under Florida common law, and trustee did not allege that any debts were jointly owed by debtor and his wife or that debtor had acquired property as result of fraudulent conveyance. In re Schwarz (2007, BC SD Fla) 362 BR 532, 20 FLW Fed B 265.

Debtor's tax refund was properly claimed as exempt property owned as tenant by entireties (TBE) under 11 USCS § 522(b)(3)(B); debtor and her non-filing spouse filed joint tax return, they did not revoke that election, and they were entitled to refund that qualified as TBE property and, thus, when debtor filed her bankruptcy petition, all required unities existed. In re Freeman (2008, BC MD Fla) 387 BR 871, 21 FLW Fed B 317.

2.Nonbankruptcy Law as Determining Exempt Status 89. Generally

Under state law, to extent debtor and nonfiling spouse are indebted jointly, property owned as tenant by entireties may not be exempted from individual debtor's bankruptcy estate under 11 USCS § 522 and trustee may administer such property for benefit of joint creditors. Sumy v Schlossberg (1985, CA4 Md) 777 F2d 921, 13 BCD 1237, 13 CBC2d 1213, CCH Bankr L Rptr P 70861.

Property owned by Chapter 13 bankruptcy debtor as tenancy by entireties with non-debtor under state law is not part of bankruptcy estate and therefore cannot be reached by creditors; provided that property meets all requirements as tenancy by entireties under applicable law, it is exempt from bankruptcy administration under § 522(b)(2)(B) of Bankruptcy Code, 11 USCS § 522(b)(2)(B). Mu-solino v Sinnreich (In re Musolino) (2004, CA11 Fla) 391 F3d 1295, CCH Bankr L Rptr P 80201, 18 FLW Fed C 53.

"Applicable nonbankruptcy law", as term is used in 11 USCS § 522(b)(2)(B), and under which court is to determine extent to which debtor's interest as tenant by entirety is exempt from process, is not restricted to state statutory law, and includes state common law. In re Ford (1980, BC DC Md) 3 BR 559, 6 BCD 202, 1 CBC2d 840, CCH Bankr L Rptr P 67429, affd (1981, CA4 Md) 638 F2d 14, 3 CBC2d 549, CCH Bankr L Rptr P 67768 and (superseded by statute as stated in In re Bell-Breslin (2002, BC DC Md) 283 BR 834) and (criticized in In re Spears (2004, BC WD Mich) 308 BR 793).

Although 11 USCS § 522 exempts property held by debtor with non-debtor spouse as tenants by entirety, it does not create additional federal exemptions with regard to such property, but merely recognizes immunity if there is one under local law. In re Koehler (1980, BC MD Fla) 6 BR 203, 6 BCD 1126, CCH Bankr L Rptr P 67877.

Debtor/spouse's interests in real estate held as tenants by entirety may be claimed as exempt un-der 11 USCS § 522(b)(2)(B) where creditor's right to levy, as contingent/future right, does not con-stitute sufficient interest to deprive debtor of exemption. In re Gibbons (1982, BC DC RI) 17 BR 373, 8 BCD 923, CCH Bankr L Rptr P 68590.

Nature of debtor's interest in property held as tenant by the entirety is to be determined by non-bankruptcy law; filing of petition for bankruptcy does not generally act to sever estate by the en-tirety but where state law indicates that an estate is to be severed, each spouse is deemed entitled to

Page 175 11 USCS § 522

undivided one-half interest in equity of the property; neither spouse may exempt more than one-half interest in residence held as tenancy by the entirety. In re Ignasiak (1982, BC ED Mich) 22 BR 828.

Where state law provides entireties property is attachable only for joint debts, 11 USCS § 522(b)(2)(B) preserves the exemption in the property and precludes creditor from selling it where only one spouse was liable on debt. In re Hayden (1983, BC ED Ky) 41 BR 21, 12 BCD 272.

Debtor/grantee's post-delivery alteration of deed by adding language "as tenants by the entirety with right of survivorship as at common law" had no effect on type of estate conveyed so that debtor and his wife did not, under Virginia law, own property by right of entireties, with result that it was not exempt under 11 USCS § 522(b)(2)(B). In re Scialdone (1995, BC ED Va) 197 BR 225.

Deed to husband and wife as joint tenants with full common law right of survivorship created tenancy by entireties under Virginia law, so that both land and proceeds of sale of land are exempt from claims of non-joint creditors. In re Zella (1996, BC ED Va) 196 BR 752, 8 Fourth Cir & Dist Col Bankr Ct Rep 769, affd (1996, ED Va) 202 BR 712, 8 Fourth Cir & Dist Col Bankr Ct Rep 871 and (criticized in McNeilly v Geremia (In re McNeilly) (2000, BAP1 RI) 249 BR 576).

11 USCS § 522(b)(2)(B), by limiting exemption to property exempt from process under applica-ble nonbankruptcy law, intended to limit debtor's exemption to that available under applicable local law, and thus Illinois law would govern entitlement to exempt tenancy by entireties property in in-stant case. Voiland v Gillissie (In re Gillissie) (1997, BC ND Ill) 215 BR 370.

Unlike state law governing exemption entitlements under 11 USCS § 522(b)(2)(A), state law at play in § 522(b)(2)(B) is not "keyed into" situs of debtor's prepetition domicile, but is determined by situs of asset held by debtor as tenant by entireties. McNeilly v Geremia (In re McNeilly) (2000, BAP1 RI) 249 BR 576.


Filing of bankruptcy petition solely by husband-debtor does not sever estate of tenancy by en-tirety in either real or personal property held by debtor and wife under state law, such that debtor's interest in entireties property is property of bankruptcy estate under 11 USCS § 541 and that interest may be exempted from property of estate by debtor pursuant to 11 USCS § 522. Greenblatt v Ford (1981, CA4 Md) 638 F2d 14, 3 CBC2d 549, CCH Bankr L Rptr P 67768.

Debtor may not exempt property held with his wife as tenants by the entirety so as to bar lifting of automatic stay under 11 USCS § 362 in order to allow hospital to seek and enforce state court judgment to satisfy debt owed for wife's stay as patient in hospital, where 11 USCS § 522(b)(2)(B) provides that debtor's interest in entireties property may only be exempted if such interest is exempt from process under nonbankruptcy law, and state law in present case provides that entireties prop-erty is liable for joint debts of both spouses and is reachable against them by proper process. Chip-penham Hospital, Inc. v Bondurant (1983, CA4 Va) 716 F2d 1057, 11 BCD 11, CCH Bankr L Rptr P 69346.

Creditor with judgment on joint debt may levy upon entireties property and thus debtor's interest is not exempt under 11 USCS § 522(b)(2)(B) since each spouse is liable for whole debt jointly and severally. In re Grosslight (1985, CA6 Mich) 757 F2d 773, 12 CBC2d 525, CCH Bankr L Rptr P 70332.

New York statute permitting court to make order denying, limiting, conditioning, regulating, ex-tending, or modifying enforcement procedure is not "applicable nonbankruptcy law" making resi-

Page 176 11 USCS § 522

dences owned jointly by Chapter 7 debtors and their nondebtor spouses exempt from process under 11 USCS § 522(b)(2)(B) and not subject to sale under 11 USCS § 363(h) because statute creates no substantive exemption for any particular type of property interest; under New York law, debtor's interest in tenancy-by-entirety property is not exempt for enforcement purposes. In re Persky (1989, CA2 NY) 893 F2d 15, 19 BCD 1860, 21 CBC2d 1460, CCH Bankr L Rptr P 73170.

Missouri nonbankruptcy law does not prevent creditors from attaching entireties property where both holders of entirety interest are jointly indebted to creditors, and therefore property owned by debtor and his nondebtor spouse as tenants by entirety may not be exempted by debtor under 11 USCS § 522(b)(2)(B). In re Garner (1991, CA8 Mo) 952 F2d 232, 26 CBC2d 274, CCH Bankr L Rptr P 74392.

Chapter 7 debtor's bankruptcy estate does not include his present possessory interest in property he holds as tenant by entirety, but his bankruptcy estate does include his right of survivorship in that property pursuant to Tennessee law and 11 USCS § 522(b)(2)(B); creditor of only one spouse may execute judgment against only that spouse's right of survivorship but not against spouse's present possessory interest under Tennessee law. In re Arango (1993, CA6 Tenn) 992 F2d 611, CCH Bankr L Rptr P 75231.

Judgment creditor must seek to avoid transfer by which debtor transformed his individual prop-erty into home furnishings owned with his wife as tenants-by-the-entireties through adversary pro-ceeding to which debtor's wife is indispensable party in order to preserve her due process rights. Havoco of Am., Ltd. v Hill (In re Hill) (1999, CA11 Fla) 197 F3d 1135, CCH Bankr L Rptr P 78069, 13 FLW Fed C 271.

Insofar as individual creditors are concerned, entireties property is exempt from process under Virginia law; thus, presence of individual claims against either or both of spouses in joint case does not prevent debtor spouses from exempting their interests in entireties property under 11 USCS § 522(b)(2)(B). Bunker v Peyton (In re Bunker) (2002, CA4 Va) 312 F3d 145, 49 CBC2d 1157, CCH Bankr L Rptr P 78750.

Chapter 7 debtor may not avoid lien on his survivorship interest in property held by him and his nondebtor spouse as tenants by entirety, despite his argument that allowing creditor to enforce its judicial lien on right of survivorship will impair his 11 USCS § 522(b)(2)(B) exemption of use and control of his entireties property because he and his nondebtor wife are now unable to convey mar-ketable title to encumbered properties without consent of creditor, where under Tennessee law debtor would not be entitled to exempt his survivorship interest, with or without lien. Arango v Third Nat'l Bank (1993, ED Tenn) 155 BR 465, affd (1993, CA6 Tenn) 992 F2d 611, CCH Bankr L Rptr P 75231.

Tennessee garnishment statute does not provide an exemption for earnings in bankruptcy pro-ceedings and Chapter 7 podiatrist's unpaid patient accounts receivable are not exempt under 11 USCS § 522(b). Lawrence v Jahn (In re Lawrence) (1998, ED Tenn) 219 BR 786.

District court reversed bankruptcy court's order sustaining trustee's objections to debtor's claim of exemption because entireties property, which was non-exempt under 11 USCS § 522(b)(2)(B), could be distributed only to creditor who had rights against property under Florida law, which was joint creditor of both spouses; therefore, because such creditor declined to file claim after non-filing wife's satisfaction of joint debt, there were no filing by joint creditors to whom proceeds of entire-

Page 177 11 USCS § 522

ties property within bankruptcy estate could be distributed. In re McRae (2003, ND Fla) 308 BR 572.

Entireties property, which is non-exempt under 11 USCS § 522(b)(2)(B), may be distributed only to creditor who had rights against property under Florida law, which includes joint creditor of both spouses. In re McRae (2003, ND Fla) 308 BR 572.

Creditor's objections to debtor's claim of exemption under 11 USCS § 522 to property he alleged was held with his wife as tenants in entireties was denied because there was no provision under state law that altered common law presumption that conveyance of real property to husband and wife created tenancy by entireties; therefore, debtor's conveyance of property to himself and his wife was not fraudulent conveyance which could be avoided under 6 Del. C. § 1305(a)(1). Law Office of Staats, P.A. v Kelly (In re Kelly) (2004, DC Del) 316 BR 629.

25 Del. C. § 309 clearly permitted debtor to convey interest in real property to himself and his wife because statute repealed former common law rule forbidding such action and allowed married couples to convey property in any form of interest they desire; furthermore, debtor's failure to state in deed express description of interest he created only precluded debtor from claiming that he had created joint tenancy under 25 Del. C. § 701 and, therefore, creditor's objection to debtor's claim for exemption of property under 11 USCS § 522 was denied. Law Office of Staats, P.A. v Kelly (In re Kelly) (2004, DC Del) 316 BR 629.

Because "applicable nonbankruptcy law" as that phrase is used in 11 USCS § 522(b)(3)(B) does not mean exemption law of debtor's domicile, bankruptcy court erred in applying debtor's domicile state law to reject debtor's exemption; here, where exemption involved Florida property, Florida law should have been applied. Holland v Safanda (In re Holland) (2007, ND Ill) 366 BR 825.

Debtor's undivided interest in property which he held immediately before commencement of case as tenant by entirety with nonbankrupt spouse, as such tenancy is presently constituted under Maryland law, is property of estate in bankruptcy under 11 USCS § 541, and tenancy by entirety is not severed by filing of petition under Code; "applicable nonbankruptcy law" as term is used in 11 USCS § 522(b)(2)(B), and under which Bankruptcy Court is to determine extent to which debtor's interest as tenant by entirety is exempt from process, is not restricted to state statutory law and in-cludes state common law, and where, under such common law, debtor's interest in entireties prop-erty, standing alone, is unavailable to joint creditor, his interest in entireties property which be-comes asset of estate is likewise exempt from process under state law, and may be exempted from bankruptcy estate under 11 USCS § 522 when debtor chooses to exempt property under applicable state exemption laws. In re Ford (1980, BC DC Md) 3 BR 559, 6 BCD 202, 1 CBC2d 840, CCH Bankr L Rptr P 67429, affd (1981, CA4 Md) 638 F2d 14, 3 CBC2d 549, CCH Bankr L Rptr P 67768 and (superseded by statute as stated in In re Bell-Breslin (2002, BC DC Md) 283 BR 834) and (criticized in In re Spears (2004, BC WD Mich) 308 BR 793).

For purpose of determining portion of tenancy by entirety exempt under applicable nonbank-ruptcy law, debtor may not bifurcate interest in property, claiming that, in addition to interest as tenant by entirety, allegedly of little value since creditor cannot oust wife from premises or prevent debtor from continuing to reside on premises, debtor's interest also consists of right to continued occupancy during wife's lifetime, alleged to constitute main value of tenancy by entirety, for pur-pose of claiming great part of debtor's own interest, as well as wife's interest, exempt under 11

Page 178 11 USCS § 522

USCS § 522. In re Weiss (1980, BC SD NY) 4 BR 327, 6 BCD 431, 2 CBC2d 426, CCH Bankr L Rptr P 67476.

Under 11 USCS § 541, entire interest of bankrupt spouse in entireties property is property of es-tate, including undivided present right to use, possession, and income from property, as well as right of survivorship, and although debtor's present income in property is exempted pursuant to 11 USCS § 522, debtor spouse's right of survivorship remains within estate; although, under Tennessee law, creditors are accorded right to levy on spouse's survivorship interest, debtor spouse's right of survi-vorship is not sufficient interest in entireties property to enable trustee to sell entire property pursu-ant to 11 USCS § 363. In re Shaw (1980, BC MD Tenn) 5 BR 107, 6 BCD 651, 2 CBC2d 599.

Under 11 USCS § 522(b)(2)(B) it is not tenancy by entirety itself which becomes part of estate, but only interest which debtor held in such property immediately before commencement of case; such interest is exempt only to extent it is immune from process under state law; where at com-mencement of Chapter 11 proceeding, debtor's interest in property held as tenant by entirety con-sisted of statutory right to redeem, right expired on date that automatic stay was lifted, and property was subsequently liquidated; debtor did not possess interest in property which could be considered exempt from process under state law following termination of statutory redemption period and liq-uidation of property; unexercised statutory right to redeem does not constitute interest as tenancy by entirety exempt from process under applicable nonbankruptcy law. In re Jones (1983, BC ED Mich) 31 BR 372, 8 CBC2d 1215, affd (1985, ED Mich) 49 BR 990.

Joint creditor of husband and wife is entitled to pursue their joint property, known in Florida as tenancy by entirety property, even where one spouse files bankruptcy and obtains discharge from indebtedness. In re Snow (1983, BC MD Fla) 38 BR 19, CCH Bankr L Rptr P 69556 (criticized in In re Monzon (1997, BC SD Fla) 214 BR 38, 38 CBC2d 1469, 11 FLW Fed B 113).

Trustee's objection to debtor's claim of exemptions pursuant to 11 USCS § 522(b)(2)(B) and state common-law doctrine of tenancy by the entireties will be sustained where debtor's interest in his entireties property is not exempt from process by his joint creditors under state law. In re Seidel (1984, BC DC Md) 38 BR 264.

Since, in bankruptcy context, there are significant logical and/or equitable impediments to allo-cating all of estate to one of tenants by the entirety, for purpose of determining debtor's exemption in entireties property, one-half of equity in subject property should be allocated to debtor, even though state case law follows traditional common-law concept that generally tenants by the entirety are each presently seized and possessed of an interest in entire estate; therefore, where all of debtor's equity in entireties property is exempt, and there is no excess equity for creditor's lien and such lien would impair debtor's exemption, debtor may avoid such lien pursuant to 11 USCS § 522(f). In re Dionne (1984, BC DC RI) 40 BR 137, 10 CBC2d 1178, CCH Bankr L Rptr P 69908.

Property held as tenants by entireties by Chapter 13 spouses subject to judicial lien cannot be exempted under 11 USCS § 522(b)(2)(B) because, under Pennsylvania law, creditors with joint judgment or joint debt may levy on entireties property; thus, interest of both spouses and debtor's interest is therefore not "exempt from process" under § 522; if co-debtor property may be reached to satisfy state court judgment, if may not be exemption under § 522(b)(2)(B). In re Riley (1985, BC ED Pa) 48 BR 194.

Where Chapter 7 debtor husband claims exemption in entireties interest in Mexican trust allow-ing use of condominium in Mexico, "applicable nonbankruptcy law" for purposes of 11 USCS §

Page 179 11 USCS § 522

522(b)(2)(B) is situs of trust res: thus debtor and creditors, if objecting, must plead and prove under Bankruptcy Rule 9017 that entireties interest is or is not exempt under Mexican law because court will not take judicial notice of foreign law; absent such proof, Bankruptcy Court will apply laws of state in which it sits. In re Anselmi (1985, BC DC Wyo) 52 BR 479, 13 BCD 573.

Individual Chapter 7 debtor's entireties property is not exempt under 11 USCS § 522(b)(2)(B) because Rhode Island Supreme Court has held creditors may attach, but not levy upon, entireties property, and thus Rhode Island does not shield entireties property from all "process." In re Gibbons (1985, BC DC RI) 52 BR 861, 13 BCD 705, 13 CBC2d 759, CCH Bankr L Rptr P 70745.

New Jersey purchase money mortgage naming debtor and his non-debtor spouse as grantees may not be exempt under 11 USCS § 522 as estate by entirety because, at its inception, mortgage could not and did not create or constitute estate by entirety under New Jersey law. In re Spatola (1986, BC SD Fla) 65 BR 49.

In addition to Florida opt-out exemptions, Chapter 7 debtor may exempt under 11 USCS § 522(b)(2)(B) following entireties property which cannot be reached under Florida law to satisfy in-dividual debt of one spouse: joint checking account, loan receivable from homeowner's association, and profit sharing plan; since no entireties estate was created in household furnishings, these are not exemptible. In re Golub (1987, BC MD Fla) 80 BR 230, 16 BCD 1016.

Chapter 7 trustee's objection to Chapter 7 debtors' claimed exemption of two Agricultural Stabi-lization and Conservation Service crop insurance payments is overruled where Bankruptcy Court finds that payments are property that is exempt pursuant to Federal Crop Insurance Act (7 USCS Chapter 36) and therefore may be exempted by debtors from bankruptcy estate under 11 USCS § 522(b)2)(A). In re Clark (1995, BC WD Mo) 186 BR 249, 34 CBC2d 169.

Although Florida does recognize exemption for personal property held by tenancy by entireties, debtor was not entitled to it, where he failed to rebut state's presumption against tenancy by entire-ties with sufficient documentary evidence; i.e., even though three of six furniture receipts were made out to debtor and his spouse, specific intent to create tenancy by entireties did not clearly ap-pear on receipts. In re Howe (1999, BC MD Fla) 241 BR 242, 13 FLW Fed B 30.

Florida constitutional and statutory exemptions are not mutually exclusive so that debtor can utilize constitutional personal property exemption to exempt equity remaining in truck after exhaus-tion of amount available under motor vehicle exemption. In re Rutter (2000, BC MD Fla) 247 BR 334, 13 FLW Fed B 139.

Indiana statute creating bankruptcy exemption for entireties property is invalidated by Suprem-acy Clause since statute frustrates full effectiveness of federal bankruptcy law in two ways: (1) stat-ute changes way Congress allocated consequences of bankruptcy between debtors and creditors and (2) statute specifically conflicts with statutory framework Congress created for dealing with entire-ties property in bankruptcy proceedings involving only one spouse. In re Cross (2000, BC ND Ind) 255 BR 25.

Debtor properly claimed real property as exempt pursuant to 11 USCS § 522(b)(2)(B) and laws of North Carolina pertaining to property held as tenants by the entirety, and property was not avail-able to trustee to satisfy general unsecured debt that was held solely in name of debtor. In re Knapp (2002, BC MD NC) 285 BR 176.

Page 180 11 USCS § 522

Given continued recognition of states' right to recognize property held as tenancy by entireties, unique abilities of federal tax collector, longstanding North Carolina law based upon doctrine of unity of person protecting entireties property, and clear language of 11 USCS § 522, U.S. Supreme Court's ruling in Craft should not be extended beyond its application to federal tax liens. In re Knapp (2002, BC MD NC) 285 BR 176.

Where all debt of Chapter 7 debtor qualified as necessaries, debtor could nonetheless claim ex-emption in her personal residence, which was owned with her husband as tenants by entirety, be-cause under applicable state law, 23 Pa. Cons. Stat. Ann. § 4102, creditor could not execute on property. Zebley v Olexa (In re Olexa) (2004, BC WD Pa) 317 BR 290.

Where debtor assigned property he acquired before his marriage to debtor and his wife as ten-ants by entireties subsequent to marriage pursuant to prenuptial agreement, property was exempt under 11 USCS § 522(b)(2)(B) as tenancy by entireties because all unities of entireties estate were in existence at time assignment was executed. In re Kossow (2005, BC SD Fla) 325 BR 478, 18 FLW Fed B 229.

Joint income tax refund constitutes personal property that satisfies unities of possession, inter-est, title, and time with right of survivorship subject to rebuttable presumption; presumption can be rebutted based upon extrinsic evidence such as prenuptial agreement; where debtor claimed that federal income tax refund from joint tax return was exempt under 11 USCS § 522(b)(2)(B) as ten-ancy by entireties, debtor was denied summary judgment because couple's prenuptial agreement could be interpreted so as to treat tax refunds as separate property. In re Kossow (2005, BC SD Fla) 325 BR 478, 18 FLW Fed B 229.

Where Chapter 7 debtor sought to exempt personal injury action under Mass. Gen. Laws ch. 223, § 42, because it was non-assignable under state common law, trustee's objection was sustained because non-assignability did not equate to exemption; 11 USCS § 541 effectuated transfer of assets from debtor to estate by operation of law rather than by assignment. In re MacDonald (2005, BC DC Mass) 326 BR 6.

Proceeds of settlement of personal injury action received by bankruptcy debtor and non-debtor spouse were not exempt in debtor's bankruptcy under 11 USCS § 522(b)(2)(B) as property held in tenancy by entirety, since there was no unity of interest in debtor's personal injury claim and spouse's distinct loss of consortium claim. In re Pereau (2007, BC MD Fla) 20 FLW Fed B 371.

Chapter 7 debtor was not permitted to exempt household goods and furnishings as owned with his non-filing spouse as tenants by entireties because debtor produced no written instrument, as re-quired by N.J. Stat. Ann. § 46:3-17.2, to show that debtor and his non-filing spouse acquired per-sonal property as tenants by entireties. Dzikowski v Kirshner (In re Kirshner) (2007, BC SD Fla) 58 CBC2d 1472, 21 FLW Fed B 148.

Remedies of 11 USCS § 523(a)(5) judgment creditor must be pursued in accordance with state law because 11 USCS § 522(c) is not execution statute and does not confer any rights greater than that which existed outside of bankruptcy; that is, § 522(c) leaves exempt property exposed to post-bankruptcy liability only to extent it would have been exposed if bankruptcy had not occurred. Rupp v Elmasri (In re Elmasri) (2007, BC ED NY) 369 BR 96.

Where Chapter 7 debtor and his wife for their entire 35-year marriage always filed joint tax re-turns, proceeds from three separate tax refund checks, made payable to both of them and either de-

Page 181 11 USCS § 522

posited into bank account designated as tenancy by entireties account or used to purchase jointly-titled certificate of deposit, were exempt as tenants by entireties property pursuant to state law and 11 USCS § 522(b)(3)(B). Dillworth v Hinton (In re Hinton) (2007, BC MD Fla) 378 BR 371, 21 FLW Fed B 40.

Chapter 7 debtor was entitled under 11 USCS § 522(b)(2)(B) to exemption for $ 2 million resi-dence held as tenant by entirety with ex-wife since (1) under Hawaiian law, estate by entireties may not, without consent of both spouses, be levied upon for separate debts of either spouse, (2) creditor was unable to show fraudulent bankruptcy planning, and (3) equitable considerations should not be used to disregard clear mandates of Bankruptcy Code and Hawaiian law. Coughlin v Cataldo (In re Cataldo) (1998, BAP9 Hawaii) 224 BR 426, 98 CDOS 7054, 98 Daily Journal DAR 9889, CCH Bankr L Rptr P 77816.

In 11 USCS § 522 exemption matter bankruptcy appellate panel found that, under Utah's home-stead law, joint owners need not be married but were not considered members of "household" unless they were related by blood or marriage. Carlson v Diaz (In re Carlson) (2004, BAP10) 303 BR 478.

C.Homestead


Homestead exemption in Illinois entitles debtor to remain in his home rent free until he receives cash value of exemption. In re Szekely (1991, CA7 Ill) 936 F2d 897, 24 CBC2d 2028, CCH Bankr L Rptr P 74070.

Homestead exemption set forth in 11 USCS § 522 protects debtor and debtor's dependents by helping them to preserve interest in their home. David Dorsey Distrib. v Sanders (In re Sanders) (1994, CA10 Utah) 39 F3d 258, 32 CBC2d 582, CCH Bankr L Rptr P 76187 (superseded by statute as stated in Pepper v Public Serv. Emples. Credit Union (In re Pepper) (1997, BC DC Colo) 210 BR 480, 14 Colo Bankr Ct Rep 205, 38 CBC2d 596) and (superseded by statute as stated in In re Richardson (1998, BC ND Okla) 224 BR 804, 40 CBC2d 980, CCH Bankr L Rptr P 77815) and (superseded by statute as stated in Parsons v Investment Co. (In re Parsons) (1999, BAP10 NM) 16 Colo Bankr Ct Rep 55).

Federal exemptions are not applicable where state has specifically vetoed exemptions under op-tion given by 11 USCS § 522 to each state, and under such circumstances issue of whether property is exempt homestead is to be decided under state law; value and status of exempt property in bank-ruptcy is determined as of date petition is filed, and where debtors arrange to retain possession of homestead until day after bankruptcy petition was filed, at which time they moved into leased prem-ises, under applicable state homestead exemption, state court case holding that property remains homestead exemption until sale is closed, is dispositive. In re Crump (1980, BC SD Fla) 2 BR 222, 5 BCD 1235, 1 CBC2d 378, CCH Bankr L Rptr P 67444.

Amount and method of calculation of state homestead exemption is to be determined by state nonbankruptcy law. In re Miles (1983, BC ED Cal) 35 BR 52 (criticized in Wiget v Nielsen (In re Nielsen) (1996, BAP9 Cal) 197 BR 665, 96 CDOS 5516, 96 Daily Journal DAR 8807, CCH Bankr L Rptr P 77052).

Bankruptcy Court must resort to state law for interpretation of nature of state exemption rights in homesteads under 11 USCS § 522; state law defines nature and extent of debtor's interest in prop-erty. In re Evans (1985, BC DC Vt) 51 BR 47.

Page 182 11 USCS § 522

Exemption in 11 USCS § 522(d)(11) for personal injury awards is supplemental to other exemp-tions, not limit on them; thus fact that debtor claims more than § 522(d)(11) allows has no effect on availability of homestead exemption to debtor. In re Wheeling (1986, BC WD Pa) 68 BR 388.

Although homestead exemptions vary widely from state to state, there are 3 general principles underlying all: (1) homestead, being creature of statute, must be interpreted in light of statute in question; (2) homestead statutes are to be liberally construed; and (3) sine qua non of homestead is ownership plus occupancy; as very broad generalization, it can be stated that if owner intends struc-ture to be his homestead and actually lives in it, then it can be his homestead, no matter what its form, appearance, or original use; thus, bar located in middle of block building in which debtor has made his home for years constitutes exempt homestead under 11 USCS § 522 and will not be parti-tioned absent sufficient evidence how partition could be practicably accomplished. In re Robinson (1987, BC WD Mo) 75 BR 985.

Bankruptcy Court must presume that Chapter 7 debtor's property designated as homestead is in fact being used by debtor as his homestead, thus only that property may be treated as exempt under Texas homestead exemption and no claim of homestead exemption can be made as to other parcels. In re Montgomery (1987, BC WD Tex) 80 BR 385, 16 BCD 1351.

Where Chapter 7 debtor properly claimed homestead exemption under 11 USCS § 522(b), such exempt homestead never became property of estate. In re Spain (1988, BC ND Ala) 83 BR 61.

Under 11 USCS § 522(l), where Chapter 7 debtor properly claimed homestead as exempt and no objections were filed, homestead is exempt. In re Spain (1988, BC ND Ala) 83 BR 61.

Purpose of 11 USCS § 522(d)(1) is to provide those debtors eligible to select federal exemptions with homestead exemption, and term "residence" must be interpreted in that light; whether real property constitutes residence is dependent upon facts of case but vacation homes which involve seasonal, sporadic occupancy generally do not fall within protection of state homestead laws. In re Tomko (1988, BC ED Pa) 87 BR 372, 19 CBC2d 16, CCH Bankr L Rptr P 72376.

Debtor's right to claim homestead exemption under 11 USCS § 522 is generally determined by facts as they exist on date bankruptcy is filed. Martinson v Michael (In re Michael) (1995, BC DC Mont) 183 BR 230.

11 USCS § 522(p) is applicable to debtors in opt-out states that do not allow choice of federal exemptions. In re Virissimo (2005, BC DC Nev) 332 BR 201, CCH Bankr L Rptr &p&t80385.

Although there may be ambiguity in 11 USCS § 522(p)(1), since debtors in opt-out states have very limited right of election, courts should adhere to legislative intent which clearly reflects that Congress intended cap of $ 125,000 to be applied to all debtors under circumstances mentioned in section; accordingly, Bankruptcy Court concludes that state debtors are subject to provisions of 11 USCS § 522(p). In re Summers (2006, BC DC Ariz) 344 BR 108.

Debtor's claim of homestead, even though post-bankruptcy, made pursuant to state law prevails over that of trustee under 11 USCS § 522. In re Martin (1982, BAP9 Cal) 20 BR 235, 9 BCD 164, CCH Bankr L Rptr P 68710.

Bankruptcy court properly applied tenants by entirety election under Massachusetts law, Mass. Gen. Laws Ann. ch. 209 § 1, when calculating debtor's homestead exemption, 11 USCS § 522(d)(1)(5), to determine whether debtor could avoid judicial lien pursuant to 11 USCS § 522(f); record clearly showed that in 1992, debtor recorded in proper county registry of deeds debtor's Elec-

Page 183 11 USCS § 522

tion of Treatment for post-February 1980 tenancy by entirety, so debtor had right to whole property and value of debtor's interest exceeded total amount of liens against property. Maloni v Fairway Wholesale Corp. (In re Maloni) (2002, BAP1) 282 BR 727, 40 BCD 32, 49 CBC2d 571.

Bankruptcy court correctly applied Oklahoma's homestead exemption to facts of debtor's case, pursuant to Okla. Stat. Ann. tit. 31, § 1(A)(1) (1991 & Supp. 2000); trustees carried their burden and proved that debtor did not intend, as of date of bankruptcy petition, to make property her principal residence and homestead. Robinson v Sanchez (In re Robinson) (2003, BAP10) 295 BR 147.

92. Qualifications for exemption

State's exclusion from scope of its homestead exemption of liens that attached before property in question qualified for homestead status does not prevent such liens from being avoided under 11 USCS § 522(f). Owen v Owen (1991) 500 US 305, 114 L Ed 2d 350, 111 S Ct 1833, 91 CDOS 3710, 91 Daily Journal DAR 6043, 21 BCD 1164, 24 CBC2d 850, CCH Bankr L Rptr P 73963 (su-perseded by statute as stated in In re Parrish (1995, BC WD Wis) 186 BR 246, CCH Bankr L Rptr P 76786).

Under former law, right to homestead exemption is privilege given by state statute which by its terms requires timely execution, acknowledgment, and recordation of declaration of homestead, and if declaration is not properly acknowledged, it is ineffective; therefore, bankrupts are disallowed homestead exemption where prior to bankruptcy they (1) execute and record declaration of home-stead; (2) discover at first meeting of creditors that declaration is void because commission of no-tary public who took acknowledgment has expired; and (3) then record new declaration. Coopman v Citizens State Bank (1936, CA9 Wash) 83 F2d 815, cert den (1937) 300 US 655, 81 L Ed 865, 57 S Ct 431 and reh den (1936, CA9 Wash) 85 F2d 799.

Failure to comply with state homestead exemption statute will preclude debtor from claiming that exemption for bankruptcy purposes; 11 USCS § 522(b)(2)(A) provides that for property to be exempt under state or local law, it must be claimed as exempt in manner prescribed by those laws; exemption conferred presupposes compliance with pertinent state and local laws. Zimmerman v Morgan (1982, CA4 Va) 689 F2d 471, 9 BCD 992, 7 CBC2d 859, CCH Bankr L Rptr P 68794.

Bankruptcy Court cannot impose either constructive trust or equitable lien on Chapter 13 debtor's homestead for unsecured home improvement funds creditor bank advanced to debtor merely because of oral promise by debtor to comply with Texas statutory requirements for placing lien on homestead property; Texas constitutional and statutory prerequisites must be strictly com-plied with before there is any attachment to homestead property; neither will court imply vendor's lien on homestead since none of funds were used to purchase homestead. In re Daves (1985, CA5 Tex) 770 F2d 1363.

Debtors' failure to comply strictly with opt-out state statutory requirement that both spouses sign homestead declaration precludes them from claiming their residence as exempt under 11 USCS § 522 where debtors could not establish that it was impossible to obtain both spouses' signatures on such declaration. In re Renner (1987, CA9) 822 F2d 878, CCH Bankr L Rptr P 71913.

Under Texas law, in order to establish homestead rights, proof must show combination of both overt acts of homestead usage and intention on part of owner to claim land as homestead; Chapter 7 debtor's actual and continuous use of homestead property since purchase is most satisfactory and

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convincing evidence of intention. In re Niland (1987, CA5 Tex) 825 F2d 801, CCH Bankr L Rptr P 71664.

Debtors could exempt their entireties property (their home) under 11 USCS § 522(b)(2)(B) to extent of their equity, where none of unsecured creditors was joint creditor of husband and wife, each of creditors was individual creditor with claim against either husband or wife, and state law shielded entireties property from claims of individual creditors of either spouse. Bunker v Peyton (In re Bunker) (2002, CA4 Va) 312 F3d 145, 49 CBC2d 1157, CCH Bankr L Rptr P 78750.

Debtors could exempt their entireties property (their home) under 11 USCS § 522(b)(2)(B) be-cause their innocent practice of commingling their finances did not convert their individual creditors into joint creditors under Virginia entireties law. Bunker v Peyton (In re Bunker) (2002, CA4 Va) 312 F3d 145, 49 CBC2d 1157, CCH Bankr L Rptr P 78750.

Where appellee debtor acquired title to Texas property prior to marriage and prior to statutory period of 11 USCS § 522(p)(1)(D), she was entitled to her full homestead exemption notwithstand-ing divorce decree's later awarding it to her; district court's affirmance of denying appellant credi-tor's objection to exemption was affirmed. Wallace v Rogers (In re Rogers) (2008, CA5 Tex) 513 F3d 212, CCH Bankr L Rptr P 81081.

Liquidating Chapter 11 plan allowing homestead exemption cannot be confirmed where no prepetition homestead deed was filed as required under state's opt-out statute. In re Smith (1987, WD Va) 75 BR 365.

Bankruptcy Courts must follow state law interpretation of state exemption rights in homesteads under 11 USCS § 522(b)(2)(A); determinations whether homestead land has urban or rural character and whether Chapter 11 debtor has abandoned homestead by temporary absences for health reasons or by transfer of property to holding corporation are questions of state law; under Texas law, debtor's right to homestead exemption is unaffected by fact that debtor dishonestly engages in mul-tiple sham conveyances of homestead property in effort to protect home from judgment creditor, and thus trustee and judgment creditor may not set aside conveyance of debtor's exempt homestead property since such conduct is not fraudulent as to creditors. In re Moody (1987, SD Tex) 77 BR 580, affd (1989, CA5 Tex) 862 F2d 1194, CCH Bankr L Rptr P 72633, reh den (1989, CA5) 1989 US App LEXIS 3526 and cert den (1992) 503 US 960, 118 L Ed 2d 209, 112 S Ct 1562.

Debtors who have properly and timely filed homestead deed may claim homestead exemption under 11 USCS § 522(f) even after discharge has been granted, where debtors have engaged in no inequitable conduct. In re Webb (1984, BC ED Va) 49 BR 646.

Debtors cannot exempt Kansas homestead when filing petition in Virginia because they failed to comply with Virginia's requirement that homestead deed be filed in county where property is lo-cated. In re Calhoun (1985, BC ED Va) 47 BR 119.

Chapter 7 debtor may properly claim homestead, under South Dakota law, in parcel on which house is located in which she and her husband have resided and in which she has owned interest since 1975 and regarding which debtor has filed affidavit of homestead claim evidencing intent by debtor to make property her home. In re Corbly (1986, BC DC SD) 61 BR 843.

Chapter 7 debtors who failed to record Declaration of Homestead as required by Montana law to establish their right to homestead exemption by bankruptcy petition date could not amend their schedules postpetition to claim exemption, where Montana law provided no automatic homestead

Page 185 11 USCS § 522

exemption by possession alone and required compliance with recordation statutes for there to be valid exemption, thereby making debtors' homestead property of estate on petition date by operation of 11 USCS § 541. Martinson v Michael (In re Michael) (1995, BC DC Mont) 185 BR 830.

While subsequent mortgage could subordinate prior Massachusetts homestead to mortgage, un-der Mass. Gen. Laws ch. 188, § 7, such mortgage did not extinguish debtor's homestead claimed as to all subsequent creditors, and thus, bankruptcy court overruled judicial lien creditors' objection to debtor's homestead exemption claimed under Mass. Gen. Laws ch. 188, § 1, and granted debtor's motion to avoid judicial liens under 11 USCS § 522(f)(2)(A). In re Heretakis (2003, BC DC Mass) 293 BR 82.

Chapter 7 trustee could bring fraudulent property transfer suit against transferee though trustee failed to timely object to debtor's claimed homestead property exemption for land transferred pre-petition, as land claimed as exempt was never part of bankruptcy estate. Novak v Woodin (In re Woodin) (2003, BC DC Conn) 294 BR 436, 50 CBC2d 1109.

With no joint debts, debtor was entitled to exempt his entire interest in homestead real estate that he owned with his wife as tenants by entirety; since he was entitled to full exemption, debtor could avoid fixing of creditor's judicial lien, on his interest in homestead real estate pursuant to 11 USCS § 522(f)(1)(A), to extent that lien impaired exemption. lien was considered to impair exemp-tion to extent of $ 143,613.40, amount of creditor's lien, and was therefore fully avoidable. In re Tolson (2005, BC CD Ill) 338 BR 359.

Where unmarried bankruptcy debtor lived with debtor's non-dependent sibling, debtor nonethe-less qualified as head of household for purposes of homestead exemption since debtor's dependent parent lived with debtor prior to parent's death and there was no showing that homestead was termi-nated; it was irrelevant that parent was only partially supported by debtor, that debtor might not have been legally obligated to support parent, and that parent died prior to debtor's bankruptcy. In re Morris (2006, BC WD Ark) 340 BR 78.

Where debtors claimed blanket exemption against their home and 30-acre noncontiguous parcel of land under Ohio Rev. Code Ann. § 2329.66(A)(1)(b), 30-acre parcel of land could not be claimed as exempt under § 2329.66(A)(1)(b) because homestead exemption was limited to just one parcel of property. In re Williams (2006, BC ND Ohio) 345 BR 853.

Where mortgage on debtors' property was defective because it lacked acknowledgment, debtors' Chapter 13 plan could not be confirmed pursuant to 11 USCS § 1325(a)(4) because if case were one under Chapter 7, mortgage could have been avoided and creditors would have fared better under Chapter 7 than under debtors' Chapter 13 plan; debtors' argument that they could amend schedules and claim their homestead as exempt was no answer to Trustee's objection because once debtor had voluntarily transferred lien in property to creditor and lien was successfully avoided, debtor could not subsequently exempt property that was subject to lien. In re Beene (2006, BC WD Ark) 354 BR 856.

Bankruptcy court disallowed debtor's claim to homestead exemption under Fla. Const. art. X, § 4(a)(1) on house he owned with his ex-wife in New York because Florida courts limited exemption to homesteads that were located in Florida. In re Schlakman (2007, BC SD Fla) 20 FLW Fed B 384.

Bankruptcy court's denial of debtor's claimed homestead exemption under Mass. Gen. Laws ch. 188, § 1 to tract of vacant land connected to his residence was vacated because bankruptcy court did

Page 186 11 USCS § 522

not conduct fact specific inquiry into nature and use, or intended use, of vacant land by debtor. Fiffy v Nickless (In re Fiffy) (2003, BAP1) 293 BR 550. Unpublished Opinions

Unpublished: When debtor's property was abandoned pursuant to 11 USCS § 554, it reverted to debtor and was no longer part of estate, and because it was not "property of estate," residence was no longer protected under automatic stay provision of 11 USCS § 362(a), so creditor did not violate § 362(a) when he foreclosed on debtor's property; further, because residence was not part of estate at time of creditor's foreclosure, Homestead Exemption was not applicable. Fields v Bleiman (2007, DC NJ) 2007 US Dist LEXIS 75543.

93. Marshaling

Debtor's exempt homestead property is not subject to marshaling; state-legislated homestead ex-emption is superior equity which prevents marshaling of bankrupt's assets. Gibson v Farmers & Merchants Bank (1986, ND Fla) 81 BR 84.

Chapter 7 debtors' entitlement to homestead exemption under Iowa opt-out provisions depends on whether judgment creditor with lien on homestead has exhausted other property of debtors liable to execution, where Iowa exemption provides that homestead may be sold to satisfy debts con-tracted prior to acquisition, but only after exhaustion of other property. In re Mosher (1987, SD Iowa) 79 BR 840.

Debtor's homestead exemption is superior, or at least equal, to right of junior lienor to have asset marshaled, and thus, senior lien claimant may not be required first to satisfy its claim from exempt property which has been specifically pledged to such senior creditor in order to leave resort to other nonexempt property by junior lienor who has recourse only against such nonexempt property. Farmers & Merchants Bank v Gibson (1984, BC ND Fla) 81 BR 81, vacated (1984, BC ND Fla) 81 BR 83, affd (1986, ND Fla) 81 BR 84.

Bankruptcy trustee could not require bank to foreclose on debtor's homestead before resorting to nonhomestead property, although surplus apparently would exist in nonhomestead property if bank first satisfied remainder of its claim from homestead, because first resort to homestead property should not be required in view of superior rights of homestead claimant that nonexempt property be looked to first. Farmers & Merchants Bank v Gibson (1984, BC ND Fla) 81 BR 83, affd (1986, ND Fla) 81 BR 84.

Where debtors' home and separate parcel were encumbered by one mortgage, debtors could not claim exemption in home under Ohio Rev. Code Ann. § 2329.66(A)(1)(b) because trustee had dis-cretion to marshal debtors' assets and first allocate mortgage as encumbrance against home, leaving no equity in home as result. In re Williams (2006, BC ND Ohio) 345 BR 853.

94. Appreciation since filing date

Chapter 7 debtors' argument that they are entitled to $ 45,000 homestead exemption plus home's appreciation since filing of bankruptcy petition is premature, but in any event is without merit be-cause California statute gives debtor $ 45,000 exemption as of time of sale, not $ 45,000 equity in-terest in property; only in bankruptcy context, where appreciable time period passes between filing of petition and sale of property, can property rise or fall in value, but there is no basis for treating sale by bankruptcy trustee any different from sale by judgment lienholder as debtor's right to use

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exemption comes into plan not upon filing of bankruptcy petition, but only if and when trustee at-tempts to sell property, and at that point, and not before, debtor first faces possibility of being dis-possessed of his home and grim prospect of having to use exemption money to find alternative housing. In re Hyman (1992, CA9) 967 F2d 1316, 92 CDOS 5323, 92 Daily Journal DAR 8504, 23 BCD 153, CCH Bankr L Rptr P 74706.

Although Utah debtor asserts that he is entitled to "baseline hypothetical state of affairs" of homestead, which includes right to continued enjoyment of his home and appreciated value, if any, postpetition, nothing contained in Utah statute suggests legislature intended to establish baseline hypothetical state of affairs as part of property owner's homestead rights; moreover, Utah home-stead exemption is strictly limited to finite dollar values; further, allowing 11 USCS § 522(f) to ex-tend to postpetition increases in value of secured property is contrary to concept of protecting credi-tor's surviving secured interests. David Dorsey Distrib. v Sanders (In re Sanders) (1994, CA10 Utah) 39 F3d 258, 32 CBC2d 582, CCH Bankr L Rptr P 76187 (superseded by statute as stated in Pepper v Public Serv. Emples. Credit Union (In re Pepper) (1997, BC DC Colo) 210 BR 480, 14 Colo Bankr Ct Rep 205, 38 CBC2d 596) and (superseded by statute as stated in In re Richardson (1998, BC ND Okla) 224 BR 804, 40 CBC2d 980, CCH Bankr L Rptr P 77815) and (superseded by statute as stated in Parsons v Investment Co. (In re Parsons) (1999, BAP10 NM) 16 Colo Bankr Ct Rep 55).

When debtor's original Chapter 11 petition was filed, debtor's interest in his residence passed to bankruptcy estate and estate held that interest at all times after petition was filed; thus, when resi-dence was sold, proceeds of sale vested in bankruptcy estate and any postpetition appreciation in value of residence accrued to estate, thereby entitling debtor to only $ 45,000 California homestead exemption in proceeds from sale of residence. Alsberg v Robertson (In re Alsberg) (1995, CA9) 68 F3d 312, 95 CDOS 7988, 95 Daily Journal DAR 13733, CCH Bankr L Rptr P 76676, cert den (1996) 517 US 1168, 134 L Ed 2d 667, 116 S Ct 1568.

Under literal application of term "all other liens" in statutory formula under 11 USCS § 522(f)(2)(A), debtors' homestead exemption was impaired by judicial lien, two mortgage liens, and homestead exemption, total of which exceeded debtors' interest in property, and BAP properly avoided hospital's lien in its entirety. Kolich v Antioch Laurel Veterinary Hosp. (In re Kolich) (2003, CA8 Mo) 328 F3d 406, 41 BCD 75, 49 CBC2d 1896, CCH Bankr L Rptr P 78840.

Debtors should be ones to benefit from any appreciation of their property after filing of petition for relief and value of debtor's property for purposes of deciding whether lien is avoidable under 11 USCS § 522(f) should be determined as of date of filing of debtor's petition and, accordingly, where there is only approximately $ 13,000 in equity after deducting first and second mortgage balances and debtors were entitled to $ 15,000 as an exemption, creditor's judgment lien impairs debtors' claimed exemption in residence so as to permit them to avoid that lien pursuant to 11 USCS § 522(f)(1). In re Rappaport (1982, BC ED Pa) 19 BR 971, 6 CBC2d 749, CCH Bankr L Rptr P 68734 (criticized in Wood v LA Bank (In re Wood) (1996, BC MD Pa) 190 BR 788, 28 BCD 570, 35 CBC2d 275).

Bankruptcy court sustained trustee's objection to claimed homestead exemption due to debtor's failure to file his homestead deed in compliance with Va. Code Ann. § 34-6 (Michie Supp. 2002). In re McWilliams (2002, BC ED Va) 296 BR 424.

Page 188 11 USCS § 522

Creditor's objection to homestead exemption under Fla. Const. art. X, § 4(a)(1), Fla. Stat. 222.01, 222.02, and 222.05 was overruled because $ 125,000 exemption cap of 11 USCS § 522(p) did not apply to property in which debtor obtained ownership interest more than 1,215 days before petition date, even if property's equity increased during 1,215-day pre-petition period. In re Sainlar (2006, BC MD Fla) 344 BR 669.

Debtors were entitled to recover their claimed exemption for their residence in amount asserted on their schedules for claimed amount of $ 21,511, plus joint entitlement of $ 36,900; however re-mainder of post-petition appreciation in residence belonged to estate, even if trustee had not ob-jected to exemption within time required under Fed. R. Bankr. P. 4003, and homestead was still re-quired to be administered through estate. Klein v Chappell (In re Chappell) (2007, BAP9) 373 BR 73.

95. Residency

Debtor was entitled to take homestead exemption in family home in which he held one-half re-mainder interest as tenant in common with his brother, even though at time of filing he did not live in house and would not be able to until termination of his octogenarian aunt's life estate. In re De-Masi (1998, DC RI) 227 BR 586.

Debtor who in petition recites that he is resident of Florida, entitled to homestead exemption under Florida law for Florida house, is bound by such law, which provides homestead exemption can only be claimed for one property, and may not claim second exemption for house in Puerto Rico notwithstanding fact he could have established residence in Puerto Rico and then claimed dwelling as exempt under Puerto Rican law, since exemptions are determined as of date petition was filed. In re Velez-Velez (1980, BC SD Fla) 6 BR 373, 1 CBC2d 822.

For purposes of claiming South Dakota homestead exemptions pursuant to 11 USCS § 522 debtor is not required to actually reside within state at time of claim; however court must find that debtor who has left South Dakota for business, health, or personal reasons for indefinite period has continued to consider himself as South Dakota resident and intends to return to state to live. In re Wood (1981, BC DC SD) 8 BR 882.

Debtors who shipped their furniture and furnishings to other state prior to filing homestead deed and departed shortly after filing deed to other state where furnishings were sent are entitled to ex-emptions under either state law if deemed to still be resident at time of filing of homestead deed or under 11 USCS § 522(d) if not deemed to still be resident of state. In re Chaffins (1982, BC ED Va) 16 BR 686.

South Dakota restricts availability of real property or homestead exemptions to residents of South Dakota who are not in process of permanently removing family from state and therefore debtors who had moved to Wyoming were ineligible to claim South Dakota homestead exemption; South Dakota has also "opted out" prohibiting residents of South Dakota from claiming federal ex-emptions and therefore operative effect of South Dakota exemption law, coupled with 180-day do-miciliary requirement of Bankruptcy Code, would have effect of denying debtors right to homestead exemption; however, as debtors are not residents of South Dakota entitled to claim South Dakota exemptions, it follows that debtors are not residents for purposes of state's prohibiting availability of federal exemptions; therefore, debtors may claim federal exemptions. In re Volk (1983, BC DC SD) 26 BR 457, 9 BCD 1382, 7 CBC2d 1096.

Page 189 11 USCS § 522

Debtor cannot claim homestead exemption under 11 USCS § 522 in property that is not his resi-dence. In re Mason (1984, BC MD Ala) 48 BR 382.

Chapter 7 debtor Canadian citizen who has lost her right to remain permanently in United States cannot form intent to remain legally and permanently in United States and therefore cannot claim her residence as exempt homestead under Florida law; rejection of debtor's homestead exemption does not treat debtor differently than any other alien whose presence in United States is temporary as matter of law and who, under controlling provisions of immigration laws, is legally unable to form intent to reside permanently in U.S. In re Boone (1991, BC MD Fla) 134 BR 979.

Chapter 7 debtor was Canadian citizen in residence in United States pursuant to nonimmigrant visa for purposes of employment "on a temporary basis," and objection to debtor's claims of home-stead and personal property exemptions under Florida law is sustained under 11 USCS § 522(b), as lack of domicile in any state within 180-day period immediately preceding filing of petition is fatal to any right of exemption under state law. Atty. Gen. v Levy (In re Levy) (1998, BC SD Fla) 221 BR 559.

Chapter 13 debtor is not entitled to exemption under 11 USCS § 522(d)(1) where debtor resides in one of two parcels of real property which form res of trust, as debtor does not reside in his one-third interest in trust. In re Bowers (1998, BC DC Mass) 222 BR 191.

Bankruptcy debtor was not entitled to homestead exemption where it was undisputed that debtor abandoned homestead property without filing notice of intention to preserve homestead interest. In re Holman (2002, BC DC Minn) 286 BR 882.

Effectively, for purposes of 11 USCS § 522(d)(1), terms "residence" and "homestead" are equivalent and interchangeable. In re Brown (2003, BC ND Tex) 299 BR 425.

State debtor who met legal requirements for claiming homestead exemption for his state con-dominium, pursuant to Fla. Const. art. X, § 4, and 11 USCS § 522, was entitled to that protection and Chapter 7 discharge, pursuant to 11 USCS § 727, even though property was purchased with his proceeds from what was eventually found to be Ponzi scheme; debtor had established residence for purposes of state law. Neilson v Laing (In re Laing) (2005, BC MD Fla) 329 BR 761, 18 FLW Fed B 352.

Pursuant to 11 USCS § 522(b)(2), Wisconsin (WI) was debtor's domicile for greater portion of 180 days preceding filing of bankruptcy petition because WI was place of his residence and em-ployment and location of his fiance and children on petition date; he testified that he intended to remain there permanently; and he procured WI driver's license and bank account; therefore, under WI homestead statute, Wis. Stat. § 815.20, debtor's WI homestead was exempt to extent of debtor's equity in property up to $ 40,000. In re Stone (2005, BC ND Iowa) 329 BR 860.

Bank's objection to debtors' claim of exemption of their residence in Florida was properly sus-tained because residence was not debtors' domicile for longer portion of 180 days immediately pre-ceding "the date of filing of petition." Tanzi v Comerica Bank-California (In re Tanzi) (2003, BAP9) 297 BR 607, 2003 CDOS 7643, 41 BCD 212.

96. Ownership

Louisiana law does not exempt from seizure Chapter 7 debtor's real property occupied by debtor as her home and owned by her in indivision with another who is not debtor's spouse. Brocato v Traina (In re Brocato) (1994, CA5 La) 30 F3d 641, CCH Bankr L Rptr P 76070.

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In proceeding by trustee for authorization to sell property owned jointly with nondebtor spouse under 11 USCS § 363(h), Bankruptcy Court erred in allocating $ 7,500 homestead exemption to Chapter 7 debtor's nondebtor co-owner spouse because, unless case involves joint debtors, only 1 homestead exemption may be claimed under 11 USCS § 522(d)(2) and upon sale of property, full value of her interest will be paid to her, after outstanding mortgage is satisfied. In re Spain (1988, ND Ala) 103 BR 286.

South Dakota homestead exemption does not include preservation loan servicing rights because only former owner can be eligible for preservation rights and only present owner can have home-stead rights. In re Nelson (1992, DC SD) 143 BR 722, affd (1992, CA8 SD) 969 F2d 626, 23 BCD 283, CCH Bankr L Rptr P 74738.

Where transfer of property from debtor to debtor's children was considered to be sham transac-tion, debtor still had fee simple interest in property and, thus, had homestead exemption as to that fee simple interest. Snyder v Zayler (2004, ED Tex) 309 BR 272, 52 CBC2d 520, affd (2005, CA5 Tex) 125 Fed Appx 573.

Denial of debtor's homestead exemption claim under 11 USCS § 522 was affirmed because property that had been conveyed to her husband prior to her bankruptcy filing was not within debtor's bankruptcy estate under 11 USCS § 541 since Wyo. Const. art. 19, § 9 and Wyo. Stat. Ann. § 1-20-101 did not create legal or equitable interest in property sufficient to independently support bankruptcy exemption, and because neither debtor nor her husband owned or were entitled to own claimed homestead property when debtor filed for bankruptcy protection, Wyo. Stat. Ann. 1-20-102(a) did not allow homestead exemption for property, since § 1-20-102(a) allows homestead to be exempt only when it is occupied by (1) owner or member of owner's family, or (2) person entitled to ownership or member of that person's family. Hart v Crawford (In re Hart) (2005, DC Wyo) 332 BR 439.

Under 11 USCS § 522, debtors may exempt property only after it becomes property of estate, and property which is not property of estate, such as real estate held by debtors as tenants by entire-ties, may not be claimed as exempt. In re Jeffers (1980, BC ND Ind) 3 BR 49, 8 BCD 85, 1 CBC2d 559.

Debtor must have interest in property in order to use exemption in property, and debtor in joint bankruptcy may not claim homestead exemption beyond $ 7,500 exemption which his wife is enti-tled to, regardless of whether he terms such exemption residential exemption under 11 USCS § 522(d)(1), or exemption in other property in lieu of residential exemption under 11 USCS § 522(d)(5), where debtor has no interest in residence to exempt, because ownership of residence is in wife's name only. In re Cunningham (1980, BC DC Mass) 5 BR 709, 6 BCD 863, 2 CBC2d 1095.

South Dakota debtors are entitled to claim homestead exemption even though they hold property only by license since under South Dakota law right to homestead is not estate in land but mere privilege granted by legislature in fulfilling constitutional mandate. In re Wood (1981, BC DC SD) 8 BR 882.

Husband, as joint debtor with wife, does not have such interest in real property titled only in wife's name as to permit him to claim exemptions under 11 USCS § 522(d)(1) and (5), where, de-spite fact that husband has right of use and occupancy therein, is obligated on mortgage note, and has contributed substantially to downpayment on property and monthly mortgage payments, and that under applicable state law, even though title to property lies in one spouse, where payments are

Page 191 11 USCS § 522

made by other spouse, resulting trust may be found in latter's favor, at date of filing trustee of hus-band's estate acquired lien creditor's and bona fide purchaser's right in property, pursuant to 11 USCS § 544, which would be superior to right of husband to seek reconveyance of his unrecorded equitable claim to one-half interest in property. In re Trotta (1981, BC DC Conn) 12 BR 843, 8 BCD 187.

Each spouse is entitled to claim exemption for homestead where property is owned as tenancy by entirety. In re Korff (1981, BC ED Mich) 14 BR 189, 8 BCD 287, 5 CBC2d 174, CCH Bankr L Rptr P 68433.

Fact that debtor's interest in property changes after commencement of bankruptcy case from tenant by entirety to that of tenant in common does not deprive debtor of his exemption in that property under 11 USCS § 522(b)(2)(B). In re Flagg (1982, BC ED Pa) 17 BR 677, CCH Bankr L Rptr P 68627.

11 USCS § 363(h)(2) is available to Chapter 7 trustee seeking to sell home owned as tenants by the entirety by debtor and debtor's husband, who is not debtor, free and clear of husband's interest in home, debtor having elected federal exemptions under 11 USCS § 522(b)(1) and asserted $ 5,000 exemption in home, where specific exemption of entirety property provided in § 522(b)(2)(B) for debtors electing state exemptions does not appear in federal exemption scheme under § 522(b)(1), and absent § 522(b)(2)(B), debtor's complete "undivided" interest in entirety property, including possessory rights, becomes and remains part of bankruptcy estate, subject only to exemption under applicable subsections of § 522(d). In re Hamilton (1983, BC MD Tenn) 32 BR 337, 10 BCD 1251, CCH Bankr L Rptr P 69338.

Creditor's objection under 11 USCS § 522(b)(1) to Chapter 11 debtor's claim of homestead ex-emption in home owned by corporation in which debtor owned all stock was sustainable since stock ownership in corporation which holds title to co-operative apartment, together with clear right of exclusive possession, does not constitute homestead for purposes of forced sale. In re Duque (1983, BC SD Fla) 33 BR 201.

Debtor was entitled to $ 5,000 homestead exemption in her undivided interest in residence since legislative intent of new Tennessee statute appears to have been to include within purview of statute property held by tenancy in common and joint tenancy as well as tenancy by entireties; since debtor's exemptions are determined as of date of filing of petition, debtor's right to exemption is un-affected by her having ceased to live in house approximately 3 months after filing petition. In re Young (1984, BC ED Tenn) 42 BR 892.

Debtors cannot exempt homestead under Wisconsin law after they assigned their interest as vendees in land sale contract in exchange for agricultural loan, because assignment was in effect mortgage and mortgages are excepted from homestead exemption; thus, bank is relieved from effect of stay. In re Kienol (1984, BC WD Wis) 44 BR 959.

Where debtor did not establish new homestead since his divorce and professed desire to pur-chase his former wife's interest in event she decides to sell, trustee did not meet his burden of proof that exemption was not properly claimed and therefore homestead exemption applies. In re Crain (1985, BC ED Mo) 3 BAMSL 1777.

Under Illinois homestead exemption, by way of 11 USCS § 522(b)(1), individual debtor without ownership interest in marital residence may nevertheless claim $ 7,500 homestead exemption be-

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cause title is in spouse and statute provides for exemption of property "rightly possessed" by lease or "otherwise," which includes by marriage. In re Reuter (1985, BC ND Ill) 56 BR 39 (criticized in In re Hartman (1997, BC CD Ill) 211 BR 899) and (criticized in In re Popa (1998, BC ND Ill) 218 BR 420, 98-1 USTC P 50276, 81 AFTR 2d 1282) and (criticized in In re Carver (2003, BC SD Ill) 50 CBC2d 336).

Debtors cannot use 11 USCS § 522(f)(1) to avoid prepetition equitable lien, which is judicial lien, imposed by way of constructive trust on property claimed as exempt under state homestead exemption, because section applies only to extent of debtor's interest in property; where debtor holds only legal title, and equitable title is held by another because of debtors' fraud, property to ex-tent of equitable interest does not enter into estate. In re Dudley (1986, BC SD Fla) 68 BR 426, 15 BCD 654.

Homestead exemption under 11 USCS § 522(d) is not available to property whose title is solely in codebtor wife, notwithstanding that debtor and wife resided in property, where applicable state law makes homestead exemption an estate in land which depends completely on claimant's title. In re Owen (1987, BC CD Ill) 74 BR 697.

Debtor husband's filing of Chapter 7 bankruptcy did not sever wife's right of survivorship in homestead and trustee did not become co-owner with wife. In re Spain (1988, BC ND Ala) 83 BR 61.

Chapter 11 debtors may claim homestead exemption in proceeds from sale of their residence even if their title prior to sale was subject to dispute due to prepetition foreclosure which debtors allege was defective; possibility that foreclosure was defective means that there was possibility that debtors were still owners of property, and in any event, they retained possessory interest. In re Donaldson (1993, BC ND Cal) 156 BR 51, CCH Bankr L Rptr P 75371.

Chapter 7 debtor's alleged lack of equity interest in property subject to lien which debtor is seek-ing to avoid under 11 USCS § 522(f)(1) is not fatal defect to debtor's motion, where such liens might impair debtor's right to achieve equity position in future. In re Citrone (1993, BC SD NY) 159 BR 144, CCH Bankr L Rptr P 75492.

Installment contract for warranty deed constitutes financing device vesting equitable title in Chapter 13 debtors to which creditor's judicial liens have affixed, and liens impair debtors' home-stead exemption and are avoided under 11 USCS § 522(f)(2)(A). In re Groff (1998, BC SD Ill) 223 BR 697.

Debtor was denied exemption in her former residence under O.C.G.A. § 44-13-100(a)(1), where she had sold property and moved from it, retaining security interest and receiving monthly pay-ments, as it was no longer her residence. In re Page (2003, BC SD Ga) 289 BR 484.

Chapter 7 debtors' motion to avoid judicial lien as impairing their homestead exemption was de-nied where debtors retained no ownership interest in their residence on date of bankruptcy petition because, prior to filing, they had transferred title to residence to their daughter. In re Sbriglio (2004, BC DC Conn) 306 BR 445, 51 CBC2d 1252.

Where bankruptcy debtors claimed homestead exemption in parcel of real property which in-cluded mobile home where debtors resided, property was not subject to exemption under 11 USCS § 522(b) since it was not owned by debtors; although property was owned by limited liability com-pany of which debtors were majority owners, and property was leased to corporation of which debt-

Page 193 11 USCS § 522

ors were sole principals, property was not in fact property of debtors. In re LaVelle (2005, BC DC Idaho) 350 BR 505.

Chapter 7 debtor was entitled to claim homestead exemption per 11 USCS § 522(b) in house de-vised to her and her sisters under her mother's will; debtor's possessory interest, along with equita-ble interest in house and acreage under her mother's will, was sufficient to constitute "ownership" for purposes of Idaho Code § 55-1004(1). In re Dougan (2006, BC DC Idaho) 350 BR 892.

Bankruptcy debtors were precluded from claiming state homestead exemption in property, where debtors owned total interest in limited partnership which owned real property where debtors resided, because partnership interest was personal property under state law and exemption could only be claimed for interest in real property. In re Christian (2006, BC DC Ariz) 355 BR 161.

Judgment lien that attached to real property prior to time debtor made property dwelling place could be avoided under 11 USCS § 522(f) as impairing debtor's automatic homestead exemption under California law, even though judgment lien would have priority to homestead exemption under state law, where debtor owned property prior to recording and fixing of lien and lien therefore im-paired exemption to which debtor would have been entitled, to extent that sufficient equity did not exist to satisfy both lien and debtor's homestead exemption. Hastings v Holmes (In re Hastings) (1995, BAP9 Cal) 185 BR 811, 95 Daily Journal DAR 12277.

Bankruptcy court correctly ruled that spouse of Chapter 7 debtor was not entitled to claim homestead exemption in property in which she resided, but had no ownership interest, on date bank-ruptcy case was filed; under Wyoming law, ownership interest was prerequisite to claim of home-stead exemption, pursuant to Wyo. Stat. Ann. § 1-20-102(b) (2002). Duncan v Zubrod (In re Dun-can) (2003, BAP10) 294 BR 339.

Bankruptcy court did not err in disallowing Chapter 7 debtor's homestead exemption in property he transferred pre-petition because debtor was not entitled to homestead exemption in property which he did not own. Eagle v Bank of Am. (In re Eagle) (2007, BAP8) 373 BR 609.

97. Divorce or property settlements

Judgment lien against family residence awarded by state court to husband in divorce degree, which also awarded ownership of residence to wife, could not be subject of Oregon homestead ex-emption upon husband's subsequent petition in bankruptcy; however, under Oregon law, husband's interest could qualify for exemption as proceeds of homestead; in order for "proceeds" exemption to apply, it must be shown that Oregon law permits tolling of fixed five-year period for reinvestment of proceeds where delay is not caused through fault of party claiming exemption, inasmuch as hus-band-debtor in present case has no right under lien to receive payment for 5 years unless wife sells residence. In re White (1984, CA9 Or) 727 F2d 884.

11 USCS § 522(d)(10)(D) is not intended to embrace payments or transfers made simply to equalize division of spouses' existing property; where unimpeached relevant documents unambigu-ously reflect that particular payment is part of division of existing property and that separate provi-sion is made for nontrivial alimony payments, former obligation may not be post-hoc recharacter-ized in bankruptcy as alimony or support under § 522(d)(10)(D) simply on basis of finding that ob-ligee spouse also had need of former payments for support. Milligan v Evert (In re Evert) (2003, CA5 Tex) 342 F3d 358, 50 CBC2d 1150, CCH Bankr L Rptr P 78897.

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Bankruptcy court made error of law in prematurely resorting to Nunnally factors in determining that promissory note payable to debtor and executed by debtor's former husband constituted ali-mony, support, or separate maintenance and, therefore, could be shielded from creditors under 11 USCS § 522(d)(10)(D); although Nunnally factors were binding law at least as to 11 USCS § 523(a)(5), they should not have been applied to 11 USCS § 522(d)(10)(D) where written agreement and divorce decree clearly established nature of obligation and where there were distinct provisions for nontrivial alimony and for property settlement, and, because both labels given to obligation in agreement and substantive characteristics of obligation clearly reflected that it was part of property settlement, note was not exempt under 11 USCS § 522(d)(10)(D). Milligan v Evert (In re Evert) (2003, CA5 Tex) 342 F3d 358, 50 CBC2d 1150, CCH Bankr L Rptr P 78897.

Divorced noncustodial parent is entitled to homestead exemption where he has made child sup-port payments, and substantially but not completely compiled with his alimony and property settle-ment obligations. In re Cummings (1983, DC Kan) 40 BR 208.

Even though former husband held legal title to marital home, final judgment in divorce action clearly delineated Chapter 7 debtor's legal interest in marital home in which she resided with her children and pursuant to 11 USCS § 522(d)(1) debtor is entitled to claim as exempt $ 15,000 of amount awarded in judgment. Hoffman & Schreiber v Medina (1998, DC NJ) 224 BR 556 (criti-cized in Tannenbaum v Smith (In re Smith) (2001, BC DC NJ) 263 BR 71, 37 BCD 281, 46 CBC2d 666) and (criticized in In re Gallagher (2002, BC MD Fla) 283 BR 608, 15 FLW Fed B 248).

Property settlement in divorce judgment is not excepted from discharge in bankruptcy but equi-table lien is created upon homestead property of bankrupt and can be enforced in court where lien was created. In re Thumm (1976, BC ED Wis) 2 BCD 1347, 11 CBC 524, CCH Bankr L Rptr P 66172.

Bankrupt is entitled to homestead exemption in amount of portion of proceeds from sale of home, owned by bankrupt and non-bankrupt ex-wife as tenants by entirety, allocated to bankrupt as result of divorce property settlement provisions. In re Klein (1978, BC WD Mich) 5 BCD 697.

Although state of Ohio, which does not authorize debtors domiciled in Ohio to exempt property specified in 11 USCS § 522, gives every person domiciled in Ohio $ 5,000 exemption in real or per-sonal property that he, she, or one of dependents uses as residence, debtor may not claim such ex-emption in residence in which dependent child by former wife lives where, as part of property set-tlement, debtor has transferred such property to former wife, who has agreed to assume outstanding mortgages on such premises, since debtor does not have interest in such property. In re Hicks (1980, BC ND Ohio) 3 BR 459, 1 CBC2d 963.

Debtor is entitled under 11 USCS § 522(b)(2)(B) to homestead exemption to which she was enti-tled at time of filing of bankruptcy petition; her right to exemption is fixed at time of filing and is not affected by changes brought about by her divorce, even though it brought another, different in-terest into bankruptcy estate. In re Sivley (1981, BC ED Tenn) 14 BR 905, 5 CBC2d 565, CCH Bankr L Rptr P 68409.

Lien was created by property settlement in divorce decree for relinquishment of wife's joint ten-ancy interest on payment of $ 25,000 is not avoidable under 11 USCS § 522(f) because lien pro-tected wife's pre-existing property interest and did not attach to any interest of debtor in property; court rejects debtor's argument that $ 25,000 is not value of lien, because divorce settlement is fixed

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value; lien extends only to real estate, however, not to crops grown on it. In re Seablom (1984, BC DC ND) 45 BR 445.

Automatic stay is lifted to allow Kentucky court to clarify whether its judgment setting aside original property settlement agreement between Chapter 7 debtor and former wife and awarding wife $ 71,233.75 plus interest from date of original decree was intended to be retroactive, which ruling will be dispositive of trustee's complaint objecting to debtor's homestead exemption, since under Kentucky law if award is deemed to have arisen at time of original decree then liability arose prior to construction of debtor's former residence and he is not entitled to exemption; however, if award was not made retroactive, then debt arose after homestead was built and debtor may properly claim exemption. In re Kincaid (1985, BC WD Ky) 55 BR 652.

Chapter 7 debtor husband, whose only interest in property titled solely in name of his former wife is marital interest available to him under equitable distribution rights pursuant to state law, and who was awarded one-half interest in property by state divorce court postpetition, is entitled to claim his exemption in property under 11 USCS § 522(d)(1) up to amount of $ 7,500 but distribu-tion can only be made to him as unsecured claimant pursuant to liquidation and distribution of as-sets of debtor former wife and, to extent that fund created by liquidation of debtor's wife's assets is insufficient to pay all unsecured creditors, claims of unsecured creditors, including debtor husband, shall abate in accordance with Code; since debtors' cases are being jointly administered but are not consolidated, husband's claim against property owned by ex-wife rises no higher than claims of wife's other creditors since trustee in wife's bankruptcy case retains rights pursuant to 11 USCS § 544 that would inherently be superior to husband's rights; husband has right to be compensated from wife's estate for value of his share of marital property which is not necessarily any specific property. In re McCulley (1993, BC MD Pa) 150 BR 358, 28 CBC2d 698, CCH Bankr L Rptr P 75153 (criticized in Simeone v Simeone (In re Simeone) (1997, BC ED Pa) 214 BR 537) and (criti-cized in Scholl v Scholl (In re Scholl) (1999, BC ED Pa) 234 BR 636, 42 CBC2d 613).

Chapter 13 debtor could not avoid valid judicial lien of wife's attorneys on his residence for debtor's nonpayment of attorney fees that were in nature of support, since lien constituted nondis-chargeable debt under 11 USCS § 523 (a)(5) and did not impair any exemption under 11 USCS § 522(c). In re Slater (1995, BC ED Wash) 188 BR 852.

In 11 USCS § 522 exemption matter, pursuant to Wash. Rev. Code. § 6.13.080, bankruptcy court found that, in order to prime homestead exemption, lien granted was required to be compensa-tion for interest in real property that was transferred, or at minimum, divorce court must have re-ferred to judgment as lien against specific real property. In re Goodale (2003, BC WD Wash) 298 BR 886, 51 CBC2d 35.

Where Chapter 7 debtor executed agreement whereby debtor, in return for lump sum payment, agreed to remit to defendant remaining monthly alimony payments she was scheduled to receive from her former husband, alimony payments were not exempt under 11 USCS § 522(d)(10)(D) be-cause, as of petition date, debtor had no right, legal or equitable, to retain alimony payments. Dean v Telegadis (In re Dean) (2004, BC WD Pa) 317 BR 482.

Commencement of debtor's divorce action did not sever his interest in property held with his wife in tenancy by entirety; such interest was severed only upon entry of divorce decree and accord-ingly, tenancy by entirety existed as of date of bankruptcy filing, and thus constituted entireties

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property that debtor could exempt via 11 USCS § 522(b)(3)(B). Zebley v Davis (In re Davis) (2006, BC WD Pa) 356 BR 385.

Commencement of debtor's divorce action did not sever his interest in property held with his wife in tenancy by entirety; fact that debtor, by virtue of his right to equitable distribution via pend-ing divorce action, may ultimately receive distribution of residence titled in fashion that would have been other than by tenancy by entirety would not have operated to negate debtor's present exemp-tion. Zebley v Davis (In re Davis) (2006, BC WD Pa) 356 BR 385.

Committee's objection under 11 USCS § 522(p)(1) to homestead exemption was sustained be-cause debtor actively participated in negotiation of divorce decree that occurred in 1215-day period and acquired his ex-wife's community property interest in certain property, which interest had dis-tinct monetary value and was not protected by 11 USCS § 522(p)(2)(B); however, debtor's own community property half acquired prior to beginning of 1215-day period was exempt. In re Presto (2007, BC SD Tex) 376 BR 554.

Congress' intent to close mansion loophole does not preclude or contradict holding that applies 11 USCS § 522(p) to acquisition of new value in homestead through divorce decree; even if 11 USCS § 522(p) is deemed ambiguous and legislative history is relevant, applying 11 USCS § 522(p) to divorce decree does not contradict statute's general intent of limiting abuse of generous state homestead exemptions. In re Presto (2007, BC SD Tex) 376 BR 554.

98. Determination of exemption

Chapter 7 debtors, by listing "homestead" instead of "homestead exemption" on their schedule of exempt property, could not claim entire homestead as exempt rather than $ 45,000 allowed under California law, where debtors listed homestead as exemption under state law and valued that ex-emption at $ 45,000; debtors did not sufficiently notify others that they were claiming entire home-stead as exempt, but rather their schedule only gave notice that they claimed $ 45,000 as exempt. In re Hyman (1992, CA9) 967 F2d 1316, 92 CDOS 5323, 92 Daily Journal DAR 8504, 23 BCD 153, CCH Bankr L Rptr P 74706.

Bankruptcy Court carefully adhered to prescriptions of Bankruptcy Code and did not overstep bounds of its very considerable equitable powers when it allowed Chapter 7 debtor to exempt 3 of her 113 acres upon which she could build residence, and authorized simple change in zoning in at-tempt to grant debtor adequate homestead and at same time give consideration to interest of credi-tors by exempting only enough property to meet debtor's entitlement, despite amicus's contention that because Bankruptcy Court and trustee did not have authority to have exempt property rezoned, court should have given debtor 35 acres, which is amount necessary to build home on property as zoned, where Bankruptcy Court balanced need to comply with Wisconsin's homestead exemption statute against requirement to make estate avoidable to creditors; court could have ordered sale of entire parcel and awarded debtor certain proceeds of sale, but, instead, allowed her to stay on land. In re Lloyd (1994, CA7 Wis) 37 F3d 271, 31 CBC2d 1786, CCH Bankr L Rptr P 76125.

Portion of debtor's equity in residence was not avoidable against amount owed for judgment lien; when debtor owned property with non-related person who was not party to bankruptcy and who was also liable for mortgage, debtor was only allowed to apply one-half of amount due for mortgage against debtor's one-half ownership interest in property. Miller v Okmi Sul (In re Miller) (2002, CA3 Pa) 299 F3d 183, 39 BCD 257, 48 CBC2d 937.

Page 197 11 USCS § 522

Where state court has found debtor was criminally liable for negligent homicide, such finding triggers federal statutory cap on state homestead exemptions under Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8, § 322(a), 119 Stat. 23, 97 (codified at 11 USCS § 522(q)(1)(B)(iv). Larson v Howell (In re Larson) (2008, CA1 Mass) 513 F3d 325.

Under California law determination of value of equity subject to sale by trustee is made by de-ducting homestead exemption from debtor's interest in value of property less encumbrances since 11 USCS § 522(b)(2)(B) requires exemption calculation to be determined in accordance with state non-bankruptcy law. In re Schneider (1981, ND Cal) 9 BR 488, 7 BCD 502 (criticized in Wiget v Niel-sen (In re Nielsen) (1996, BAP9 Cal) 197 BR 665, 96 CDOS 5516, 96 Daily Journal DAR 8807, CCH Bankr L Rptr P 77052).

In proceeding under 11 USCS § 522(f), court incorrectly applied rule of comity to conclude that debtor is not entitled to automatic homestead exemption, as law is clear that question of exemption must be determined as of date of filing petition in bankruptcy and court was required to make inde-pendent determination as to validity of the exemption. In re Hsia (1995, ND Cal) 183 BR 201.

Debtors are entitled to exemption of approximately $ 6,700 in home having fair market value of $ 17,500 which is subject to mortgage in total amount due and owing of approximately $ 10,700; since such equity does not exceed claimed exemption of $ 15,000, so that judicial liens against resi-dents amounting to approximately $ 2,900, if executed upon property, would reduce debtors' ex-emptions by such amount, such judicial liens impair debtors' exemption to their full extent, and therefore are voidable in their entirety. In re Butler (1980, BC DC Md) 5 BR 360, 6 BCD 768, CCH Bankr L Rptr P 67659.

Debtor was entitled to avoid prepetition judgment lien entered against both debtor and his non-debtor spouse as tenants in entirety of debtor's homestead property since value of debtor's interest in property was equal to amount of exemption debtor could claim if there were no liens on property. Lashley v Fuhrer (In re Lashley) (1997, BC ED Mo) 206 BR 950.

Trustee's objection to Chapter 7 debtor's homestead exemption is sustained where debtor sought, following conversion of case from Chapter 13 to Chapter 7, to claim property other than home listed on original Chapter 13 petition as exempt homestead; bankruptcy court determined in Chapter 13 case property could not claimed as homestead and right to claim homestead exemption is based on debtor's homestead at time original bankruptcy petition was filed under 11 USCS § 522(b) and 11 USCS § 348(a), not at time of conversion. In re Alexander (1999, BC DC Minn) 236 BR 679, 42 CBC2d 817, affd (1999, BAP8) 239 BR 911, CCH Bankr L Rptr P 78014 (criticized in In re Wegner (2000, BC DC Neb) 243 BR 731) and affd (2001, CA8) 236 F3d 431, 37 BCD 56, CCH Bankr L Rptr P 78343 (criticized in In re Fonke (2005, BC SD Tex) 321 BR 199) and (criticized in In re Fonke (2005, BC SD Tex) 2005 Bankr LEXIS 595).

Debtors, husband and wife, rebutted the presumption that they had abandoned the home because their absence from the home was temporary and was done for the purpose of renovating the home and avoiding the close proximity with the husband's former spouse. In re Patterson (2002, BC DC Colo) 275 BR 578.

Debtors' right to amend homestead exemption created under Mass. Gen. Laws ch. 188, § 2, ter-minated on bankruptcy filing date because under 11 USCS § 522(b)(2)(A), facts and law as they ex-isted on petition date determined extent of claimed exemption, and thus, debtors could not amend declaration of homestead exemption or bankruptcy schedule of exemptions to to add second lot to

Page 198 11 USCS § 522

homestead exemption and thus, could not avoid creditor's judgment lien under 11 USCS § 522(f). In re Govoni (2002, BC DC Mass) 289 BR 500.

Limitation of homestead exemption to $ 125,000 set forth in 11 USCS § 522(p)(1) applied to claimed residential exemptions in state even though Fla. Const. art. 10, § 4 allowed for homestead exemption for full amount of residence; because property was held by debtor and non-debtor spouse in tenancy by entirety, trustee could only use non-exempt interest in residence to satisfy any claims that were owed by debtor and her spouse. In re Wagstaff (2006, BC SD Fla) 19 FLW Fed B 192.

Although Chapter 7 debtor's admitted facts in state charge of motor vehicular homicide by neg-ligent operation was sufficient to constitute criminal act under 11 USCS § 522(q)(1)(B)(iv), she was allowed to present evidence as to whether difference between her claimed and capped state home-stead exemption was necessary for her support. In re Larson (2006, BC DC Mass) 340 BR 444.

Even though bankruptcy debtor could not elect federal homestead exemption in Florida, limita-tion on recently acquired homestead exemptions under 11 USCS § 522(p) applied to debtor's ex-emption despite statutory language indicating that statute only applied as result of electing; exclud-ing states which opted out of federal exemptions from operation of § 522(p) was contrary to legisla-tive intent to close loophole by which millionaires shielded mansions in bankruptcy by relocating to states with substantial or unlimited homestead exemptions. In re Buonopane (2006, BC MD Fla) 344 BR 675, 19 FLW Fed B 326.

Because only one person could claim under state law to be head of same family for purposes of claiming homestead exemption, bankruptcy assumed that, because debtor one had income and debtor two did not, debtor one provided support for family and was thus entitled to homestead ex-emption under 11 USCS § 522(f). In re Uhrich (2006, BC DC Neb) 355 BR 783.

Bankruptcy debtor's accumulation of equity in homestead by paying down homestead mortgage during 1,215-day look-back period of 11 USCS § 522(p) was not excludable from debtor's home-stead exemption under § 522(p), since equity acquired by debtor during look-back period was not ownership interest, and debtor acquired ownership interest prior to look-back period; 11 USCS § 522(p)(1) is inapplicable to bankruptcy debtor who purchases homestead outside 1,215-day look-back period; accumulation of equity during look-back period by paying down homestead mortgage is instead limited by operation of § 522(o). In re Anderson (2007, BC DC Kan) 374 BR 848.

Where debtor obtained satisfaction of his claim for exemption in real property, he could no longer assert that claim with respect to any equity that remained. Braunstein v Leung (In re Leung) (2008, BC DC Mass) 385 BR 489.

Bankruptcy Court's ruling under 11 USCS § 522(f) that Chapter 7 debtors' homestead exemption was not impaired by two judicial liens is affirmed; determination of a homestead exemption based on undisputed facts is legal conclusion interpreting statutory construction which is reviewed de novo by the appellate court. Ball v Payco-General Am. Credits (In re Ball) (1995, BAP9 Cal) 185 BR 595, 95 CDOS 7046, 95 Daily Journal DAR 11731.

Court will not adopt procedure for actuarially analyzing debtor's interest in tenancy by entirety because it does not fit into mold of quick and binding resolution, and court will therefore reject debtor's argument that court should have considered his gender, age, and life expectancy. Snyder v Rockland Trust Co. (In re Snyder) (2000, BAP1) 249 BR 40, affd (2001, CA1) 248 F3d 1127, re-ported in full (2001, CA1) 2 Fed Appx 46.

Page 199 11 USCS § 522

Chapter 7 debtors who had registered as domestic partners under state's Domestic Partner Rights and Responsibilities Act of 2003 were limited to single homestead exemption under Cal. Code Civ. Proc. § 703.110 in house they owned together because homestead exemption rights of domestic partners were identical to those of people who were married. Rabin v Schoenmann (In re Rabin) (2006, BAP9) 359 BR 242, CCH Bankr L Rptr P 80822.

99. Miscellaneous

Debtor was not barred from using homestead exemption as defense against making payment to former spouse's attorney for fees awarded in divorce from proceeds from sale of homestead prop-erty where payments are not to be made to former spouse but to her attorney. Graziadei v Graziadei (In re Graziadei) (1994, CA9 Cal) 32 F3d 1408, 94 CDOS 6312, 94 Daily Journal DAR 11525, 31 CBC2d 1025, CCH Bankr L Rptr P 76043.

"Interest," as used in 11 USCS § 522(p)(1), refers to some vested economic interest in property acquired during statutory period, not homestead interest, thus, homestead interest established within statutory period, without more, does not fall within purview of § 522(p)(1). Wallace v Rogers (In re Rogers) (2008, CA5 Tex) 513 F3d 212, CCH Bankr L Rptr P 81081.

Following conversion of case from Chapter 13 to Chapter 7, debtors are permitted to change homestead exemption from house that was originally claimed as exemption but subsequently fore-closed upon and sold, to different property owned by debtors; exemptions which may be claimed are determined as of date of conversion to Chapter 7, not as of date of original filing of Chapter 13 case. In re Patterson (1995, SD Tex) 190 BR 84 (criticized in Lowe v Sandoval (In re Sandoval) (1997, CA5 Tex) 103 F3d 20, CCH Bankr L Rptr P 77238).

Even if escrowed funds were held under valid wage attachment, because creditors have not ob-tained writ of execution or court order of disbursement, attached funds must be considered property of estate which may be exempted under 11 USCS §§ 522(d)(1) and (5). In re Hodgkins (1986, BC DC RI) 61 BR 922.

Lien of judgment against debtor individually is avoided to extent it would bind debtor's interest in residential portion of real property owned by debtor and his nondebtor wife, which includes their principal residence, where equity allocated to debtor after deduction of mortgage lien is less than state homestead exemption recognized under 11 USCS § 522(b)(1); judgment lien, however, at-taches to property to extent of equity interest allocated to debtor for portion of property dedicated to business purposes. In re Hager (1987, BC ND NY) 74 BR 198, affd (1988, ND NY) 90 BR 584.

When case is converted from Chapter 13 to Chapter 7, funds in hands of trustee under 11 USCS § 1326 that debtor claims as exempt under 11 USCS § 522(d)(1) shall be paid to debtor. In re Rutenbeck (1987, BC ED Wis) 78 BR 912.

Florida homestead exemption is creation of state law and may be superseded by Bankruptcy Code should facts of case warrant it; thus, while citations to decisions of Florida's Supreme and Dis-trict Courts are useful in determining whether exemption applies, these cases are not authoritative as to the application of 11 USCS §§ 544, 546 or 548. Forman v Jeffrey Matthews Fin. Group, LLC (In re Halpert & Co.) (1999, BC DC NJ) 254 BR 104.

Issue of whether Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAP-CPA) amendments to 11 USCS § 522(p), which limits amount of homestead available to those who have owned their homestead less than 1215 days, applied to debtors was certified to court of ap-

Page 200 11 USCS § 522

peals, pursuant to 28 USCS § 158, because it involved matter of first impression and statutory con-struction of hotly contested BAPCPA provision and would recur in state, which had extremely lib-eral homestead exemption and had experienced unprecedented growth in population and real estate appreciation, and in other districts in Ninth Circuit. In re Virissimo (2005, BC DC Nev) 332 BR 208.

Debtor's claimed exemption for homestead under State law was not capped at $ 125,000 under new provisions added by Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, as set forth in 11 USCS § 522(b) and (p), because "safe harbor" provision of § 522(p)(2) applied when debtor had purchased his first residence in State outside of 1251-day period and debtor claimed ex-empt equity in current residence from that first purchase; fact that second intervening residence was purchased and sold within 1251-day look back period did not preclude debtor from claiming that $ 125,000 cap under § 522(p)(1) did not apply to him because of ownership of that first principal residence. In re Wayrynen (2005, BC SD Fla) 332 BR 479, CCH Bankr L Rptr P 80391.

Increase in value of equity in Chapter 7 debtors' homestead was not subject to $ 125,000 cap in 11 USCS § 522(p) where property had been purchased more than two and half years prior to start of 1,215-day period. In re Blair (2005, BC ND Tex) 334 BR 374, CCH Bankr L Rptr P 80415.

Although 11 USCS § 522(p) provides that cap on homestead exemption comes into effect as re-sult of bankruptcy debtor's election to exempt property under state law, express statutory require-ment for election of state exemption to trigger cap is clearly contrary to congressional intent since it excludes debtors in states that opted out of federal exemption scheme and thus precluded any elec-tion; section 522(p) was intended to close "mansion loophole" whereby wealthy individuals, prior to declaring bankruptcy, shielded money from creditors by converting assets into expensive home-steads in states with substantial or unlimited exemptions, but statute as written only applied to hand-ful of jurisdictions that allowed debtors to choose between state and federal exemptions. In re Kane (2006, BC DC Nev) 336 BR 477.

Where bankruptcy debtors contended that, since State opted out of bankruptcy exemption scheme and debtors were thus required to claim their homestead exemption under state law, exemp-tion cap under 11 USCS § 522(p) did not apply because debtors did not elect state exemption, ex-press statutory requirement for election of state exemption to trigger cap was clearly contrary to congressional intent and, applying statute as intended, cap applied to debtors' claimed exemption. In re Kane (2006, BC DC Nev) 336 BR 477.

Trustee's objection to debtor's claimed homestead was sustained to extent that debtor's claimed homestead exceeded $ 125,000 because homestead was acquired by debtor within 1215 days pre-ceding bankruptcy filing; new provision set forth in 11 USCS § 522(p) applied to homestead exemp-tions made under state "opt out" provisions such as those set forth under state law. In re Landahl (2006, BC MD Fla) 338 BR 920.

U.S. Bankruptcy Court for District of Massachusetts, Eastern Division, concluded that term "criminal act" as used in 11 USCS § 522(q)(1)(B)(iv) is sufficiently clear, statute's application does not lead to absurd result, and language does not have or require descriptive culpability. In re Larson (2006, BC DC Mass) 340 BR 444.

To extent that equity in homestead at time of petition resulted from appreciation, such apprecia-tion did not constitute interest that was acquired by debtor within meaning of 11 USCS § 522(p); because Trustee's objection depended on construction of § 522(p) that would have included appre-

Page 201 11 USCS § 522

ciation as part of interest acquired within 1,215-day period, objection was overruled on that ground. In re Rasmussen (2006, BC MD Fla) 349 BR 747, 19 FLW Fed B 395.

Condemnation proceeds received by Chapter 7 debtors from county highway district were not exempt under state law and thus were property of bankruptcy estate; none of statutes cited by debt-ors, Idaho Code §§ 55-1001, 55-1002, and 55-1003, purported to cover cash proceeds from sale, voluntary or otherwise of homestead, or any part thereof. In re Wiley (2006, BC DC Idaho) 352 BR 716.

11 USCS § 522(o) is not invoked by recording of homestead exemption declaration within 1,215 days of filing for bankruptcy protection because such conduct does not constitute acquisition of in-terest in property; homestead is classification of property under state law and is not quantifiable in-terest in property. In re Lyons (2006, BC DC Mass) 355 BR 387.

Trustee's objection to debtor's claim to homestead exemption that exceeded $ 125,000 cap estab-lished by 11 USCS § 522(p) was sustained by bankruptcy court over his claim that his interest pre-dated bankruptcy by more than 1215 days based on his having had equitable interest in property when it was owned solely by his wife; because purely equitable ownership of property was not cog-nizable for purposes of 11 USCS § 522(p), debtor "acquired" his interest for purposes of § 522 by accepting delivery of deed from his wife, which delivery occurred only six months before he filed for bankruptcy relief. In re Leung (2006, BC DC Mass) 356 BR 317, CCH Bankr L Rptr P 80821.

Equity passively resulting from market appreciation was not to be counted against $ 125,000 cap of 11 USCS § 522(p); accordingly, where there was nothing in record to have indicated that debtors actively increased their equity by anything other than scheduled amortization payments, that passive equity did not count towards cap. In re Chouinard (2006, BC MD Fla) 358 BR 814.

State law exemptions provided in 11 USCS § 522(b)(3)(A) such as Fla. Const. art. X, § 4 are separate and distinct from those provided in 11 USCS § 522(b)(3)(B) such as exemption for tenan-cies by entireties; that is, debtor may use tenancy by entireties exemption on debtor's home without using Florida constitutional homestead exemption. In re Fyock (2008, BC MD Fla) 391 BR 882.

Appellate panel reversed bankruptcy court's entry of summary judgment in favor of creditor, who sought to judicially estop debtors from asserting objection to value of secured claim they made while acting as debtors in possession and performing trustee's fiduciary duty to object under 11 USCS § 704, which debtors had, when filing their motion to avoid judicial lien while acting on their own account under 11 USCS § 522(f)(2) to protect their homestead right, asserted was of greater value; bankruptcy court abused its discretion and applied incorrect legal standard by not considering implications of different capacities in which inconsistent positions were taken. Cheng v K&S Diver-sified Invs., Inc. (In re Cheng) (2004, BAP9) 308 BR 448, 51 CBC2d 1808.

Bankruptcy court erred in ruling that Chapter 7 debtor's homestead exemption had to be capped at $ 125,000 pursuant to 11 USCS § 522(p) because debtor's bankruptcy petition was filed approxi-mately two weeks before § 522(p) became effective. Stornawaye Fin. Corp. v Hill (In re Hill) (2008, BAP1) 387 BR 339.

2.Proceeds of Sale of Homestead 100. Generally

Under Mississippi opt-out provisions, Chapter 11 debtor may claim homestead exemption in proceeds from sale of real property used as residence even though debtor continues to maintain

Page 202 11 USCS § 522

leasehold interest in portion of property. In re Williamson (1988, CA5 Miss) 844 F2d 1166, CCH Bankr L Rptr P 72303.

Under Mississippi opt-out provisions, Chapter 11 debtor may claim homestead exemption in proceeds from sale of real property used as residence, even though at time debtor filed petition, property was subject to executory contract for sale of land, where, under Mississippi law, vendor under such contract holds land in trust for purchaser and creditor can execute against such interest. In re Williamson (1988, CA5 Miss) 844 F2d 1166, CCH Bankr L Rptr P 72303.

Under Mississippi exemption statutes, Chapter 11 debtor householder need not own, and thus need not sell, both land and buildings to qualify for homestead exemption in proceeds so long as property sold has been used for homestead purposes. In re Williamson (1988, CA5 Miss) 844 F2d 1166, CCH Bankr L Rptr P 72303.

Object of Texas statute exempting proceeds from sale of homestead was solely to allow claim-ant to invest proceeds in another homestead, not to protect proceeds in and of themselves. In re England (1992, CA5 Tex) 975 F2d 1168, CCH Bankr L Rptr P 74979.

Chapter 7 debtors' available exemptions under 11 USCS § 522 are determined at time of filing bankruptcy petition and, once exemptions are determined, debtors will not lose them by subsequent sale of exempt assets; therefore, where at time of filing debtors had available exemption, debtors did not lose that exemption by subsequent sale of it because it is value of debtors' equity in tools of trade as opposed to physical items themselves which may be claimed as exempt. In re Patterson (1986, WD Wis) 64 BR 120, 14 BCD 1276, remanded on other grounds (1987, CA7 Wis) 825 F2d 1140, 16 BCD 607, CCH Bankr L Rptr P 71935 (superseded by statute as stated in In re Stallsworth (1991, BC SD Ind) 133 BR 470).

Debtor who sells homestead and purchases new home during pendency of Chapter 11 case be-fore conversion of case to Chapter 7 is not entitled to claim homestead exemption under state law pursuant to 11 USCS § 522(b) for new home where (1) none of proceeds from sale of original homestead are used to pay antecedent debt and there is no other property available from which such debts can be paid and (2) debtor violated 11 USCS § 363(b) by purchasing new home without Bank-ruptcy Court authorization, thus making such purchase avoidable by trustee under 11 USCS § 549(a). In re Wooten (1986, ND Iowa) 82 BR 84.

Post-petition conduct, including voluntary sale of homesteaded property and consequent conver-sion into proceeds that may not have been exempt under state law, specifically homestead exemp-tion of Mass. Gen. Laws ch. 188, § 1, could not remove previously exempted property from protec-tions of 11 USCS § 522(c). Pasquina v Cunningham (In re Cunningham) (2006, DC Mass) 354 BR 547.

State court decision holding that debtor's property remains homestead until sale is closed, is con-trolling on issue of whether debtors are entitled to homestead exemption under 11 USCS § 522 where state has specifically vetoed federal exemptions under option to do so given by 11 USCS § 522 to each state and will be applicable to grant homestead exemption to debtors who arrange to retain possession of home until day after bankruptcy petition was filed, at which time they moved into other leased premises. In re Crump (1980, BC SD Fla) 2 BR 222, 5 BCD 1235, 1 CBC2d 378, CCH Bankr L Rptr P 67444.

Page 203 11 USCS § 522

Debtor is not entitled to recover dollar amount of homestead exemption from sale of debtor's right of survivorship in property owned by debtor and his wife as tenants by entirety; better ap-proach is to sell survivorship interest subject to debtor's right to homestead exemption if and when he is survivor. In re Elsea (1985, BC ED Tenn) 47 BR 142.

11 USCS § 522(d)(1) protects value of debtor's equity in residence, as opposed to physical prop-erty; thus, although Chapter 7 debtor's residence has been sold free and clear of liens under 11 USCS § 363(f), debtor is entitled to claim homestead exemption in sale proceeds. In re Sajkowski (1985, BC DC RI) 49 BR 37, CCH Bankr L Rptr P 70538.

Chapter 7 debtor's homestead exemption should be determined at time of filing of bankruptcy petition and not at time of original homestead sale; therefore proceeds of contract for deed yet to be paid at time petition was filed are properly includable as part of homestead exemption under state opt-out legislation pursuant to 11 USCS § 522. In re Pierce (1985, BC DC SD) 50 BR 718.

Under Kansas law, involuntary transfer of debtor's homestead pursuant to divorce decree does not terminate homestead status of proceeds if debtor intends to use proceeds to purchase another homestead; Chapter 7 debtor may exempt such proceeds where his uncontradicted testimony is that he intends to use proceeds to invest in another homestead. In re Daniels (1986, BC DC Kan) 65 BR 703.

If Chapter 7 debtor should sell homestead, proceeds from sale would be subject to execution by claimant only to extent provided under state law, while 11 USCS § 522(c) would require that pro-ceeds obtained from sale of entire property be set aside as exempt in bankruptcy despite fact that homestead claim may exceed that allowed by state law. In re Karrer (1994, BC ND Iowa) 183 BR 177.

Debtor was not entitled to Illinois homestead exemption in proceeds received on refinancing home, court finding Illinois statute providing exemption for proceeds of "conveyance" only extends to proceeds received upon sale of homestead, not refinancing, where statute was encaptioned by Legislature with words "Proceeds of Sale." In re Lowder (1995, BC CD Ill) 188 BR 573 (criticized in In re Ziegler (1999, BC CD Ill) 239 BR 375).

11 USCS § 522(c)(1) and (2), read together with 11 USCS § 522(f)(1)(A)(i), lead to conclusion that where properly perfected lien against debtor's homestead supports judgment under 11 USCS § 523(a)(5), such judgment lien should be paid out of proceeds of trustee's sale in same priority as it would have been paid under state law; this is so even if it means that debtor's homestead exemption would be impaired. Rupp v Elmasri (In re Elmasri) (2007, BC ED NY) 369 BR 96. Unpublished Opinions

Unpublished: Debtors had no exemptible interest in balance of proceeds of sale of that property held by trustee because trustee stepped into shoes of debtor's father who financed second mortgage and trustee held father's lien clam against sale proceeds of property; therefore, 11 USCS § 551 pre-served preferential transfer avoided in adversary proceeding for benefit of estate and there was no equity in property or proceeds of its sale that debtors could exempt. In re Brown (2004, BC ND Ga) 2004 Bankr LEXIS 1807.

101. Foreclosure sales

Page 204 11 USCS § 522

Creditor's argument, that debtor's right to homestead exemption under 11 USCS § 522(f) is ex-tinguished when homestead is foreclosed on and sold, is meritless, since homestead exemption sim-ply attaches to proceeds of sale. In re Webb (1984, BC ED Va) 49 BR 646.

Where foreclosure sale occurred with respect to portion of debtors' homestead on which their residence was located, no homestead rights survive foreclosure as to balance of land because focus of New York exemption statute is upon residence and exemption ceases with termination of occu-pancy; trustee is not precluded from claiming proceeds of sale by virtue of his failure to object to debtors' original claim of exemption because at outset of case claim appeared perfectly proper and when nature of estate's interest materially changed upon foreclosure it was incumbent upon debtors to amend their claim of exemption if they believed remaining land was exempt. In re Ellerstein (1989, BC WD NY) 105 BR 214.

Purpose of New York's homestead exemption statute is to protect homeowner from seizure of his or her home to satisfy money judgment and to protect debtor's home in event of bankruptcy; however, in event of mortgage foreclosure action, exemption does not apply because it is suit in eq-uity not resulting in money judgment within meaning of statute; surplus monies realized in mort-gage foreclosure action are personalty and, hence, not within ambit of statute. In re Ellerstein (1989, BC WD NY) 105 BR 214.

Where foreclosure sale occurred with respect to portion of debtors' homestead on which their residence was located, no homestead rights survive foreclosure as to balance of land because focus of New York exemption statute is upon residence and exemption ceases with termination of occu-pancy; trustee is not precluded from claiming proceeds of sale by virtue of his failure to object to debtors' original claim of exemption because at outset of case claim appeared perfectly proper and when nature of estate's interest materially changed upon foreclosure it was incumbent upon debtors to amend their claim of exemption if they believed remaining land was exempt. In re Ellerstein (1989, BC WD NY) 105 BR 214.

Bank's deficiency judgment after foreclosure impaired exemption of debtors, and debtor may avoid that judgment under authority of 11 USCS § 522(f)(1), subject to provisions of 11 USCS § 349(b)(1) for automatic reinstatement of lien if case should be dismissed without provision for dif-ferent result. In re Smith (2001, BC WD NY) 270 BR 557, 38 BCD 212, 47 CBC2d 953 (criticized in Banknorth, N.A. v Hart (In re Hart) (2003, CA1) 328 F3d 45, 41 BCD 79, CCH Bankr L Rptr P 78845).

While exception of 11 USCS § 522(f)(2)(C) was inapplicable to debtor's motion to partially avoid judgment creditor's lien because lien did not arise out of foreclosure judgment, which merely adjudicated it as valid and junior, because debtor had waited 17 months to file his motion to par-tially avoid lien to assert his homestead exemption, and appeared to have side deal with foreclosure sale buyer to detriment of creditor, motion was denied as precluded by laches. In re Kelly (2006, BC ND Ill) 350 BR 778.

102. Particular proceeds of other sales

Under opt-out provision of 11 USCS § 522(b)(1), Indiana real property exemption does not ap-ply to Chapter 7 debtor's interest in proceeds from sale of real estate, even though, at time of filing, not all amounts had been paid and debtor still retained some equity in property; rather, debtor's in-terest in contract of sale becomes part of bankruptcy estate under 11 USCS § 541 as personalty, be-

Page 205 11 USCS § 522

cause Indiana has adopted doctrine of equitable conversion and lien theory for conditional contracts of sale. In re Jones (1985, CA7 Ind) 768 F2d 923.

Under California homestead exemption, when Chapter 7 debtor fails to reinvest homestead pro-ceeds within period of 6 months in which debtor has control of those proceeds, proceeds revert to Chapter 7 trustee; because debtor had full control of proceeds from time of sale of his residence un-til trustee commenced action, which was longer than 6-month period exemption period was not tolled from time debtor filed his petition. In re Golden (1986, CA9 Cal) 789 F2d 698, CCH Bankr L Rptr P 71125.

Under Mississippi opt-out provisions, Chapter 11 debtor has not waived homestead exemption in proceeds from sale of homestead property by failing to claim exemption until after sale where, under both Mississippi law and automatic stay, creditor with lien on homestead property is fore-closed from asserting lien. In re Williamson (1988, CA5 Miss) 844 F2d 1166, CCH Bankr L Rptr P 72303.

Under Mississippi opt-out provisions, where debtor is entitled to exempt as homestead maxi-mum of 160 acres to maximum value of $ 30,000, debtor waives possible advantage he might have gained by specifying which 160 acres of total 854-acre lot he wished to exempt, and, upon sale of lot, debtor may only exempt figure resulting from dividing 160 by 854, multiplied by dollar value of debtor's total equity interest. In re Williamson (1988, CA5 Miss) 844 F2d 1166, CCH Bankr L Rptr P 72303.

Chapter 7 debtor's inability to recover land sold to good- faith purchaser does not render entire appeal moot, where Wisconsin homestead exemption applies and follows proceeds of sale, and where proceeds from sale of land remaining after severance of "homestead" have not been distrib-uted and are being held pending outcome of case, and, therefore, debtor's assertion that she can re-cover from proceeds value of land that she claims was improperly sold is not moot. In re Lloyd (1994, CA7 Wis) 37 F3d 271, 31 CBC2d 1786, CCH Bankr L Rptr P 76125.

Chapter 7 debtors are not entitled to $ 7,500 of proceeds from sale of property back to secured creditor, on basis of claim to 1988 rent on their schedule of exemptions, despite contention that un-der North Dakota law debtor is entitled to rents from property during redemption and their claim for 1988 rent was evidence that they had expectancy interest in these redemption period rents, because petition was filed in 1987, and, as of that date, value of 1988 rent was zero; therefore, no property existed in estate for debtors to exempt, and 11 USCS § 541(a)(6) applies only to rents to or from property of estate, not mere expectancy of rents to be collected in future; furthermore, under North Dakota law, no foreclosure took place, no redemption period therefore arose, and no right to rents arose; however, debtors may amend their exemption schedules pursuant to Bankruptcy Rule 1009 to claim exemption in proceeds of sale because, as matter of course, debtor should be allowed to amend his exemption claims to include newly found property if case has not been closed; debtors claimed rental income on schedules at time when it was reasonable to assume that no equity existed in property, but when property was sold back to creditor, surplus was realized which became prop-erty of estate and qualifies as newly found property. Armstrong v Hursman (1988, DC ND) 106 BR 625, 19 BCD 1495.

Proceeds from involuntary sale of debtor's homestead pursuant to division of marital property in Michigan do not fall within Kansas homestead exemption when debtor moves to Kansas. In re Sipka (1992, DC Kan) 149 BR 181 (criticized in In re Stratton (2001, BC DC Or) 269 BR 716) and

Page 206 11 USCS § 522

(criticized in Drenttel v Jensen-Carter (In re Drenttel) (2005, CA8) 403 F3d 611, CCH Bankr L Rptr P 80259).

Where debtors at commencement of case have contingent interest in earnest money deposit in escrow account maintained by real estate broker, this contingent interest becomes property of estate under 11 USCS § 541(a)(1) when debtors file their petition; when purchaser forfeited deposit after petition was filed, broker should have turned over debtors' share to trustee under 11 USCS § 543(b)(1) rather than to debtors; because debtors received and retained $ 1,500, they have received part of homestead exemption, and trustee is entitled to keep $ 1,500 of proceeds from sale of home, and remainder should be turned over to debtors as part of their homestead exemption. In re Turner (1983, BC DC Me) 29 BR 628, 10 BCD 1039.

Debtor's claimed homestead exemption in proceeds from sale of marital home which were being held in escrow by real estate company is sustained where real company's first contract is rescinded and no listing contract existed between parties at time house was sold. In re Morris (1984, BC WD Ky) 42 BR 305.

While Idaho state law extends 6 months' protection to proceeds of sale of debtor's homestead exempt under 11 USCS § 522, purpose of extension is to enable debtor to purchase another resi-dence; where debtor has converted majority of proceeds into automobile and ruby ring, and debtor has shown no effort to use cash remainder to establish another homestead, both items and cash re-mainder are subject to trustee's turnover motion. In re Deglopper (1985, BC DC Idaho) 53 BR 95.

Chapter 7 debtor may still claim homestead exemption in property despite fact that during pe-riod between notice of lis pendens and petition filing, debtor twice sold and repurchased interest in property to family members where: (1) debtor had either joint tenancy or tenancy in common on appropriate dates; and (2) she owned interest in property both before legal troubles began and over 2 years before filing bankruptcy; because debtor had interest in property on date notice of lis pendens was filed, subsequent judgment did not attach to homestead property and thus it was not pre-existing debt and homestead exemption may properly be claimed. In re Johnson (1986, BC DC SD) 61 BR 858.

Debtor is entitled to claim homestead exemption under New Hampshire law, even though he was ordered to abandon property during pendency of divorce proceedings and had no intent to re-possess property, where parties had agreed that property would be sold and debtor would receive his 1/2 interest out of proceeds. In re Eckols (1986, BC DC NH) 63 BR 523.

Under Kansas law, involuntary transfer of debtor's homestead pursuant to divorce decree does not terminate homestead status of proceeds if debtor intends to use proceeds to purchase another homestead; Chapter 7 debtor may exempt such proceeds where his uncontradicted testimony is that he intends to use proceeds to invest in another homestead. In re Daniels (1986, BC DC Kan) 65 BR 703.

Trustee does not possess valid charging lien against Chapter 7 debtor's exemption in proceeds from sale of homestead, for his services rendered in selling residence, that is entitled to priority over nondischargeable claim of IRS for unpaid trust fund taxes where: (1) no attorney-client relationship exists between trustee and debtor; (2) trustee has ample opportunity to receive compensation through appropriate procedures; and (3) trustee has tried to remove compensation from court's scru-tiny and simultaneously cause IRS to bear costs of sale of debtor's residence. In re Clate (1987, BC WD Pa) 69 BR 506.

Page 207 11 USCS § 522

Chapter 7 debtor may deduct entire $ 45,000 homestead exemption from 50 percent joint ten-ancy interest in net proceeds from sale of property that is property of bankruptcy estate. In re Reed (1988, BC CD Cal) 89 BR 100, 19 CBC2d 378.

Chapter 13 debtor may not rely on 11 USCS § 522 homestead exemption to avoid transfer of part of proceeds of sale of house and judicial lien on those proceeds where debtor is not trying to recover house nor does he allege that money from sale is used as residence and thus, because nei-ther debtor nor dependent uses proceeds as residence, homestead exemption is not available; debtor may claim exemption of $ 3,849 from proceeds of sale of residence by applying unused homestead exemption and wild card exemption and he is entitled to prejudgment interest from date of action at state legal rate of interest. In re Hoffman (1988, BC WD Pa) 96 BR 46.

Upon sale of Chapter 13 debtors' property, debtors are not immediately entitled to receive their applicable real estate exemption from proceeds of closing but, rather, funds shall be retained by trustee and debtors' entitlement to receive cash representing their exemptible interest in real estate will be deferred until debtors successfully complete their plans. In re Deeble (1994, BC SD Ga) 169 BR 240.

If debtor had accepted offer for purchase and sale of her homestead property during her Chapter 13 case, and she or Chapter 13 trustee had moved for order approving sale, or Chapter 7 trustee had moved to sell property after conversion to Chapter 7, order approving sale would have provided for payment to debtor of her $ 10,000 homestead exemption out of sale proceeds, and remaining pro-ceeds would then be used to pay creditors with any further balance being paid to debtor, even though payment of homestead exemption from proceeds of voluntary sales is not provided for under New York law; here, debtor made proper claim to homestead exemption in property of estate where, even at time of sale of property at postpetition mortgage foreclosure sale, there was sufficient equity in property, over and above valid liens, including judgment liens, to support claimed $ 10,000 ex-emption; to allow debtor's previously unobjected to claim of homestead exemption in property to be cut off by postpetition foreclosure sale and then to allow Chapter 7 trustee to distribute resulting surplus money to prepetition creditors would frustrate fresh start policy of Bankruptcy Code and render meaningless provisions of 11 USCS § 522(c), which provide that properly exempted property is no longer available for payment of prepetition debt; if this issue had been raised at time relief from stay order was entered, which provided for any surplus money to be paid to trustee, court, in furtherance of § 522 and fresh start policy, and pursuant to 11 USCS § 105, would have required provision in order that any surplus money would first be used to pay debtor her claimed homestead exemption. In re Bedell (1994, BC WD NY) 173 BR 463.

Fact that Chapter 11 debtor subsequently converted to Chapter 7 did not allow creditors to at-tack homestead claim where new homestead was purchased within six months of sale of old home-stead with proceeds from that sale and had thus, under Texas law, never entered bankruptcy estate. In re Reed (1994, BC WD Tex) 178 BR 707, op withdrawn, reported at (1994, BC WD Tex) 8 Tex Bankr Ct Rep 283.

Although new homestead acquired with proceeds from sale of old homestead within six months did not enter bankruptcy estate under Texas law, proceeds received by debtor, including note, lost their exempt status insofar as debtor had not reinvested them after six months and debtor's pledge of note to secure his obligations arising from new homestead did not amount to reinvestment sufficient to exempt note. In re Reed (1994, BC WD Tex) 178 BR 707, op withdrawn, reported at (1994, BC WD Tex) 8 Tex Bankr Ct Rep 283.

Page 208 11 USCS § 522

Condominium which was valued in Chapter 7 debtor spouses' schedules at $ 120,000 but subse-quently sold for $ 158,000 was not entirely exempted so as to entitle debtors to increase in value where debtors had only claimed $ 15,000 exemption each (reflecting difference between $ 120,000 scheduled value and creditor's $ 90,000 mortgage); trustee had no reason to object to claimed ex-emptions and no reason to believe that exemption claims would deprive estate of any more than amount claimed. In re Bregni (1997, BC ED Mich) 215 BR 850.

Divorce court's order that home owned by Chapter 7 debtor and her spouse be sold was forced sale of property to satisfy money judgment and, therefore, debtor, who filed bankruptcy after home was sold, was entitled to homestead exemption in sale proceeds under Cal. Code Civ. Proc. § 704.720. In re Cumberbatch (2003, BC CD Cal) 302 BR 675.

Chapter 7 debtors' $ 15,000 homestead exemption in their residential property could not take priority over payment of secured encumbered loans and expenses associated with liquidating prop-erty, which took priority pursuant to 11 USCS § 724(b), and federal tax lien filed by IRS, which took priority after payment of secured obligations, pursuant to 11 USCS § 522(c)(2)(B). Grochocin-ski v Laredo (In re Laredo) (2005, BC ND Ill) 334 BR 401, 96 AFTR 2d 7448.

Attorneys could recover post-petition attorney's fees from proceeds that debtor received from sale of real estate that had been subject to homestead exemption under Mass. Gen. Laws ch. 188, § 1 because property was no longer property of estate, based on homestead exemption and Chapter 7 trustee's decision to abandon any interest in property, and property had reverted back to debtor. In re Hermosilla (2007, BC DC Mass) 375 BR 20.

Under Ariz. Rev. Stat. § 33-1101(C), debtors were required to reinvest sale proceeds in new homestead within 18 months in order to maintain exempt status; fact that proceeds lost their exempt status post-petition did not change this result because, although exemptions were generally deter-mined as of bankruptcy petition date, if applicable state law required certain conditions to be met as of petition date, such as reinvestment, debtors were required to meet these conditions to maintain exempt status. Gaughan v Smith (In re Smith) (2006, BAP9) 342 BR 801.

Proceeds from refinancing of debtors' home did not qualify for exemption pursuant to Colo. Rev. Stat. § 38-41-207 (2000); plain reading of statute indicated that it required actual transfer of ownership and possession of home for "sale" to have occurred and for statute to have applied. Polimino v Peters (In re Polimino) (2006, BAP10) 345 BR 708.

In Chapter 7 bankruptcy proceeding, debtor was allowed to trace $ 22,000 in proceeds from sale of debtor's home when debtor had not filed homestead declaration prior to selling home if home-stead was otherwise eligible for exemption pursuant to Mont. Code Ann. § 70-32-216. In re Snyder (2006) 2006 MT 308, 335 Mont 11, 149 P3d 26.

3.Use or Occupancy 103. Generally

Although debtor's right to homestead exemption is determined by state law since state legisla-ture has denied debtor's use of exemptions provided in 11 USCS § 522, essence of right to home-stead exemption under state law as well as federal law is based on debtor's designation and occu-pancy of real or personal property as residence. In re Orwig (1980, BC SD Ohio) 6 BR 725.

Since exemption right is interpreted liberally to afford debtors and families benefits of such al-lowances, truly constructive occupancy qualifies for § 522 exemption so that if debtors demonstrate present intention to occupy premises as homestead at definite future time, accompanied by actual

Page 209 11 USCS § 522

ongoing preparations for occupancy thereof, temporarily unoccupied premises qualifies for home-stead exemption, although intention to occupy at definite future date must be substantiated by de-monstrative, tangible, physical evidence in addition to any expressed subjective intent. In re Cottingim (1980, BC SD Ohio) 7 BR 56, CCH Bankr L Rptr P 67698.

Alabama homestead statute pre-empts 11 USCS § 522(d) and under that statute essential ele-ment of right of homestead is actual occupancy at time property is claimed as exempt; therefore when at date of filing debtors were no longer living in house but had abandoned it since they knew they would have to sell it in order to pay debts and had established new residence they are not enti-tled to homestead exemption for original home. In re Brasington (1981, BC MD Ala) 10 BR 76.

Debtors were entitled to use state homestead exemption for home debtors were occupying as residents for family unit on date when bankruptcy petition was filed, home which they continued to use as dwelling house, and home which they had no intention of abandoning as homestead perma-nently even though on temporary basis debtors did rent homestead premises. In re White (1982, BC DC Vt) 18 BR 95.

Finding that debtors actually occupied homestead on filing date is neither necessary nor suffi-cient to qualify for exemption; occupation may be constructive as well as actual; primary factor is debtor's intention on filing date. In re Grindal (1983, BC DC Me) 30 BR 651.

Under both 11 USCS § 522(d)(1) and homestead exemption provided under Hawaii law, debtor in bankruptcy may claim as exempt only residence wherein he resides at time of petition, and fact that debtor moves to property several months after filing petition does not enable him to claim the property as exempt. In re Tevaga (1983, BC DC Hawaii) 35 BR 157.

Under Ohio homestead exemption statute, debtor is only entitled to claim exemption for interest in real estate if debtor or debtor's dependent occupies residence as principle dwelling and, although actual occupancy is not necessarily required, it is well established that where debtor leaves resi-dence, he must retain active intent to return to property in order to be entitled to exemption; there-fore, Chapter 7 debtor wife, who has left residence because of marital discord and who has ex-pressed no interest in reconciling marriage or in returning home, is not entitled to claim exemption in property which both parties have expressed their intention to sell. In re Shinners (1986, BC ND Ohio) 60 BR 139.

Under New Hampshire law, "occupancy" which must be actual and physical in nature, is essen-tial to existence of homestead right; once homestead is validly established, however, homestead right may be continued in some circumstances by constructive possession or temporary absence with no intent to abandon homestead permanently. In re Eckols (1986, BC DC NH) 63 BR 523.


Under certain circumstances, debtor may validly claim residence as exempt homestead even if she or he does not physically occupy property on petition date; while occupancy may be construc-tive as well as actual, precedent indicates debtor must have actually resided on property at one time and must demonstrate intention to return. In re Cole (1995, BC DC Me) 185 BR 95.

Bankruptcy court noted that debtor elected bankruptcy exemptions under state law rather than 11 USCS § 522 and court found that debtor's claimed interest was abandoned by debtor; property

Page 210 11 USCS § 522

was no longer impressed with homestead character sufficient to allow debtor to claim right to homestead exemption in property pursuant to Ark. Code Ann. § 16-66-217, 218; Ark. Const. art. 9, § 4, when debtor's only tie to property in which he claimed right of homestead was camping and, more likely, pasture and not use as residence. In re Hunter (2003, BC WD Ark) 295 BR 882.

Objection to bankruptcy debtor's claim of homestead exemption in real property, which debtor did not presently live in and had rented out but in which debtor intended to reside in future, was overruled, but objections to exemptions unsupported by statute were sustained; debtor was not shown to have abandoned homestead. In re Marrama (2004, BC DC Mass) 307 BR 332, 52 CBC2d 234.

104. Dependents

Debtor who is single man living with his mother, sister, her husband and her child is head of household and since part of premises occupied by sister's family is not divisible as practicable mat-ter entire home enjoys homestead status. In re Geijo (1981, BC SD Fla) 9 BR 75.

In order to properly effectuate purpose and function of state homestead exemption, and to pre-vent inequitable injury to debtor and his family, exemption claimed by debtor will be allowed, even though property claimed as exempt has not been occupied by debtor as his principal residence, but has been occupied by his wife and daughter, as state homestead exemption extends to protect real property owned by debtor and occupied as principal residence by debtor or members of debtor's immediate family. In re Warren (1984, BC ND NY) 38 BR 290.

State constitutional provisions regarding homestead exemptions are liberally construed in favor of person asserting exemption and once homestead attaches it is not lost if debtor's family subse-quently departs from homestead because of death, divorce, or arrival of children at age of majority; thus debtor is entitled to exemption in property on which she resided with her husband even though prior to filing petition debtor divorced her husband and at time of petition she lived on property alone and unmarried. In re McCraw (1985, BC WD Ark) 58 BR 175.

Language in 11 USCS § 522(a), which provides that "dependent" may include spouse whether or not actually dependent, does not apply to Ohio homestead exemption which requires occupancy of residence by debtor or debtor's dependent because language of § 522 does not appear to contem-plate that definition will be employed in interpretation of state exemption statutes, particularly in light of fact that Ohio has opted out of federal scheme. In re Shinners (1986, BC ND Ohio) 60 BR 139.

Where debtors in Chapter 7 bankruptcy proceeding claimed homestead exemption in duplex in which they resided in one unit and mother of one debtor resided in other, trustee's objection to homestead exemption was overruled; because debtors provided financial and personnel support to mother, and debtors purchased duplex for purpose of allowing mother to live under same roof in order to facilitate her care, it was undisputed that debtors and mother lived together as family within meaning of N.H. Rev. Statnn. § 480:1. In re Myers (2005, BC DC NH) 323 BR 11.

Debtor was entitled to homestead exemption where debtor was to receive $ 16,000 when he conveyed his one-half interest in marital property to his former spouse, marriage dissolution judg-ment came after filing of bankruptcy petition, and debtor's former spouse, at time of filing of bank-ruptcy petition, qualified as debtor's dependent residing in property. In re Reed (2005, BC DC Conn) 331 BR 44.

Page 211 11 USCS § 522

105. Property inherited postpetition

Debtor who inherited property from mother within 180 days from filing of petition is not enti-tled to claim homestead exemption in property under 11 USCS § 522 because debtor did not reside there permanently, only on occasion to take care of his mother, he intended to sell or rent property at his mother's death, and at time of filing debtor had no interest in home; debtor's claim for reim-bursement of expenses is also denied because payments for repair and upkeep were not made by him in anticipation of living in home but were made to protect mother's home before her death. In re Smith (1985, BC MD Ala) 48 BR 435.

Where, within 180 days of filing petition, debtor's father died, leaving him one-half interest in apartment building in which he resided, court will exempt, as homestead, ratio that apartment square footage of entire premises. In re Tsoupas (2000, BC DC NH) 2000 BNH 26, 250 BR 466.

106. Unimproved property

Debtor may not exempt as homestead property lot upon which she does not reside and upon which there is no house, even though she intends to use property in future as place to retire, because Tennessee homestead exemption statute has residency requirement. In re Huffines (1985, MD Tenn) 57 BR 740.

Debtor will not be permitted to claim exemption under state statute in property which is unde-veloped but on which she claims she will build home where court is convinced on record as whole that intention to make unimproved real estate homestead did not exist at bankruptcy and there was not then and there is not at time of decision reasonable possibility that debtor will convert land to permanent residence. In re Crippen (1983, BC ED Mo) 36 BR 7, 2 BAMSL 577.

Law of Vermont is that homestead of debtor is exempt from attachment upon debts contracted after filing of deed of homestead for record and before occupation of premises by debtor as home-stead, and thus, where Chapter 11 debtor filed deed prior to commencement of construction of resi-dence but did not move in until after completion of residence, she is not precluded from asserting homestead as against contractor's lien where debtor clearly intended premises to be her homestead; further, debtor moved into residence prior to time when contractor perfected his lien thus debtor's homestead was established before contractor's lien attached. In re Bernstein (1986, BC DC Vt) 62 BR 545.

Chapter 7 debtors may exempt as homestead property vacant lot located directly across road from parcel on which their residence is located where parcel was purchased with intention of being used in conjunction with residence, parcel has been used to supplement inadequate storage and parking at their residence, and parcel is used for residential gardening purposes; parcel of real prop-erty used by debtor in conjunction with residential parcel, that would be contiguous with same but for presence of road separating them, should not be precluded from acquiring nature of homestead property simply on that basis alone. In re Flatt (1993, BC ND NY) 160 BR 497, 29 CBC2d 1253.

107. Rental of property

Debtor does not abandon homestead under Missouri law when debtor rents homestead in order to meet payments on homestead. In re Turner (1984, BC WD Mo) 44 BR 118.

Leasing part of homestead does not constitute abandonment of homestead rights as to that part leased where (1) leasing is not intended as abandonment and (2) purpose for which it is leased is not inconsistent with assertion of right of homestead therein; however, where debtor who owns 2 build-

Page 212 11 USCS § 522

ings which are situated on one lot rents one and resides in other, rented building cannot be deemed exempt from claim of creditors. In re Evans (1985, BC DC Vt) 51 BR 47.

Under Florida law, debtors' homestead exemption is limited to that portion of property occupied by debtors as residence on date of bankruptcy and cannot include that portion of property which was rented to and occupied by third party. In re Rodriguez (1985, BC SD Fla) 55 BR 519.

Under Florida constitution, Chapter 7 debtors are entitled to exempt only their residence as homestead and not 3 other units in their apartment building that are rented to tenants. In re Aliotta (1986, BC MD Fla) 68 BR 281.

For purposes of determining what portion of debtor's residence, which has attached rental unit, may be exempt under Florida homestead exemption, susceptibility to division by perpendicular lines, horizontal lines, or both, and to conveyance as independent parcel under existing law should be criteria for divisibility; since duplex, although susceptible to division by vertical or horizontal line, is not lawfully sellable under existing zoning laws, entire duplex is exempt. In re Kuver (1986, BC SD Fla) 70 BR 190, 15 BCD 826 (criticized in Englander v Mills (In re Englander) (1996, CA11 Fla) 95 F3d 1028, 10 FLW Fed C 399) and (criticized in In re Nofsinger (1998, BC SD Fla) 221 BR 1018, 11 FLW Fed B 322) and (criticized in In re Blocker (1999, BC MD Fla) 242 BR 75, 13 FLW Fed B 64).

For purposes of determining what portion of debtor's residence, which has attached rental unit, may be exempt under Florida homestead exemption, susceptibility to division by perpendicular lines, horizontal lines, or both, and to conveyance as independent parcel under existing law should be criteria for divisibility; since duplex, although susceptible to division by vertical or horizontal line, is not lawfully sellable under existing zoning laws, entire duplex is exempt. In re Kuver (1986, BC SD Fla) 70 BR 190, 15 BCD 826 (criticized in Englander v Mills (In re Englander) (1996, CA11 Fla) 95 F3d 1028, 10 FLW Fed C 399) and (criticized in In re Nofsinger (1998, BC SD Fla) 221 BR 1018, 11 FLW Fed B 322) and (criticized in In re Blocker (1999, BC MD Fla) 242 BR 75, 13 FLW Fed B 64).

North Dakota Chapter 7 debtor has homestead exemption of up to $ 80,000 of property on which debtor lives, including portion that is rented to commercial establishment. In re Patten (1987, BC DC ND) 71 BR 574, 15 BCD 1023.

Chapter 7 debtor may claim homestead in residence which he vacated subsequent to bankruptcy and has since rented, and he may avoid prejudgment writ of attachment on said property under 11 USCS § 522(f), where objecting creditor has not produced any evidence indicating that debtor in-tended to abandon his homestead or had recorded subsequent homestead on another real property, which would constitute abandonment of first declared homestead by operation of California law; although residency is required to declare homestead, continued residency is not required under Cali-fornia law and moving away does not destroy exemption status. In re Figy (1989, BC SD Cal) 102 BR 785.

Chapter 7 debtors are not entitled to declared homestead exemption under California law, even though debtor husband filed declaration prior to bankruptcy at time when he resided in home, where debtors vacated property and leased it prior to bankruptcy filing. In re Yau (1990, BC CD Cal) 115 BR 245.

Page 213 11 USCS § 522

Debtor does not necessarily abandon his homestead simply because he may rent or lease por-tions thereof; rather, debtor's property should be subject to divisibility test, criteria for which in-clude not only whether unit or parcel is susceptible to division by perpendicular and/or horizontal lines, but also whether such unit or parcel is lawfully conveyable as independent parcel under exist-ing law; in present case, 2-story garage of single-family structure containing 2 rental rooms is ex-empt where property is zoned as single-family residence with no possibility legally to sever and convey rented portions of garage. In re Makarewicz (1991, BC SD Fla) 130 BR 620.

Chapter 7 debtors' claimed homestead exemption in real property consisting of 2 free-standing structures on real property which contain 5 rental units, one of which serves as debtors' residence, is limited under Florida law to portion of net proceeds that square footage of debtors' residential unit bears to total square footage of 2 structures; because property is indivisible, trustee will sell entire real property and divide proceeds, after satisfying mortgage and other liens of record and paying ordinary and necessary costs and expenses of sale and closing, between estate and debtors. In re Wierschem (1993, BC MD Fla) 152 BR 345, 7 FLW Fed B 44.

Judicial lien may be avoided in its entirety under 11 USCS § 522(f), despite lienholder's argu-ment that only portion of Chapter 7 debtor's property is entitled to exemption since she resides in only one of 4 units in apartment building, where, under New York exemption law, homestead ex-emption applies to all real property which consists of lot of land with dwelling thereon owned by debtor and occupied by debtor as principal residence. In re Vizentinis (1994, BC ED NY) 175 BR 824, 32 CBC2d 1496.

108. Debtor's move or sale postpetition

Under Mississippi law, debtor who abandons homestead rights by voluntarily moving out of property cannot later convey to his wife homestead exemption in such property under 11 USCS § 522. Joe T. Dehmer Distributors, Inc. v Temple (1987, CA5 Miss) 826 F2d 1463.

Debtor wife may claim Colorado homestead exemption in home, even though debtor husband had already moved to Texas with couple's children, had new job there, enrolled children in school, and had leased house with option to buy, where debtor wife remained in Colorado and lived in home while she arranged for moving company to pack their belongings, and she moved to Texas 10 days after bankruptcy petition was filed; although house was listed for sale, debtor wife occupied residence on day of filing and for 10 days thereafter and her intention to move in immediate future does not disqualify her homestead right; further, actions of debtor husband in leasing house with option to buy evidences intent to purchase another home, and Colorado homestead statute allows debtors to exempt proceeds of sale of homestead for one year if debtor uses proceeds for acquisition of another home. In re Raymond (1993, CA10 Colo) 987 F2d 675, CCH Bankr L Rptr P 75179.

Under Mississippi homestead exemption, debtor may claim $ 30,000 from proceeds of sale of homestead even though debtor agreed to sale of homestead prior to filling. In re Williamson (1985, BC SD Miss) 49 BR 675.

Objection to Chapter 7 debtor's claim of homestead exemption filed by bank which holds judg-ment lien on property cannot be sustained where, at time of commencement of case, debtor was resident owner of property and bank has failed to present evidence that debtor did not intend to es-tablish property as her homestead or that she effectively abandoned it as her homestead by moving into apartment located elsewhere. In re Russell (1986, BC MD Fla) 60 BR 190.

Page 214 11 USCS § 522

Chapter 11 debtor's clear intent to sell her homestead in future cannot establish present aban-donment of homestead where, at time of filing, debtor still resided at homestead. In re Bernstein (1986, BC DC Vt) 62 BR 545.

Chapter 7 debtors' move from property after filing petition, but before court hearing on exemp-tion, is not fatal to their California homestead exemption; changes occurring after filing are not relevant. In re Knudsen (1987, BC CD Cal) 80 BR 193.

Fact that Chapter 7 debtor seeks to sell her homestead, and probably intended to do so when she filed for bankruptcy, does not impair her exemption claim; however, when debtor executed her homestead declaration, in which she stated that she intended to use residence as her homestead, she clearly did not intend to continue living at residence because next day, and before homestead decla-ration was recorded, she vacated residence and granted prospective purchaser license to use resi-dence until sale could be completed, thereby bringing into question veracity of statements made in declaration, and thus further evidentiary hearing is necessary to determine whether debtor's state-ments in declaration are accurate. In re Zohner (1993, BC DC Nev) 156 BR 288.

Where property was debtors' homestead at time they filed their Chapter 7 petition, they did not abandon their exemption by entering into purchase and sale agreement while still occupying prem-ises and then subsequently moving from premises prior to closing; thus, debtors complied with pro-visions of 11 USCS § 522(f) and were entitled to avoid creditor's judicial lien. In re May (2005, BC DC NH) 329 BR 789.

109. Abandonment

Former homestead loses its homestead character when its owner abandons its, and likewise, proceeds of sale of that former homestead lose their homestead character and become proceeds of former homestead; Texas law does not afford owners of former homestead rights of homestead claimants; owners of abandoned homesteads have no rights in their former homesteads, and there are no hindrances to seizure thereof. In re England (1992, CA5 Tex) 975 F2d 1168, CCH Bankr L Rptr P 74979.

Texas court's sanctions order declaring that debtor had abandoned homestead claim to certain property was entitled to res judicata treatment for bankruptcy purposes since it constituted valid judgment under Texas law rather than unconstitutional forced sale. McDaniel v Camp (In re Camp) (1995, CA5 Tex) 59 F3d 548.

Debtors have not lost their claimed bankruptcy exemption in any equity that may result from contract for deed because they may have abandoned real property; trustee's objection to exemption claim based upon abandonment or upon lack of adequate description in schedules is denied where debtors were parties to contract for deed to house and had moved from house after filing. In re Karns (1981, BC ED Mo) 1 BAMSL 460.

Both spouses have valid homestead interest in property where only one spouse filed bankruptcy petition and only declaration of homestead recorded was recorded by other spouse during previous marriage; under state law homestead rights continue until abandoned and dissolution of registered spouse's previous marriage and her remarriage to present spouse did not terminate these rights; homestead exemptions extend to entire interest of both spouses in property and is to be ratably ap-portioned between community property interests and separate property interests. In re Halub (1982, BC CD Cal) 25 BR 617.

Page 215 11 USCS § 522

Under Texas law governing homestead exemption, there is no requirement of occupancy of property which debtor claims as homestead, and when homestead rights are once shown to exist in property, anyone asserting abandonment has burden of pleading and proving it by competent evi-dence; acquiring of new home is not sufficient to show abandonment of original homestead absent evidence of total abandonment with intent not to return to claim exemption. In re Byrd (1984, BC WD La) 39 BR 374.

Defendant's judgment lien which impaired homestead exemption was subject to avoidance de-spite contention that debtors had abandoned property and property therefore was not "homestead" under Missouri law where evidence indicated debtors' intent to retain property in question as home base. In re Farris (1984, BC ED Mo) 42 BR 388, 2 BAMSL 896.

Deciding consideration in determining whether Chapter 7 debtor's absence represents abandon-ment of homestead is whether debtor has intention to return; debtor's intent must be determined in relation to surrounding exigencies. In re Brent (1987, BC DC Vt) 68 BR 893.

Debtor may claim homestead exemption under state law despite fact that he abandoned house 3 days after filing for bankruptcy where debtor has lived in house for number of years prior to filing of petition, thereby establishing residency, and thus, without concurrence of both act of abandon-ment and intent to abandon, debtor's occupancy of house continued his residence status during time petition was filed. In re Cope (1987, BC ND Ohio) 80 BR 426.

Under provisions of homestead exemption in state that had opted out of federal exemptions pur-suant to 11 USCS § 522(b)(1), Chapter 7 debtor permanently abandoned claimed homestead in property where he did not occupy property at time of filing of bankruptcy petition and failed to demonstrate that he intended to return and occupy that property as homestead. In re Moneer (1995, BC ND Ill) 188 BR 25.

Debtors did not abandon their home located in Bismarck, North Dakota (Bismarck home) sim-ply by relocating to Medora, North Dakota, where relocation was temporary and necessary for debtors to manage their business which was located in that city; in addition, it was reasonable for debtors to have purchased mobile home in Medora because they were away for extended period of time while tending to their business and needed temporary or second dwelling; accordingly, debtors could claim as exempt under N.D. Cent. Code § 47-18-16 proceeds from sale of Bismarck home. In re Morlock (2006, BC DC ND) 364 BR 684.

110. Absence due to marital difficulties

Debtor's former wife voluntarily and permanently abandoned her occupancy of marital resi-dence and therefore is not entitled to claim homestead exemption in property under New Hampshire law where debtor testified that wife told him at time she left that she intended to leave permanently and she took children, furniture, clothing and toys with her when she left. In re Cilley (1986, DC NH) 64 BR 32.

Debtor abandoned his homestead when he voluntarily gave his ex-wife exclusive possession of house pursuant to property settlement agreement, moved out of house, and ceased to make any payments toward mortgage and taxes due on house; therefore, he may not exempt his one-half in-terest in house. Konrad v Stephenson (1986, ED Ark) 67 BR 457.

Where Chapter 7 debtor vacates his residence prior to filing bankruptcy petition pursuant to court order granting spouse exclusive occupancy rights to property pending resolution of marital

Page 216 11 USCS § 522

dispute, Bankruptcy Court will not apply literal interpretation of state law requirement of "occu-pancy" and allow debtor's claim for 11 USCS § 522 homestead exemption. In re Smith (1985, BC WD NY) 57 BR 81, 13 BCD 1290.

Absence from marital abode pending final resolution of property rights by New York divorce court does not constitute abandonment of rights in homestead under New York law. In re Smith (1985, BC WD NY) 57 BR 81, 13 BCD 1290.

Under Ohio homestead exemption statute, debtor is only entitled to claim exemption for interest in real estate if debtor or debtor's dependent occupies residence as principle dwelling and, although actual occupancy is not necessarily required, it is well established that where debtor leaves resi-dence, he must retain active intent to return to property in order to be entitled to exemption; there-fore, Chapter 7 debtor wife, who has left residence because of marital discord and who has ex-pressed no interest in reconciling marriage or in returning home, is not entitled to claim exemption in property which both parties have expressed their intention to sell. In re Shinners (1986, BC ND Ohio) 60 BR 139.

Debtor may, under New Hampshire law, claim homestead exemption in marital property even though he temporarily was ordered out of home during pendency of divorce proceedings where debtor had consistent intent to return to residence upon obtaining custody of children. In re Eckols (1986, BC DC NH) 63 BR 523.

Debtor is entitled to claim homestead exemption under New Hampshire law, even though he was ordered to abandon property during pendency of divorce proceedings and had no intent to re-possess property, where parties had agreed that property would be sold and debtor would receive his 1/2 interest out of proceeds. In re Eckols (1986, BC DC NH) 63 BR 523.

Chapter 7 debtor did not abandon his homestead merely because he misinterpreted state divorce court's order to sell homestead as implicitly prohibiting him from occupying it where he maintained intention to return. In re Brent (1987, BC DC Vt) 68 BR 893.

Chapter 7 debtor continued to utilize property as residence on date debtor filed voluntary peti-tion and debtor may exempt proceeds from post-petition sale of property under 11 USCS § 522(d)(1) where debtor purchased and physically occupied premises for 7 years prior to bankruptcy filing, debtor did not abandon premises when he physically vacated premises weeks before filing because absence was involuntary and compelled by state court order following separation from wife, and debtor continued to occupy premises constructively on date debtor filed petition. Makoroff v Buick (In re Buick) (1999, BC WD Pa) 237 BR 607, 42 CBC2d 1151, CCH Bankr L Rptr P 77980.

Bankruptcy court held that pursuant to state law, any indication of husband's abandonment of homestead property did not allow both debtors' homestead to become subject to judgment lien where lien did not arise from: (1) pre-acquisition debt; (2) contractual agreement expressly stipulat-ing that homestead shall be liable; or (3) work furnished exclusively on debtors' homestead. In re Powers (2002, BC ND Iowa) 286 BR 726.

111. Absence due to extreme circumstances

Debtor is entitled to claim homestead exemption for marital residence under New York law notwithstanding her nonoccupancy of premises because of extreme conditions under which she was forced to vacate premises whereby debtor's husband had physically thrown debtor of house and be-cause premises are still occupied by debtor's family. In re Thomas (1983, BC SD NY) 27 BR 367.

Page 217 11 USCS § 522

Debtor can reinstate homestead exemption upon filing of petition, even though under Minnesota law debtor had abandoned homestead prior to petition, and debtor will be deemed to have construc-tive occupancy of homestead when he claims intent to live there and that his absence is caused by fear of violence from relatives. In re Lehman (1984, BC DC Minn) 44 BR 946.

112. Other particular circumstances

Remarried debtor cannot claim homestead exemption for residence she occupied as single adult, because, under Texas law, actual use and occupancy is most significant, and debtor moved to new husband's house prior to time lien on former homestead was created. In re Claflin (1985, CA5 Tex) 761 F2d 1088.

Under Texas law, once debtor establishes initial homestead character of property, homestead status is presumed to continue, and burden of proof shifts to person relying on affirmative defense of abandonment; evidence that Chapter 7 debtor was temporarily absent twice from homestead property for several months during 10-month period and rented all but one bedroom of property by written lease on another occasion was insufficient to establish abandonment. In re Niland (1987, CA5 Tex) 825 F2d 801, CCH Bankr L Rptr P 71664.

Under Texas law homestead claimant is clearly not estopped to assert his homestead rights in property notwithstanding fact he made numerous sworn misrepresentations to effect that other property was his homestead, if, at time of such declarations, claimant was in actual use and posses-sion of his homestead property. In re Niland (1987, CA5 Tex) 825 F2d 801, CCH Bankr L Rptr P 71664.

Bankruptcy Court's finding that Chapter 11 debtor lacked intent to make 190-acre tract his homestead is clearly erroneous where Bankruptcy Court, as basis for its factual finding, relied on factually-inaccurate homestead designation and disclaimer, which did not include land on which house in which debtor lived was located and did not contain land that had already been encumbered to another creditor and tract of land that had already been deeded to debtor's son, and where debtor's occupancy and use of his home and surrounding acreage were unquestioned; under Texas home-stead law investigation of intention need not be made when land is actually put to homestead uses as in present case. In re Kennard (1992, CA5 Tex) 970 F2d 1455.

Bankrupt was not entitled to claim farm as homestead under former 11 USCS § 24 where such farm was not used as home, but had merely been claimed as homestead in past years for tax pur-poses. In re Neale (1967, ND Tex) 274 F Supp 969.

Debtor's property was subject to homestead exemption where debtor owned property, had con-structed residence on it, and was moving personal items into it and intermittently occupying it at time judgment lien on debtor's non-exempt real property was recorded, subsequently received cer-tificate of occupancy, and, it was undisputed that property was debtor's homestead when he filed bankruptcy petition approximately one year later. Gibson Group v Cooper (In re Cooper) (1996, MD Fla) 197 BR 698, 10 FLW Fed D 26.

To establish Florida homestead exemption, it must be established bankrupt intended to make property in question his or his family's permanent place of residence, and Canadian tourist who does not hold permanent visa cannot be permanent resident of Florida; regardless of what his intent is to do in future, he is incapable of declaring home as permanent residence and therefore cannot avail himself of state homestead benefits. In re Cooke (1979, BC ND Fla) 1 BR 537.

Page 218 11 USCS § 522

Notwithstanding that debtor wife, who together with husband filed voluntary joint petition, never resided in house which debtors seek to claim as exempt, she may apply $ 400 exemption plus spillover from unused residential exemption to claim exemption in home. In re Phelmetta (1980, BC DC Conn) 7 BR 461.

Under provision of South Dakota homestead exemption which precludes conveyance or encum-brance of homestead by its owner without spouse's concurrence, since debtor and his wife did not intend realty to be their homestead at time debtor encumbered property to bank, intending instead for property to be used in debtor's construction business, realty was not attached with character of homestead when it was encumbered and bank's lien is valid. In re Lemme (1984, BC DC SD) 41 BR 829.

Chapter 7 debtor may still claim homestead exemption despite her residing in nursing home be-cause, under South Dakota law, mere absence from her home due to health reasons, even for long period of time, is not itself sufficient to establish that debtor has never acquired homestead or has subsequently abandoned it in absence of proof that debtor did not intend to return to her home. In re Johnson (1986, BC DC SD) 61 BR 858.

Where Chapter 7 debtor's residence in another town was temporary accommodation to exigen-cies of his employment, it did not create new homestead. In re Brent (1987, BC DC Vt) 68 BR 893.

Chapter 7 debtor is not entitled to homestead exemption for certain property under Ohio opt out provisions where trustee has shown that debtor is living on property other than that claimed as homestead. In re Hollar (1987, BC SD Ohio) 79 BR 294.

Chapter 7 debtors are not entitled to California automatic dwelling exemption upon forced or involuntary sale where they vacated property prior to bankruptcy filing because they could not af-ford payments, they are currently living with parents, and they have provided no evidence of how much time might elapse before they would return to property, or that they would ever return. In re Yau (1990, BC CD Cal) 115 BR 245.

Under California law, judgment creditor who obtains attachment lien and then later records judgment lien while attachment lien is in effect has lien against debtor's dwelling, for priority pur-poses, from date attachment was created; therefore, if debtor voluntarily sells dwelling subject to attachment lien and judgment lien of same creditor, debtor's exemption should have priority over judgment lien only if debtor or his spouse resided uninterrupted at dwelling from date attachment lien arose to date dwelling is found exempt. In re Yau (1990, BC CD Cal) 115 BR 245.

Debtor airline pilot who purchased property and prepared it for immediate occupancy by his son and friend and who, although not physically occupying property on continued basis, financed prop-erty and paid taxes and general maintenance thereon established that property as homestead under 11 USCS § 522. Teasdale v Frederick (In re Frederick) (1995, BC MD Fla) 183 BR 968, 33 CBC2d 962, 9 FLW Fed B 42.

Where debtor established property as homestead in 1983, maintained it as such until placing it on market in 1987, and property was being leased to another until September 1993, debtor had abandoned homestead so that lien for April 1993 judgment validly attached to non-exempt property prior to debtor's bankruptcy filing later in September and was not subject to avoidance. Teasdale v Frederick (In re Frederick) (1995, BC MD Fla) 183 BR 968, 33 CBC2d 962, 9 FLW Fed B 42.

Page 219 11 USCS § 522

Chapter 11 debtors who owned residences in Florida and Kentucky abandoned their Florida homestead and were therefore not entitled to claim homestead exemption under Florida law, not-withstanding debtors' testimony that they intended to sell Kentucky property and that they consid-ered Florida their "domicile," in light of evidence that debtors had attempted to sell Florida property substantially furnished, indicating that their most important belongings were not in Florida home but elsewhere; debtors purchased very expensive home in Kentucky at which debtors spent bulk of their time in months prior to filing for bankruptcy; debtors terminated employment and income in Florida and were associated with racetrack in Kentucky; and debtors had title to Kentucky home and merely land contract interest in Florida home. In re Vaughan (1995, BC ED Ky) 188 BR 234.

Chapter 7 Trustee's objection to debtor's claimed exemption for residential real estate is sus-tained and exemption denied as Indiana exemption statute applies only to property where debtor or dependents actually reside and debtor did not live at property on date of petition and had not for at least three years, two of debtor's daughters occupied property but there was no evidence they were dependents of debtor, the relevant point of inquiry was as of three years ago and the evidence pre-sented related to debtor's current condition, and even if debtor needed around the clock attention, there was no compelling reason why debtor had to receive it at daughter's home rather than his own home. In re Burns (1998, BC ND Ind) 218 BR 897.

Chapter 13 debtor was not entitled to Texas rural homestead in tracts of land near adjacent land on which debtor lived with his mother where, although he stated that he had always planned to build home on particular portion of land in question, he had made no preparations toward such actual oc-cupancy and use. In re Brooks (1999, BC ND Tex) 233 BR 696.

Even though debtor was member in armed forces and not residing at property debtor sought to exempt as homestead, debtor is allowed exemption under 11 USCS § 522(d)(1) where debtor re-sided at property continuously prior to transfer, debtor has not attempted to purchase any other homestead, property is rented by debtor to third party to defray expenses, debtor intends to return to property upon leaving military, and debtor's absence from property is involuntary and compelled. In re Anderson (1999, BC WD Tex) 240 BR 254.

11 USCS § 522(d)(1)'s plain language unambiguously requires actual occupancy at point prior to bankruptcy filing; therefore, debtor was not allowed to use exemption for land that he was preparing to live on in future. In re Gandy (2005, BC SD Tex) 327 BR 807.

Debtor could not claim exemption pursuant to 11 USCS § 522(d)(1) in proceeds from sale of her former residence pursuant to divorce proceedings where she had not lived in residence for eight months prior to petition date, and she had transferred her interest in former residence, and it had been sold almost two months before petition date. In re Boward (2005, BC DC Mass) 334 BR 350.

Debtor's adverse possession cause of action which arose pre-petition was non-exempt property of bankruptcy estate under 11 USCS § 541; only trustee, as representative of estate, had standing to sue on claim, not debtor whose title and homestead exemption under N.Y. Debt & Cred. Law § 282 had been cut off by foreclosure sale. Hopkins v Foothill Mt., Inc. (In re Hopkins) (2006, BC ED NY) 346 BR 294.

Chapter 7 debtor was entitled to avoid, under 11 USCS § 522(f), creditor's entire judicial lien on debtor's one-half interest in three-family residential property of which debtor resided in one unit and rented other two floors because Conn. Gen. Stat. § 52-352b(t) did not require homestead, as defined under Conn. Gen. Stat. § 52-352a, to be used exclusively as debtor's residence and did not require

Page 220 11 USCS § 522

pro-ration of exemption if some portion of property was utilized for other purposes. Majewski v Conn. Natural Gas (In re Majewski) (2007, BC DC Conn) 362 BR 67.

4.Particular Homestead Property 113. Adjacent or appurtenant property

Chapter 7 debtor may not claim homestead exemption, under South Dakota law, in pasture or storage building because properties are not "appurtenant" to debtor's home and have not been inte-gral part of use of debtor's home where (1) pasture and storage barn were neither purchased as part of nor on same date as house purchase, (2) properties are all separately located within city, and (3) horses which are reared on property are not connected to use of home. In re Corbly (1986, BC DC SD) 61 BR 843.

Debtors may, pursuant to 11 USCS § 522(b)(2) and Wisconsin law, claim as homestead exemp-tion parcel of land on which pole shed is located, which adjoins parcel on which residence is lo-cated, even though parcel was formerly used for business purposes and debtors allegedly have no need for additional storage space provided by shed, where it is both implied and expressed intent of debtors to treat and consider parcel as homestead property. In re Mann (1986, BC WD Wis) 82 BR 981.

Fact that parcel of land was acquired at different time than parcel on which residence was lo-cated and for a business purpose does not preclude it from subsequently acquiring nature of home-stead property under 11 USCS § 522. In re Mann (1986, BC WD Wis) 82 BR 981.

Chapter 7 debtors may exempt as homestead 2 contiguous lots which measure less than one-half acre, even though second lot, which is vacant, was acquired in separate transaction, is assessed separately from lot on which residence is located for tax purposes, and was never granted home-stead status for tax purposes; where debtor owns 2 contiguous lots meeting area limitation, one used for residential purposes and other vacant, debtor is entitled to declare both lots exempt unless there is evidence that separate lot is being used for business purposes. In re Dudeney (1993, BC SD Fla) 159 BR 1003, 7 FLW Fed B 275.

Chapter 7 debtors may not exempt home in which they live as well as home they own across street in which debtor husband's father resides under Texas homestead law, although lots are both urban in nature and taken together do not exceed one acre, and even though debtor and father qual-ify as family for purposes of homestead exemption, because homestead is meant to be comprised of only one residence and is not intended to included 2 separate residences located on different lots; debtors offer no authority for proposition that improvements to urban homestead may include sec-ond residence located on separate lot. In re Cate (1994, BC ND Tex) 170 BR 582.

Chapter 7 debtors may not exempt 2 tracts of real property and 2 separate homes located adja-cent to each other under Texas law, although both properties are urban in nature, are located on 2 separate, adjacent lots, were purchased at separate times, and, taken together, do not exceed one acre, and even though debtors find that their marriage is better facilitated by maintaining separate residences, because homestead is intended to be comprised of only one residence; debtors offer no authority for proposition that improvements to urban homestead may include second residence lo-cated on separate lot. In re Nerios (1994, BC ND Tex) 171 BR 224.

114. Burial plot

Release of lis pendens in which parties agreed for allowance of debtor's homestead exemption did not prevent debtor from claiming exemption in burial plot on ground that debtor had previously

Page 221 11 USCS § 522

used homestead exemption, because property which was subject of lis pendens is not real property or personal property that debtor used as residence as required by homestead statute. In re McCoy (1985, BC DC SC) 54 BR 189.

In calculating value of real property for purposes of 11 USCS § 522, mobile home was included in value of real property because, under Tennessee law, it had become fixture, where debtors had maintained mobile home as their primary residence, they connected mobile home to necessary util-ity services, they landscaped property, and any attempt to remove mobile home would have dam-aged it and real property. In re Northern (2003, BC ED Tenn) 294 BR 821.

115. Cooperative

Debtor may claim homestead exemption with respect to cooperative apartment which he left one month before bankruptcy due to marital difficulties, which he believed had detrimental effect on children, but which is occupied by his wife and 2 children. In re Pearlman (1985, BC SD NY) 54 BR 455.

Debtor's interest in cooperative apartment is exempt as homestead under 11 USCS § 522 and Florida law, where apartment is debtor's principal and exclusive residence, debtor's right to use and occupy premises exists in perpetuity, debtor's driver's license and voter's registration list apartment as his permanent address, debtor does not own any other residential property, and State of Florida has expressly defined cooperative apartments as homesteads for ad valorem tax purposes. In re Dean (1995, BC SD Fla) 177 BR 727, 8 FLW Fed B 339.

Chapter 7 debtor's net rental income from six-plex where debtor resided was exempt property under Alaska Stat. § 09.38.030(b) and Alaska Admin. Code tit. 8, § 95.030(d)(2) where bankruptcy court considered income to be liquid asset and amount of income totaled less than amount allowed under statute. In re Shell (2003, BC DC Alaska) 295 BR 129.

116. Farmland

State homestead exemption law, as made applicable by provisions of former 11 USCS § 24, ex-empts only one acre of 13.2 acre tract which had been used as family home and farm when prop-erty, jointly owned by bankrupt and wife, was incorporated in municipality and portions of property used for industrial purposes consistent with zoning of property for heavy industry, despite fact that only major visible use was farming, in view of expert testimony that area gives complexion of in-dustrial area rather than farm. Stafos v Jarvis (1973, CA10 Kan) 477 F2d 369, cert den (1973) 414 US 944, 38 L Ed 2d 168, 94 S Ct 230.

Debtors' farmland became property of estate upon their filing of Chapter 11 petition and land remained property of estate after conversion of case to Chapter 7 without confirmation of reorgani-zation plan; redemption rights that attached to farmland postpetition are property of estate pursuant to 11 USCS § 541(a)(6) as are rental proceeds stemming from those redemption rights; however, 11 USCS § 522(b)(2)(A) does not permit debtors to withdraw postpetition, postconversion farmland rental proceeds from property of estate as exempt property because debtors had no right to rental proceeds under state redemption law at either date of Chapter 11 filing or date of conversion to Chapter 7, regardless of which date controls exemption eligibility, where foreclosure sale took place after Chapter 11 filing and conversion to Chapter 7 and redemption right did not arise until that time; although debtors could properly amend their schedule of exemption, that does not require that

Page 222 11 USCS § 522

newly claimed exemption in rental proceeds be allowed. In re Harris (1989, CA8 ND) 886 F2d 1011, 19 BCD 1415, 21 CBC2d 849, CCH Bankr L Rptr P 73162.

Chapter 11 debtor may properly claim all 129.47 acres of property as rural homestead under Texas law where debtor and her family live in house on property and have used entire farm to grow hay and raise livestock, and debtor is not limited to 15 acres despite Bankruptcy Court's finding that debtor and her husband intended to use only 15 acres, holding rest open for investment and devel-opment and having executed homestead disclaimer that purported to release all of their homestead claims to 114.47 acres, because debtor and her husband never realized their intentions to develop that portion of property. In re Bradley (1992, CA5 Tex) 960 F2d 502, reh, en banc, den (1992, CA5 Tex) 966 F2d 1450 and cert den (1993) 507 US 971, 122 L Ed 2d 783, 113 S Ct 1412 and (criticized in Perry v Dearing (In re Perry) (2002, WD Tex) 289 BR 860) and (criticized in Perry v Dearing (In re Perry) (2003, CA5 Tex) 345 F3d 303, CCH Bankr L Rptr P 78909).

Chapter 11 debtor may claim rural homestead in property under Texas law even though property is located within city limits where, at time debtor began to use her homestead, farm received no util-ity or other municipal services from city. In re Bradley (1992, CA5 Tex) 960 F2d 502, reh, en banc, den (1992, CA5 Tex) 966 F2d 1450 and cert den (1993) 507 US 971, 122 L Ed 2d 783, 113 S Ct 1412 and (criticized in Perry v Dearing (In re Perry) (2002, WD Tex) 289 BR 860) and (criticized in Perry v Dearing (In re Perry) (2003, CA5 Tex) 345 F3d 303, CCH Bankr L Rptr P 78909).

For purposes of Chapter 7 debtor's objection to Bankruptcy Court's limiting homestead exemp-tion to 3 acres and ordering change in zoning from "agricultural" to "residential" to allow her to build residence, which change prevents her from engaging in farm-like activities, once Bankruptcy Court determined that Chapter 7 debtor was not farmer, for purposes of determining how much of her 113 acres she is entitled to exempt, Bankruptcy Court was not required to consider extent to which debtor would be able to continue farming activity. In re Lloyd (1994, CA7 Wis) 37 F3d 271, 31 CBC2d 1786, CCH Bankr L Rptr P 76125.

Wisconsin homestead statute, expressing strong public policy, is liberally construed in favor of debtors. In re Lloyd (1994, CA7 Wis) 37 F3d 271, 31 CBC2d 1786, CCH Bankr L Rptr P 76125.

Asphalt plant, no longer used as such, and shop building, currently used for agricultural pur-poses, are entitled to be classified as farm land. In re Cummings (1983, DC Kan) 40 BR 208.

Tract leased to radio station for transmitter which is located so that partition or severance from farm is impractical is entitled to be classified as farm land. In re Cummings (1983, DC Kan) 40 BR 208.

Protection of Chapter 7 debtor's family and purpose of homestead exemption statutes, both Vermont statute and 11 USCS § 522, are well served by allowing debtor as homestead exemption grist mill building in which family resided, stable, and storage barns with land upon which they stand and used in connection therewith, but house and land which debtor rented cannot be claimed as part of homestead despite debtor's contention that state law prohibited subdivision of property because subdivision is to crucial to protection of homestead exemption; homestead exemption is purely statutory and gives no greater right than statute itself creates and it signifies dwelling house in which family resides. In re Evans (1985, BC DC Vt) 51 BR 47.

Chapter 11 debtor farmers may not claim as homestead 80 acres of land not contiguous to land on which dwelling is located, even though Minnesota statutory limitation that acreage must consist

Page 223 11 USCS § 522

of land upon which dwelling is situated in order to qualify for homestead exemption seems to bear little present reasonable relationship to legislative purpose of protecting livelihood of family farm-ing. In re Priebe (1987, BC DC Minn) 69 BR 100.

Chapter 11 debtors could not claim 2 tracts of land as exempt under Texas homestead law, where debtors were not farming or using either tract for purpose of home at time of filing petition, but instead had leased tracts to third parties. In re Brown (1987, BC ND Tex) 78 BR 486.

Peanut quota allotment assigned to Chapter 7 debtor's farm is not part of real property and is not entitled to protection of homestead laws; improvements to real property are limited to physical addi-tions or alterations to that property and do not include intangibles such as peanut allotments; while peanut quotas by law run with real property to which quotas are allocated, this does not necessarily make them part of real estate or improvements thereon since peanut allotments are benefit created by federal government and can be taken away by same government which created them, and they can be freely sold or raised, subject to compliance with regulations which govern them. In re Jack-son (1994, BC ND Fla) 169 BR 742, 8 FLW Fed B 125.

117. Houseboat

Chapter 7 debtors are entitled to claim houseboat and dock slips as homestead under Kentucky law because: (1) debtors live on houseboat and have no other residence; (2) boat dock slips are real estate to which debtors have properly recorded title; and (3) boat dock slips are integral part of maintaining residence on houseboat by providing necessary utility hookups. In re McMahon (1986, BC WD Ky) 60 BR 632.

Chapter 7 debtors may not exempt 34-foot motorboat on which they reside as homestead ex-emption, where it would be totally unwarranted extension of homestead provision of Florida consti-tution to include boat which was certainly not designed to serve as permanent dwelling for anybody, which is movable chattel but, in this case, not moveable only because Chapter 7 debtors do not have funds to repair motor, since Florida homestead exemption was originally designed to protect family homesite house and realty on which dwelling was situated. In re Major (1994, BC MD Fla) 166 BR 457, 8 FLW Fed B 30 (criticized in In re Mead (2000, BC SD Fla) 255 BR 80, 36 BCD 262, 14 FLW Fed B 11).

Fact that Chapter 7 debtor's use of boat as residence while in dry dock is in violation of state-court order and clearly unlawful under state and local laws does not warrant denial of homestead exemption claimed by debtor pursuant to 11 USCS § 522, where debtor has used boat as residence continuously since 1991, and when, during year preceding bankruptcy filing, debtor by legal proc-ess and involuntarily was required to place boat in dry dock, his homestead rights were not extin-guished, and where allowing debtor exemption based upon his past use of boat will not have effect of encouraging unlawful activity; if there were no state-court order, debtor would lawfully have been entitled to continue to live on boat while afloat from April through November of this year, and in succeeding years. In re Herd (1994, BC DC Conn) 176 BR 312.

34 foot boat berthed at rented dock space qualified for Florida homestead exemption as dwelling house located on land that was not debtor's own but which debtor might lawfully possess. In re Mead (2000, BC SD Fla) 255 BR 80, 36 BCD 262, 14 FLW Fed B 11 (criticized in In re Christie (2003, BC MD Fla) 2003 Bankr LEXIS 26).

118. Mobile home

Page 224 11 USCS § 522

Under Mississippi opt-out provisions, permanent structure on property used for residential pur-poses is not necessary precondition of valid homestead exemption in proceeds of sale of such prop-erty; as general rule, house trailer is type of property sufficient to support homestead where it is af-fixed to ground. In re Williamson (1988, CA5 Miss) 844 F2d 1166, CCH Bankr L Rptr P 72303.

Under opt-out legislation enacted pursuant to 11 USCS § 522, purpose of Illinois homestead ex-emption is to protect and provide shelter for debtor's family and thus mobile home may be within homestead exemption if debtor intended to affix permanently mobile home to realty; where Chapter 7 debtor had resided in mobile home for 14 years and utilities had been connected to home, mobile home is within homestead exemption even if home's wheels had not been removed and home placed on permanent foundation. In re Matthews (1984, ND Ill) 43 BR 466.

Debtor cannot place mobile home within state homestead exemption statute and automobile within state motor vehicle exemption statute for purposes of claiming large exemptions and addi-tionally, for purposes of avoiding nonpossessory, nonpurchase money lien, try to fit these items within purview of 11 USCS § 522 by claiming they are held primarily for personal or family use; neither debtor's mobile home nor automobile are types of exempt property subject to avoidance un-der § 522 and creditor's liens on debtor's mobile home and automobile are good and valid liens to extent that they do not impair debtor's interest in property as provided by § 522. In re Moore (1980, BC SD Ohio) 5 BR 669.

Chapter 7 debtors' mobile home is "building" for homestead exemption purposes under former Illinois homestead law where it has been in place for 7 years and is functionally attached to land by utility connections and other means and this is true despite contract language specifically stating that it is to be personal property, not real property, because that provision is, in reality, device de-signed to waive debtors' homestead exemption rights and clause is invalid as waiver of real property homestead exemption under Illinois law because debtors did not sign any document waiving their homestead rights. In re Hockinson (1986, BC ND Ill) 60 BR 250.

Mobile home may qualify as homestead even though it has not been converted to real property under state law. In re Melvin (1986, BC WD Mo) 64 BR 104.

Even though complaint seeking avoidance of preferential transfer of mobile home from Chapter 7 debtor to father seeks judgment in amount of $ 5,500, judgment will be entered for $ 6,500 where fair market value of mobile home is $ 7,000 and father credited debtor's account in amount of $ 6,500 as result of transfer. In re Albers (1986, BC ND Ohio) 67 BR 530.

Where mobile home is permanently affixed to Chapter 13 debtor's real property, which itself is secured by mortgage, mobile home becomes part of real property, and question under Alabama homestead exemption is whether or not debtor properly alienated homestead in mortgage, which debtor did do, not whether or not debtor waived homestead exemption as to mobile home as per-sonal property; thus mortgagee finance company is secured to value of real property and mobile home by terms of mortgage on real property. In re Carroll (1986, BC ND Ala) 67 BR 1020.


Chapter 7 debtor cannot claim exemption in mobile home and property on which it is situated under Oregon opt out exemption statute where statute allows such exemption only if mobile home

Page 225 11 USCS § 522

was situated on property at time of filing, and in this case, mobile home was not situated on prop-erty at time of original Chapter 11 filing, but only at time of conversion to Chapter 7; nevertheless, debtor will be able to claim exemption in property under separate exemption statute allowing ex-emption in real property that is sole abode of debtor or debtor's child, even if such is not case at time of filing, provided that no other homestead exemption is available. In re Thurmond (1987, BC DC Or) 71 BR 596, CCH Bankr L Rptr P 71736.

Under Missouri opt-out exemptions, Chapter 7 debtor may exempt $ 1,000 of value of mobile home used as principal residence, even though debtor owns no real estate and rents pad upon which home is situated. In re Kelly (1988, BC ED Mo) 85 BR 832, 4 BAMSL 4146.

Under Missouri opt-out exemptions, Chapter 7 debtor may not exempt mobile home as home-stead property where (1) home has not been converted to realty; and (2) debtor owns no real estate and rents pad upon which home is situated. In re Kelly (1988, BC ED Mo) 85 BR 832, 4 BAMSL 4146.

Chapter 7 debtors motor home is in effect "mobile home" which may be exempted as their homestead under Florida law, although physical design better fits within definition of "motor home," rather than "mobile home," where debtors are using motor home as their residence, they pay rent to park in which it sits and park provides it with electricity, water, and sanitary waste removal, debtors do not drive motor home and could not drive it since it has no current license plate or regis-tration, and in effect debtors use it as "mobile home," not "motor home." In re Mangano (1993, BC SD Fla) 158 BR 532, 29 CBC2d 1389, CCH Bankr L Rptr P 75479, 7 FLW Fed B 246.

Chapter 7 debtor's motor home may be claimed as exempt under Florida's homestead exemp-tion, where motor home has characteristics of permanency, including permanent hookup for sewer, electric, cable TV, and telephone; purpose of homestead exemption is to preserve dwelling place or residence of citizens from forced sale to satisfy claims of creditors. In re Bubnak (1994, BC MD Fla) 176 BR 601, 8 FLW Fed B 322.

Where bankruptcy court determined that debtors did not abandon their home that was located in Bismarck, North Dakota (Bismarck home) simply by relocating to Medora, North Dakota, where relocation was temporary and necessary for debtors to manage their business which was located in that city, debtors could not also claim as exempt under N.D. Cent. Code § 28-22-02(10) mobile home in which they lived while managing their business; debtors own testimony confirmed that they never intended to change their residence from Bismarck to Medora and moreover, mobile home was not winterized and could not have been inhabited during winter months. In re Morlock (2006, BC DC ND) 364 BR 684.

In 11 USCS § 522 exemption matter, bankruptcy appellate panel agreed with Chapter 7 debtor and found that Utah's homestead statute did not require owner of mobile home to own land in order to claim exemption in mobile home; reversal was warranted. Carlson v Diaz (In re Carlson) (2004, BAP10) 303 BR 478.

119. Miscellaneous

Debtor may not transfer homestead exemption of 11 USCS § 522 from one parcel of land to an-other where creditor filed judgment lien on second parcel of property prior to debtor's bankruptcy action and transfer would prejudice creditor's secured interest. Chariton Feed & Grain, Inc. v Kin-ser (1986, CA8 Iowa) 794 F2d 1329, CCH Bankr L Rptr P 71228.

Page 226 11 USCS § 522

Chapter 7 debtors' designation of ranch as homestead automatically terminated his right to ex-empt proceeds from sale of previous homestead and triggered his right to exempt new homestead. In re England (1992, CA5 Tex) 975 F2d 1168, CCH Bankr L Rptr P 74979.

California homestead exemption includes proceeds of malpractice claim for attorney negligence resulting in loss of homestead rights as "indemnification for damage or destruction" of homestead. Haaland v Corporate Management (1989, SD Cal) 172 BR 74.

Homestead exemption applies to Chapter 7 debtor's home after remarriage, not to house occu-pied by debtor and his former spouse, whose lien debtor seeks to avoid. In re Robinson (1990, DC Colo) 114 BR 716.

Usage of rural homestead for purpose of shelter and comfort is sufficient usage to support rural homestead claim under Texas law, and there is no requirement in either Texas Constitution or rele-vant statutes which obligate rural homestead claimant to derive economic support from land claimed as homestead; rural homestead claimant must merely prove that land is rural in character and that claimant intends to use it as home. In re McCain (1993, ED Tex) 160 BR 933.

If surface land is exempt homestead under Kansas law, surface landowner's mineral interest ownership and surface landowner or lessor's unaccrued royalty interest in unsevered oil and gas pursuant to oil and gas lease is part of homestead and is also exemptable in bankruptcy proceeding under 11 USCS § 522. In re Thexton (1984, BC DC Kan) 39 BR 367.

Under Texas state exemption provisions, Chapter 7 debtor cannot claim homestead exemption in oil, gas, and other minerals in which he has 1/2 interest, where minerals are under land adjoining property that debtor owns in fee, but are not in property that debtor owns. In re Poer (1987, BC ND Tex) 76 BR 98.

Chapter 11 debtors' beach house which they occupied only sporadically during summer months is not their "residence" and thus their interest in property cannot be claimed as exempt under 11 USCS § 522(d)(1). In re Tomko (1988, BC ED Pa) 87 BR 372, 19 CBC2d 16, CCH Bankr L Rptr P 72376.

Purpose of 11 USCS § 522(d)(1) is to provide those debtors eligible to select federal exemptions with homestead exemption, and term "residence" must be interpreted in that light; whether real property constitutes residence is dependent upon facts of case but vacation homes which involve seasonal, sporadic occupancy generally do not fall within protection of state homestead laws. In re Tomko (1988, BC ED Pa) 87 BR 372, 19 CBC2d 16, CCH Bankr L Rptr P 72376.

Chapter 7 debtor's leasehold interest in residence pursuant to long-term ground lease of public land is ownership interest sufficient to satisfy requirements of Florida's homestead exemption from forced sale and therefore objection to exemption as homestead property is denied, despite creditor's argument that because debtor has only leasehold interest in his residence he can claim homestead exemption of only $ 1,000 for personal property, where both Florida supreme court and legislature have characterized long-term leasehold interests as real property interests rather than personal prop-erty interests. In re McAtee (1993, BC ND Fla) 154 BR 346, 7 FLW Fed B 113.

Chapter 7 debtor's motor home may be claimed as exempt under Florida's homestead exemp-tion, where motor home has characteristics of permanency, including permanent hookup for sewer, electric, cable TV, and telephone; purpose of homestead exemption is to preserve dwelling place or

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residence of citizens from forced sale to satisfy claims of creditors. In re Bubnak (1994, BC MD Fla) 176 BR 601, 8 FLW Fed B 322.

Where involuntary Chapter 7 debtors exercise their rights pursuant to 11 USCS § 303(f) during gap period between filing of involuntary petitions and order for relief and commence improvements to homestead, they are entitled to claim as exempt for purposes of 11 USCS § 522(b)(2)(A) im-provements commenced during gap period, and funds deposited with builder for improvements are exempt under Kansas law. In re Hodes (1999, BC DC Kan) 235 BR 104, affd (2002, DC Kan) 287 BR 561, affd (2005, CA10 Kan) 402 F3d 1005, CCH Bankr L Rptr P 80262.

Because separating real property which was subject of debtors' claim of homestead exemption under 11 USCS § 522(b)(2), Ark. Code Ann. § 16-66-217 (Supp. 2001), Ark. Const. art. 9, § 5, into exempt and non-exempt parcels would be unlawful subdivision, Arkansas bankruptcy court ordered sale of property and would later allocate proceeds between trustee and debtors according to each parties' interest. In re Bradley (2002, BC WD Ark) 282 BR 430, affd (2003, BAP8) 294 BR 64, 50 CBC2d 318, CCH Bankr L Rptr P 78867.

Bankruptcy debtors' limited occupancy of timeshare for brief period each year, coupled with lack of any intent or ability to use timeshare as permanent residence, precluded timeshare from be-ing deemed homestead under Florida law and thus precluded residence exemption under 11 USCS § 522(d)(1). In re Brown (2003, BC ND Tex) 299 BR 425.

5.Particular Homestead Exemptions 120. Federal homestead exemption

Debtor's lien interest in former marital residence, along with other charges upon land for pay-ment of debt or duty that debtor might possess, do not qualify as aggregate interest in real property or personal property qualifying for exemption under 11 USCS § 522(d)(1); bankruptcy appellate panel erred when it affirmed allowance of debtor's exemption claim because claim was based upon lien against his former marital residence that debtor was awarded in divorce decree, neither debtor nor his dependents used lien as their residence; under state law, lien was merely collateral for debt and did not represent continuation of debtor's common ownership of marital estate, and debtor's mere collateral interest in his former marital residence did not rise to level of homestead right under § 522(d)(1). Keller v Johnson (In re Johnson) (2004, CA8 Minn) 375 F3d 668, CCH Bankr L Rptr P 80127.

Federal homestead exemption permits debtor to claim homestead exemption in both realty and personalty. In re Ladd (1982, BC DC Me) 21 BR 579, 34 UCCRS 1442.

Fact that 11 USCS § 522(m) allows separate federal homestead exemptions to debtors in joint case does not conflict with state provision of allowing only one homestead exemption to joint debt-ors; under New York law, each joint debtor may claim same homestead exemption separately for same real property, but value of exemption is not cumulative; same value may be used by either spouse as often as is necessary against his or her creditors, but when real property is sold at forced sale only one homestead exemption is available to joint debtors from proceeds of sale. In re Brooks (1983, BC SD NY) 31 BR 302, 10 BCD 1051, 8 CBC2d 1082.

In reopened Chapter 7 case filed prior to Colorado's opting out of federal exemption scheme, 11 USCS § 522(d)(1) controls, thus debtor may only exempt up to $ 7,500 of her equity in homestead and may not avoid judicial liens beyond that amount and liens to attach to remaining equity over amount of exemption. In re Palmquist (1985, BC DC Colo) 54 BR 24.

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Although federal homestead exemption should be liberally construed in favor of Chapter 7 debtor, debtor must have interest in property before exemption will be allowed. In re Russell (1987, BC DC Vt) 80 BR 662.

Bankruptcy court had previously found that even if debtor had established domicile in New Hampshire while debtor lived there during 2000, debtor's return to New Jersey residence at end of operation of seasonal business evidenced domicile change back to New Jersey, and court would reach same conclusion as to "residence;" thus, prior ruling established that as of end of 2000, debtor either had not established property as debtor's residence or had abandoned it as debtor's residence, but it was not clear if debtor may have established residence at property for purposes of 11 USCS § 522(d)(1) in 2001 just before bankruptcy filing, and thus prior ruling did not preclude debtor from claiming exemption under § 522(d)(1). In re Marsico (2002, BC DC NH) 2002 BNH 15, 278 BR 1.

121. California

Under California homestead exemption, when Chapter 7 debtor fails to reinvest homestead pro-ceeds within period of 6 months in which debtor has control of those proceeds, proceeds revert to Chapter 7 trustee; because debtor had full control of proceeds from time of sale of his residence un-til trustee commenced action, which was longer than 6-month period exemption period was not tolled from time debtor filed his petition. In re Golden (1986, CA9 Cal) 789 F2d 698, CCH Bankr L Rptr P 71125.

Bankruptcy debtors in California may claim California homestead exemption. Kendall v Plad-son (In re Pladson) (1994, CA9 Cal) 35 F3d 462, 94 CDOS 7044, 94 Daily Journal DAR 12899, CCH Bankr L Rptr P 76094.

Chapter 7 debtors' entire house could not be exempted under California homestead exemption because statute merely gives debtors right to specified amount of money after forced sale, but it does not give debtors absolute right to retain homestead itself; while another exemption statute does, under certain circumstances, prevent trustee from selling debtors' homestead, it does so only when bids received at sale are less than sum of all liens and encumbrances on property plus amount of debtors' homestead exemption; thus, nothing in California exemption statutes precludes trustee from proceeding with forced sale, even if debtors' valuation of their home suggests that no equity is available for creditors; trustee is merely barred from completing sale if no bids above minimum threshold are received. Bernard v Coyne (In re Bernard) (1994, CA9 Cal) 40 F3d 1028, 94 CDOS 8793, 94 Daily Journal DAR 16364, 32 CBC2d 508, CCH Bankr L Rptr P 76206, cert den (1995) 514 US 1065, 131 L Ed 2d 559, 115 S Ct 1695.

California's conflict of law principles were irrelevant in determining applicability of California homestead exemption to debtor's Michigan house since plain language of 11 USCS § 522(b)(2)(A) points to state's exemption laws, not its conflict of law rules; California exemption statute permitted debtor to claim exemption for residence located in Michigan. Arrol v Broach (In re Arrol) (1999, CA9 Cal) 170 F3d 934, 41 CBC2d 995, CCH Bankr L Rptr P 77913 (criticized in In re Drenttel (2003, BC DC Minn) 302 BR 26).

Court of Appeals for Ninth Circuit overruled its decision in Jones v. Heskett (In re Jones), 106 F.3d 923 (9th Cir. 1997) and found, consistent with intervening California case law, that judgment creditor is entitled to surplus equity that accrues in declared homestead after abstract of judgment is recorded. Wolfson v Watts (In re Watts) (2002, CA9 Cal) 298 F3d 1077, 2002 CDOS 7076, 2002 Daily Journal DAR 8862, 49 CBC2d 190.

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Debtor's homestead declaration is not rendered invalid by fact that it is technically defective for failure to execute separately that portion of document which recites that facts stated are within per-sonal knowledge of declarant since addition of required language is mere surplusage to statements in declaration of homestead and legislative intent would be defeated if declaration of homestead were found to be unenforceable. In re Williams (1986, BC SD Cal) 58 BR 114.

Chapter 7 debtors may not, under 11 USCS § 522(f), avoid liens encumbering their alleged homestead exemption in order to facilitate voluntary sale of homestead, because California home-stead law exempts proceeds from sale only where there is forced judicial sale; liberal construction of California homestead exemption statute does not give license to Bankruptcy Court to rewrite California law. In re Knudsen (1987, BC CD Cal) 80 BR 193.

Under California homestead exemption, conveyance by Chapter 7 debtors of title to property to third party, 6 months after the debtors recorded declaration of homestead on that property, de-stroyed any homestead interest they had in property, even though debtors continued to live there; upon retransfer of property to debtors after escrow had been entered into to sell this property, decla-ration of homestead was not automatically resurrected, and thus no homestead exemption attached to proceeds from transfer. In re Knudsen (1987, BC CD Cal) 80 BR 193.

Under California law, dwelling exemption for real property owned in fee simple is automatic--nothing has to be recorded--but dwelling exemption only applies to involuntary or forced sale of homestead; Chapter 7 trustee's objection to claimed exemption is tantamount to motion to sell be-cause, if sustained, dwelling property may be sold with or without debtors' consent, and sale of property by trustee would be involuntary or forced sale. In re Yau (1990, BC CD Cal) 115 BR 245.

To claim dwelling exemption successfully under California law upon forced or involuntary sale, debtor or his spouse must have continuously resided at dwelling from date of creditor's lien attach-ment until date court determines dwelling is homestead; only when there is temporary absence from dwelling, such as vacation or hospital stay, does debtor who vacates dwelling satisfy continuous residency requirement. In re Yau (1990, BC CD Cal) 115 BR 245.

Properly recorded declaration of homestead under California law does not automatically entitle debtor to benefits of dwelling exemption, it only adds benefits to dwelling exemption; after debtor properly qualifies independently for dwelling exemption, upon declaration exempt proceeds from voluntary sale are protected, judgment liens do not attach to equity protected by declared homestead exemption, and protection of homestead against attachment of judgment liens may continue upon death of homestead owner; thus, recording of valid homestead declaration gives debtor further ad-vantage of obtaining priority for dwelling exemption over judgment lien where debtor records valid homestead declaration before judgment is recorded; because declared homestead only adds benefits to dwelling exemption, continued residency requirement must be met before debtor can obtain benefits of declared homestead. In re Yau (1990, BC CD Cal) 115 BR 245.

Creditor whose claim had been held nondischargeable under 11 USCS § 523(a)(2) was barred by 11 USCS § 522(c) from enforcing its judgment against residence which Chapter 7 debtor had claimed as exempt and which had revested in debtor on closing of case even if residence had appre-ciated in value to point there was some equity above amount allowable under California homestead laws. S & C Home Loans, Inc. v Farr (In re Farr) (1998, BC ND Cal) 224 BR 438, 40 CBC2d 915.

In determining "gross annual income" under Cal. Code Civ. Proc. § 704.730(a)(3)(C), where debtor had interest in S corporation whose primary business was providing services (as opposed to

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business that required purchase of inventory, so it made sense to deduct "cost of goods sold"), debtor was not allowed to deduct his share of corporation's losses from his gross income; bank-ruptcy court found support for its position in Cal. Fam. Code § 4058, governing child support obli-gations, which made distinction between income based on commissions, salaries and royalties and income from business that required actual expenditures for its operation. In re Sweitzer (2005, BC CD Cal) 332 BR 614.

Chapter 7 trustee's motion to limit debtors' California homestead exemption to $ 75,000 is de-nied and debtors are permitted $ 100,000 exemption since trustee failed to prove their gross income in year before bankruptcy filing exceeded $ 20,000, despite debtors' high expenses and large pay-ments to creditors prepetition. Shelley v Kendall (In re Shelley) (1995, BAP9 Cal) 184 BR 356, 95 CDOS 5654, 95 Daily Journal DAR 9605, adopted, affd (1997, CA9) 110 F3d 68, reported at (1997, CA9) 109 F3d 639, 97 CDOS 2162, 97 Daily Journal DAR 4007.

Bankruptcy court misapplied 11 USCS § 522(c) in invalidating creditor's lien in its entirety be-cause debtor's exemption under California statute was limited to $ 100,000, as debtor had claimed; 11 USCS § 522(c) did not prevent creditor from satisfying its lien from available nonexempt equity, under state law. S & C Home Loans, Inc. v Farr (In re Farr) (2002, BAP9) 2002 Bankr LEXIS 535, reprinted as amd (2002, BAP9) 278 BR 171, 2002 CDOS 4410, 2002 Daily Journal DAR 5731, 48 CBC2d 586.

Where debtor claimed $ 100,000 homestead exemption under California law in bankruptcy pro-ceeding, debtor could not later claim full equity value of residence as exempt under 11 USCS § 522(c) against claim of prepetition judgment lien creditor. S & C Home Loans, Inc. v Farr (In re Farr) (2002, BAP9) 278 BR 171, 2002 CDOS 4410, 2002 Daily Journal DAR 5731, 48 CBC2d 586.

Homestead exemption rights of registrants under Cal. Fam. Code § 297.5, California's Domestic Partner Rights and Responsibilities Act of 2003, were identical to those of people who were mar-ried, which was single combined exemption; registered domestic partners could not each claim full, separate homestead exemption under Cal. Code Civ. Proc. § 704.730(a)(2) when both filed bank-ruptcy. Rabin v Schoenmann (In re Rabin) (2006, BAP9) 359 BR 242, CCH Bankr L Rptr P 80822.

122. Florida

Florida constitution exempted Florida homestead, where debtor acquires homestead using non-exempt funds with specific intent of hindering, delaying, or defrauding creditors in violation of Florida statutes. Havoco of Am., Ltd. v Hill (2001, CA11 Fla) 255 F3d 1321.

Husband and wife who lived separately could both claim Florida homestead exemption, where appellee failed to come forward with evidence that its claim fell within one of enumerated excep-tions in Article X, § 4 of Florida Constitution or that debtors maintained separate domiciles in an-ticipation of defrauding creditors. Colwell v Royal Int'l Trading Corp. (In re Colwell) (1998, SD Fla) 226 BR 714, affd (1999, CA11 Fla) 196 F3d 1225, CCH Bankr L Rptr P 78041, 13 FLW Fed C 158, reh, en banc, den (2000, CA11 Fla) 209 F3d 726.

Under Florida's Constitution, lien did not fix on Florida exempt homestead property and was therefore not avoidable under 11 USCS § 522(f)(1)(A); nor did it impair debtor's exemption "to which he would have been entitled but for lien itself," under federal law. Cannon v Cannon (2000, SD Fla) 254 BR 773, 45 CBC2d 459.

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Alien with B-1 visa, permitting operation of business but not permanent residency, cannot claim Florida homestead exemption in Chapter 7 case, because lack of possession of permanent visa makes legally impossible formation of intent to remain in Florida permanently or to have family reside in Florida permanently, either of which is prerequisite for invocation of homestead exemp-tion in residence. In re Gilman (1986, BC SD Fla) 68 BR 374.

Chapter 7 debtors' down payment of $ 66,043.59 cash on purchase of residence less than ten months before their bankruptcy filing, which resulted in approximately $ 65,000 of equity in resi-dence, constituted transfer of non-exempt assets to exempt assets with intent to hinder, delay, or de-fraud debtors' creditors, thus forfeiting debtors' homestead exemption under Florida law to extent of their use of non-exempt assets to purchase residence, where circumstances of case made it apparent that debtors undertook well considered and carefully orchestrated series of maneuvers for purpose of shielding their assets from creditors; in addition, fact that debtors had foresight to begin process of transferring assets approximately 18 months prior to filing did not alter conclusion that debtors improperly shielded their assets from creditors. In re Bandkau (1995, BC MD Fla) 187 BR 373 (criticized in In re Young (1999, BC MD Fla) 235 BR 666, 12 FLW Fed B 249).

Debtor was entitled under Florida law to claim homestead exemption for house even though he and his former wife, who also resided there, planned to sell it and debtor kept most of his personal property in storage, since debtor's intent to reside there permanently was evidence by his actually moving into house and using it as his residence. In re Wilbur (1997, BC MD Fla) 206 BR 1002, CCH Bankr L Rptr P 77355, 10 FLW Fed B 281.

Debtor's homestead exemption claim was properly limited to only structure in which they re-sided and surrounding area no larger than 1.25 acres, rather than to entire property made up of con-tiguous parcels with different addresses and other structures which defendants rented; Florida Con-stitution's provision of homestead exemption applies to rural as well as municipal homesteads. In re Pietrunti (1997, BC MD Fla) 207 BR 18, 10 FLW Fed B 275.

Until Supreme Court of Florida determines equitable considerations may be taken into consid-eration and recognized as additional exception to immunity of homestead, Bankruptcy Court is in-clined to find that debtor's homestead is exempt from claims of creditors inasmuch as conversion of nonexempt assets to homestead with intent to hinder, delay or defraud creditors is not exception to Florida homestead exemption; since there was no contention in instant case that debtor used fraudu-lently-obtained funds to acquire homestead, objection to claimed exemption would be overruled. In re Lazin (1998, BC MD Fla) 221 BR 982 (criticized in In re Tabone (2000, BC MD Fla) 247 BR 541, 35 BCD 279, 13 FLW Fed B 148).

Florida homestead exemption extended only to portion of property used by Chapter 7 debtor as his residence and did not include any portion rented to and occupied by third party. In re Nofsinger (1998, BC SD Fla) 221 BR 1018, 11 FLW Fed B 322.

Chapter 7 debtor was entitled to Florida homestead exemption in seasonal vacation property which he had conveyed, without consideration, to his sister and brother-in-law in order to place it outside reach of his creditors where creditor was unable to establish that vacation property was not debtor's homestead prior to date on which it recorded its judgment against debtor since (1) debtor had reconveyed property to himself prior to that date, (2) debtor also prior to that date recorded war-ranty deed, applied for homestead tax exemption, and changed his driver's license to county in which vacation property was located, and (3) debtor moved into mobile home on vacation property;

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fact that debtor's conveyance of property to his sister and brother-in-law was made with intent to defraud creditors was not basis for denying debtor's homestead claim. In re Lee (1998, BC MD Fla) 223 BR 594 (criticized in In re Tabone (2000, BC MD Fla) 247 BR 541, 35 BCD 279, 13 FLW Fed B 148).

Chapter 7 debtor did not lose entitlement to Florida homestead exemption by conducting busi-ness on homestead property. In re Nelson (1998, BC SD Fla) 225 BR 508.

Chapter 7 debtor was entitled to Florida homestead exemption only as to portion of duplex used as his residence and not as to portion of duplex which was rented out. In re Oliver (1998, BC MD Fla) 228 BR 771, 12 FLW Fed B 97.

Motion to avoid judicial lien pursuant to 11 USCS § 522(f)(1) is granted since real property was claimed and allowed as exempt, debtor owned property at time of commencement of case and still owns it although it is on the market, and homestead is tenancy by entireties property which judg-ment cannot reach under Florida law since judgment is against debtor alone and not spouse. Ban-deras v Doman (In re Banderas) (1999, BC MD Fla) 236 BR 849, 12 FLW Fed B 260.

Chapter 7 debtor's home is exempt from claims of creditors under 11 USCS § 522(b)(2)(B) since debtor owns property as tenant by entireties, no joint creditors exist, and tenancy by entireties prop-erty is exempt under Florida law; despite Trustee's contention debtor converted non-exempt assets into exempt assets with intent to hinder, delay, and defraud creditors, debtor is still entitled to ex-empt property although Trustee may pursue avoidance action under 11 USCS § 548. In re Hendricks (1999, BC MD Fla) 237 BR 821, 42 CBC2d 851, 12 FLW Fed B 329 (criticized in In re Tabone (2000, BC MD Fla) 247 BR 541, 35 BCD 279, 13 FLW Fed B 148).

11 USCS § 522(f)(1)(A) was applicable to real property protected by Florida's homestead ex-emption; debtor successfully avoided judicial lien, arising out of dissolution proceedings, which impaired his homestead exemption, where lien secured payment of award not in nature of alimony, maintenance, or support. In re Lowe (2000, BC MD Fla) 250 BR 422, 13 FLW Fed B 259 (criticized in Cannon v Cannon (2000, SD Fla) 254 BR 773, 45 CBC2d 459).

Chapter 13 debtors were entitled to claimed Florida homestead exemption even though they had constructed eight-car garage on homestead property and had earned income from use of garage; fact that debtors earned income from use of facilities located on real property within constitutionally-sanctioned area limitations claimed as their homestead did not, in and of itself, entitle creditors to partition income producing property from non-income producing property. In re Haning (2000, BC MD Fla) 252 BR 799, 13 FLW Fed B 289.

Chapter 7 bankruptcy debtor's motion to avoid pre-bankruptcy judgment based on argument that judgment impaired her homestead interest was denied because under Fla. Const. art. 10, § 4(a)(1) judgment did not attach to debtor's homestead interest and because 11 USCS § 522(f) only applied to situations in which state or federal exemption limited dollar amount of property that could be ex-empted; in Florida, value debtor could place on her homestead exemption was not limited. In re Ep-stein (2003, BC SD Fla) 298 BR 917, 16 FLW Fed B 247.

11 USCS § 303(i) does not trump constitutional protection of Florida homestead of debtor under Fla. Const. art. X, § 4; thus, where Michigan bankruptcy court, prior to debtor filing for relief under Chapter 11, found debtor liable under § 303(i) for money damages for filing bankruptcy petition against creditor in bad faith and ordered that home debtor purchased in Florida did not qualify as

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homestead, order was not binding on Florida bankruptcy court and did not operate as res judicata. In re Adell (2005, BC MD Fla) 321 BR 562, 18 FLW Fed B 144.

Chapter 11 debtor established his bona fide residence in state and was entitled to homestead ex-emption under Fla. Const. art. X, § 4 where debtor purchased home in state more than 180 days prior to filing bankruptcy petition, moved into home on purchase date, registered his car in state, obtained state driver's license, registered to vote, opened and maintained bank accounts in state, and started new business venture in state. In re Adell (2005, BC MD Fla) 321 BR 562, 18 FLW Fed B 144.

State debtor who met legal requirements for claiming homestead exemption for his state resi-dence, pursuant to Fla. Const. art. X, § 4, and 11 USCS § 522, was entitled to that protection and Chapter 7 discharge, pursuant to 11 USCS § 727, even though property was purchased with his pro-ceeds from what was eventually found to be Ponzi scheme; there was no evidence of any wrongdo-ing or fraudulent transfer to debtor. Neilson v Laing (In re Laing) (2005, BC MD Fla) 329 BR 761, 18 FLW Fed B 352.

Debtor's homestead exemption claimed under Fla. Stat. ch. 222.20 was subject to statutory cap of $ 125,000 set forth in 11 USCS § 522(o), (p), (q), added by Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, and that applied to all bankruptcy cases filed after April 20, 2005; statutory cap applied even to those exemptions made under state "opt-out" provision such as Fla. Stat. cn. 222.20 In re Kaplan (2005, BC SD Fla) 331 BR 483, CCH Bankr L Rptr P 80369, 18 FLW Fed B 419.

Provisions of Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, set forth in 11 USCS § 522(b) and (p), applied to State homestead exemption claimed through Fla. Cons. art. X, § 4, even if State was considered "opt out" state as set forth in Fla. Stat. ch. 222.20. In re Wayrynen (2005, BC SD Fla) 332 BR 479, CCH Bankr L Rptr P 80391.

Where debtor had not obtained permanent resident status or "green card" as of date he filed his Chapter 7 petition, he did not fulfill residency requirement as of petition date and thus could not claim homestead exemption under Florida law; fact that debtor intended to make this home his per-manent residence was insufficient because without his green card, debtor could not legally formu-late requisite intent to make house family's permanent residence, regardless of debtor's subjective intention to remain indefinitely. In re Fodor (2006, BC MD Fla) 339 BR 519.

Debtor's exemption was limited to $ 125,000 where, although debtor held equitable ownership interest in subject property located in state, which would have supported his homestead claim, sub-ject property was not his principal residence until he moved to state six months prior to com-mencement of his Chapter 7 case; limitation on homestead exemption in 11 USCS § 522(p) applied in state notwithstanding unlimited homestead exemption guaranteed by Fla. Const. art. X, § 4. In re Buonopane (2006, BC MD Fla) 344 BR 675, CCH Bankr L Rptr P 80657, 19 FLW Fed B 327.

Debtor's motion, pursuant to 11 USCS § 522(f)(1)(A), to avoid judgment lien as impairing her homestead exemption was denied because recording of certified copy of final judgment against debtor in county where her real property was located did not create lien under state law. In re Pearl-stein (2006, BC SD Fla) 349 BR 317, 19 FLW Fed B 398.

Cap of $ 125,000 under 11 USCS § 522(p) did not limit debtor's claim of exemption based on his ownership of homestead property as tenancy by entirety; therefore, Chapter 7 trustee's objection

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to claimed homestead exemption under Fla. Const. art. X, § 4 was overruled. In re Buonopane (2007, BC MD Fla) 359 BR 346, 20 FLW Fed B 233.

Florida real property owned by Florida-domiciled debtor is exempt from administration as prop-erty of estate regardless of when debtor became Florida domiciliary if debtor had, immediately be-fore commencement of case, interest in that property held in tenancy by entireties with spouse, and there is no difference under 11 USCS § 522(b)(3)(B) whether property at issue was real property or personal property. Once property is held in tenancy by entireties in Florida by Florida domiciliary, that property is immune from execution under Florida law and exempt under § 522(b)(3)(B). Tolz v Robedee (In re Robedee) (2007, BC SD Fla) 367 BR 901, 20 FLW Fed B 419.

123. Iowa

Antecedent debt exception to state homestead exemption statute limiting homestead exception when debtor has incurred debt prior to acquisition of homestead is enforceable in Bankruptcy Court under 11 USCS § 522(b) where Chapter 7 debtor purchases new home while indebted to mortgagee of first home and amount of such debt exceeds value of collateral and there is no other nonexempt property from which debt can be satisfied; failure to obtain exemption of homestead under such cir-cumstances cannot be avoided by invoking trustee's avoidance powers under 11 USCS § 522(f) in order to avoid foreclosure judgment lien since trustee's power of avoidance is contingent on whether property is exempt in first place. In re Ellingson (1986, ND Iowa) 82 BR 88.

Under Iowa opt-out provisions, Chapter 7 debtors may claim homestead exempt to extent it is not necessary to satisfy deficiency in judgment acquired prior to acquisition of homestead, upon liquidation of other property subject to execution; exemption may not be claimed to extent defi-ciency exists. In re Nehring (1988, BC SD Iowa) 84 BR 571.

11 USCS § 522(c) does not preempt Iowa homestead exemption law, and, therefore, trustee's ob-jection to debtor's homestead exemption was sustained to extent antecedent debts were not satisfied after other property of debtors subject to execution was exhausted. In re Norkus (2000, BC SD Iowa) 256 BR 298.

Where debtors were residents of Iowa and claimed homestead was located in that state, applica-ble law for determining whether there was valid homestead exemption was not 11 USCS § 522(b) because state had specifically opted out of federal exemption scheme as set forth in Iowa Code § 627.10. In re Allen (2002, BC SD Iowa) 301 BR 55.

11 USCS § 522(e) rendered waiver of homestead exemption unenforceable as matter of federal law where debtor signed contract of guarantee that included waiver of homestead exemption, but language was insufficient to have constituted waiver under Iowa Code § 561.21(2); creditor's judg-ment lien never attached and creditor held only unsecured claim. Hebert (2003, BC ND Iowa) 301 BR 19, 50 CBC2d 1672.

Statement in contract of guarantee that debtor waived benefit of all homestead exemption laws was ineffective to waive debtor's homestead exemption under Iowa Code § 561.21(2) because it did not "expressly stipulate" that homestead would be liable for debt; because waiver provision was un-enforceable under state law, debtor's homestead was exempt on date that creditor obtained judgment against debtor and judgment lien did not attach to debtor's homestead. Hebert (2003, BC ND Iowa) 301 BR 19, 50 CBC2d 1672.

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Unpublished Opinions

Unpublished: Where Chapter 7 debtor was managing member and sole member of New Hamp-shire limited liability company (LLC), debtor was entitled to summary judgment in action brought by creditors of company, which objected to debtor's discharge of debt owed to them by debtor's company, because record did not raise material factual dispute that there had been injustice or fraud which would permit piercing company's veil; nothing in record raised any factual dispute that debtor ever misled or concealed company's status as LLC, that debtor was conducting his personal business through LLC, or that debtor commingled his personal assets with those of LLC. Teasck v Gilbert (In re Gilbert) (2007, BC DC NH) 2007 BNH 11.

124. Kentucky

Because Kentucky has opted out of federal exemptions, District Court must look to applicable Kentucky statute to determine whether Chapter 7 debtor is entitled to homestead exemption before 11 USCS § 522(f) lien avoidance can be applied. In re Brooks (1986, WD Ky) 71 BR 6, affd without op (1987, CA6 Ky) 817 F2d 104 and affd without op (1987, CA6 Ky) 817 F2d 104.

Chapter 7 debtor may not avoid judgment lien under 11 USCS § 522(f) where lien was created prior to debtor's purchase of residence and lien was executed upon property prepetition and thus, under Kentucky exemption scheme, debtor may not exempt residence under homestead exemption; Kentucky homestead statute giving priority to purchase money mortgages and not to pre-existing debts or those arising from home improvements is not at odds with Bankruptcy Code. In re Brooks (1986, WD Ky) 71 BR 6, affd without op (1987, CA6 Ky) 817 F2d 104 and affd without op (1987, CA6 Ky) 817 F2d 104.

Under Kentucky law, "homestead" means land on which owner's dwelling house is located; ex-istence of homestead depends on facts of particular case viewed in light of controlling principles adjudged by court and, likewise, existence of homestead must be decided on evidence adduced and on intention and purpose of claimant. In re McMahon (1986, BC WD Ky) 60 BR 632.

Judicial lien on homestead property may be avoided under 11 USCS § 522 by Chapter 7 debtors to extent they are entitled to Kentucky homestead exemption in entire 55-acre farm where their permanent residence is located, not just in house itself and land on which it sits. In re Gill (1986, BC WD Ky) 61 BR 201.

Chapter 7 debtors may not avoid judicial lien on homestead because, under Kentucky law, where subject debt predates purchase of homestead property and erection of improvements thereon, debtors are not entitled to exemption. In re Lawson (1987, BC WD Ky) 69 BR 103.

125. Massachusetts

Massachusetts exception for preexisting liens from homestead protection is preempted by 11 USCS § 522(f)(2) and Massachusetts exception for prior contracted debts from homestead protec-tion is preempted by 11 USCS § 522(c). Patriot Portfolio, LLC v Weinstein (In re Weinstein) (1999, CA1 Mass) 164 F3d 677, cert den (1999) 527 US 1036, 144 L Ed 2d 794, 119 S Ct 2394.

Term "criminal act" in 11 USCS § 522(q)(1)(B)(iv) did not exclude crimes of negligence, and it was evident that criminal act requirement was met on facts of case since literal lines of 11 USCS § 522(q)(1)(B)(iv) did not require "conviction" as prerequisite to application of cap on homestead ex-emptions claimed under state law; therefore, finding that debtor was criminally liable for state crime of negligent vehicular homicide under Mass. Gen. Laws ch. 90, § 24G(b) qualified as "criminal act"

Page 236 11 USCS § 522

which capped debtor's homestead exemption to $ 125,000 under Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8, § 322(a), 119 Stat. 23, 97 (codified at 11 USCS § 522(q)(1)(B)(iv)). Larson v Howell (In re Larson) (2008, CA1 Mass) 513 F3d 325.

Exceptions for prior contracted debts and previously recorded judicial liens under Massachusetts Homestead Act are preempted because they conflict with 11 USCS § 522. In re Weinstein (1998, DC Mass) 217 BR 5.

Since residence claimed as exempt had been conveyed to spouses as joint tenants, they acquired property as tenants by entirety under Massachusetts common law in absence of contrary intent ap-pearing on face of deed and, under Massachusetts common law, debtor/husband had superior right to residence than did nondebtor/wife who had only right of survivorship in property so that debtor/husband was entitled to full Massachusetts homestead exemption of $ 100,000. In re Conroy (1998, BC DC Mass) 224 BR 282.

11 USCS § 522 pre-empts exemptions to Massachusetts homestead exemption, since § 522(c) does not protect debt which arose prior to homestead declaration from homestead exemption. In re Ballirano (1999, BC DC Mass) 233 BR 11, 34 BCD 410.

Mortgagee failed to meet its burden of proving that homestead exemption was not properly claimed, where it was not apparent from pleadings whether debtor and spouse at time of declaration of homestead intended to occupy property as their principal residence pursuant to state's homestead act. In re Sebio (1999, BC DC Mass) 237 BR 1.

Debtor was entitled to claim homestead exemption under Massachusetts law although she no longer resided on property, since debtor's husband's declaration of homestead was not questioned as to its continuing validity and debtor and her husband were still married; creditor's judicial lien was avoided under 11 USCS § 522(f)(1)(A). In re Taylor (2002, BC DC Mass) 280 BR 294.

Debtors' motion to avoid judicial lien was denied because it was attempt to have state court de-cision that their homestead exemption was invalid "overturned" by bankruptcy court, which was prohibited under Rooker-Feldman doctrine; therefore, because state court determined that debtors did not have valid homestead under Mass. Gen. Laws ch. 188, § 1, they could not avoid bank's at-tachment under 11 USCS § 522(f). In re Zambre (2004, BC DC Mass) 306 BR 428.

Pursuant to Mass. Gen. Laws ch. 188, § 1, debtor, as owner of residence, could acquire estate of homestead if he occupied or intended to occupy home as principal residence, and debtor was not divested of title to residence by creditor's levy and suspension concerning residence because bank-ruptcy intervened before creditor completed its levy on residence such that title never vested in creditor; because debtor could file valid declaration of homestead after levy on execution but before sale had taken place under Mass. Gen. Laws ch. 188, § 1, his claim for homestead exemption was valid in bankruptcy. In re Mariano (2004, BC DC Mass) 311 BR 335.

Deed of real property from debtor and his co-owner to debtor as sole owner, without express reservation of previously recorded declaration of homestead on property, terminated estate of home-stead under Mass. Gen. Laws ch. 188, § 7. In re Hildebrandt (2004, BC DC Mass) 313 BR 535, affd (2005, BAP1) 320 BR 40.

11 USCS § 522(c) did not protect equity of residence from effect of second mortgage because as between Chapter 7 debtor and trustee, second mortgage had not been avoided, but was preserved for estate by 11 USCS § 551, and as result, 11 USCS § 522(c) provided debtor with no greater protec-

Page 237 11 USCS § 522

tion from trustee than debtor would have had from mortgage under non-bankruptcy law. In re Guido (2006, BC DC Mass) 344 BR 193.

Chapter 7 debtor's action in filing homestead exemption declaration pursuant to Mass. Gen. Laws Ann. ch. 188, § 1, less than 1,215 days before he filed his bankruptcy petition did not bring him within $ 125,000 exemption cap set out in 11 USCS § 522(p)(1)(D) because recordation of homestead interest did not constitute acquisition of quantifiable interest in property. In re Lyons (2006, BC DC Mass) 355 BR 387.

Chapter 13 plan's proposed distribution to creditors satisfied best interests test in 11 USCS § 1325(a)(4) because distribution to unsecured creditors properly excluded debtor's entire net equity in her jointly owned residence and not just net equity to extent of $ 125,000 cap under 11 USCS § 522(p); indeed, cap did not apply because debtor's non-debtor husband could have invoked home-stead exemption under Mass. Gen. Laws Ann. ch. 188, § 1 et seq., to protect full amount of resi-dence's net equity of $ 271,440. In re Walsh (2007, BC DC Mass) 359 BR 389, CCH Bankr L Rptr P 80855.

Bankruptcy court properly sustained Chapter 7 trustee's objection to debtor's claimed homestead exemption in real property where deed transferred real property from debtor and friend to debtor alone; transfer was conveyance under plain language of Mass. Gen. Laws ch. 188, § 7(1) because it transferred entire estate, not just friend's interest, and debtor had not specifically reserved home-stead in deed transferring property. Hildebrandt v Collins (In re Hildebrandt) (2005, BAP1) 320 BR 40.

Where debtor re-obtained legal title to her residence and recorded new homestead exemption within 1215 days prior to filing her Chapter 13 petition, her claimed homestead exemption under Mass. Gen. Laws. ch. 188, § 1, was limited to $ 125,000 pursuant to 11 USCS § 522(p)(1). Aroesty v Bankowski (In re Aroesty) (2008, BAP1) 385 BR 1, CCH Bankr L Rptr P 81216.

126. Minnesota

Minnesota's homestead exemption law applies where bankruptcy petition has been properly filed in federal bankruptcy court in Minnesota, as (1) 11 USCS § 522(b)(2)(A) clearly designates that state law where petition is filed is applied with regard to homestead exemptions; (2) state choice of law principles are not applied to determine if different state's exemption law applies, where residence of Minnesota bankruptcy debtors is located in another state; and (3) there is noth-ing in Minn. Stat. § 510.01 that precludes homestead exemption's application to out-of state resi-dence of Chapter 11 debtor where debtor sold Minnesota home and purchased new residence in dif-ferent state within 180 days of filing his or her bankruptcy petition in Minnesota. Drenttel v Jensen-Carter (In re Drenttel) (2005, CA8) 403 F3d 611, CCH Bankr L Rptr P 80259.

Minnesota bankruptcy debtors were entitled to claim exemption for their new Arizona home un-der Minnesota's homestead exemption law, as (1) under 11 USCS § 522(b)(2)(A), Minnesota's homestead exemption law applied to determine exemption that debtors were entitled to claim; (2) language of Minn. Stat. § 510.01 did not limit exemption to property that was located in Minnesota only; and (3) under state statute, debtors could claim homestead exemption for Arizona residence they had purchased just before they filed their bankruptcy petition in Minnesota. Drenttel v Jensen-Carter (In re Drenttel) (2005, CA8) 403 F3d 611, CCH Bankr L Rptr P 80259.

Page 238 11 USCS § 522

Under Minnesota legislation enacted pursuant to 11 USCS § 522, there is no need for Chapter 7 debtor to show insolvency as defined by 11 USCS § 101(26) in order to qualify for homestead ex-emption. In re Hogard (1984, BC DC Minn) 43 BR 590.

Although at time debtors filed their Chapter 7 petition they were occupying dwelling place lo-cated on parcel 1, having just moved there day before filing, their presence did not constitute "actual occupancy" within meaning of Minnesota homestead exemption law where debtors had previously lived on parcel 3 and returned to that parcel after filing, having taken only minimum necessities with them to parcel 1, even though debtors stated they intended to occupy dwelling on parcel 1 at some time in future; further, in order to effectively claim parcel 1 as homestead debtors must have abandoned their prior homestead located on parcel 3, but intention to remove permanently from that parcel at future time does not constitute abandonment until removal takes place; fact that debtors left almost all belongings at parcel 3 dwelling and have testified that it is larger and more suitable for family needs indicates they have not abandoned it as their homestead. In re Sikkink (1986, BC DC Minn) 60 BR 298.

Chapter 11 debtor farmers may not claim as homestead 80 acres of land not contiguous to land on which dwelling is located, even though Minnesota statutory limitation that acreage must consist of land upon which dwelling is situated in order to qualify for homestead exemption seems to bear little present reasonable relationship to legislative purpose of protecting livelihood of family farm-ing. In re Priebe (1987, BC DC Minn) 69 BR 100.

Chapter 7 debtor's homestead exemption under Minnesota opt-out provisions is subject to state tax lien for unpaid income taxes where legislature repealed former exemption for homestead prop-erty from such liens. In re Jewell (1988, BC DC Minn) 84 BR 619.

Under previous constitutional definition of business homestead, .85 acre tract was debtors' busi-ness homestead under Texas law and sale of such tract and lease-back with option to purchase was pretend sale of homestead prohibited by Texas law; pursuant to Tex. Const. art. XVI, § 50(c), Tex. Prop. Code Ann. § 41.006 (Vernon 2002), deed was void. Jay v Nesco Acceptance Corp. (In re Jay) (2003, BC ND Tex) 308 BR 251.

In Texas, business homestead existed if claimed property was used for principal business of homestead claimant and property was essential and necessary for business of homestead claimant; property that was incidentally useful or profitable to business did not qualify as business homestead. Jay v Nesco Acceptance Corp. (In re Jay) (2003, BC ND Tex) 308 BR 251.

Under previous Texas Constitution's definition of business homestead, tract in issue was debtor's business homestead and tract's sale and lease-back was prohibited pretended sale of home-stead in Texas where court applied both former Tex. Const. art. XVI, § 51 (amended 1999) and Tex. Const. art. XVI, § 51. Jay v Nesco Acceptance Corp. (In re Jay) (2003, BC ND Tex) 308 BR 251.

Debtors were entitled to homestead exemption under Minn. Stat. § 510.02 where land occupied by debtors as their residence was not included in laid out or platted portion of city in which it was located, and area surrounding debtors' home would have been characterized as "rural" under Minne-sota case law. In re Engstrom (2007, BC DC Minn) 370 BR 205.

Debtor was not entitled to homestead exemption under Minnesota law since debtor had aban-doned residence and bankruptcy court properly determined that debtor's lien against former marital

Page 239 11 USCS § 522

residence was not exempt under 11 USCS § 522(b)(2)(A). Mueller v Buckley (In re Mueller) (1998, BAP8 Minn) 215 BR 1018.

127. Mississippi

Under Mississippi homestead exemption, debtor may claim $ 30,000 from proceeds of sale of homestead even though debtor agreed to sale of homestead prior to filling. In re Williamson (1985, BC SD Miss) 49 BR 675.

128. New York

New York state opt-out provisions for homestead exemption relate back to date of petition where it would be inequitable not to apply exemption to interest Chapter 7 debtor acquired in prop-erty within 180 days of filing petition, even though exemption by its terms requires debtor to own property exempted at time of filing of petition. Connelly v Roach (1987, WD NY) 79 BR 159.

Chapter 13 debtor is not entitled to claim impairment of exemption under 11 USCS § 522(f) law since bank's lien resulted from mortgage foreclosure involving purchase price for property and no exemption exists under New York law. In re Liberman (2000, ED NY) 244 BR 557, 43 CBC2d 787, affd (2000, CA2 NY) 225 F3d 646, reported in full (2000, CA2 NY) 2000 US App LEXIS 23459 and cert den (2001) 531 US 1164, 148 L Ed 2d 991, 121 S Ct 1123 and (criticized in Peoples Heri-tage Bank, N.A. v Hart (In re Hart) (2002, BAP1) 282 BR 70, 49 CBC2d 74).

Trustee's objections to debtors' claims of exemptions under New York opt out statute are denied where homestead exemption could be claimed by one spouse and cash exemption by other spouse so that exemptions claimed are susceptible to allocation satisfying statutory guidelines. In re Ar-nold (1983, BC ED NY) 33 BR 765.

For purposes of New York law providing that current homestead scheme applies only to debts contracted before effective date, debt was contracted on date debtors executed contract, not date when creditor obtained judicial liens; thus former homestead scheme applies and because debtors failed to "designate" their homestead as required under former scheme, they may not avoid liens on homestead under 11 USCS § 522(f). In re Eipp (1984, BC ND NY) 66 BR 1 (criticized in In re Betz (2002, BC DC Mass) 273 BR 313).

Purpose of New York's homestead exemption statute is to protect homeowner from seizure of his or her home to satisfy money judgment and to protect debtor's home in event of bankruptcy; however, in event of mortgage foreclosure action, exemption does not apply because it is suit in eq-uity not resulting in money judgment within meaning of statute; surplus monies realized in mort-gage foreclosure action are personalty and, hence, not within ambit of statute. In re Ellerstein (1989, BC WD NY) 105 BR 214.

Judgment liens on debtor's New York real property were avoided and declared null and void on grounds that they impaired exemption of debtor in such real property, since by applying formula of 11 USCS § 522(f)(1)(A), debtor residing in New York who has no equity in home and who other-wise qualified for exemption would always be entitled to homestead exemption for purposes of § 522(f)(1). In re Whitehead (1998, BC WD NY) 226 BR 539.

Debtor was not entitled to homestead exemption under New York law for mobile home which he moved to his property and lived in for two days before town ordered it moved as part of ongoing zoning dispute, where his short term of residency, stated purpose of moving in order to establish homestead exemption, and lack of ordinary necessities on property created inference that he did not

Page 240 11 USCS § 522

intend to permanently reside in mobile home. Town of Skaneateles v Scott (In re Scott) (1998, BC ND NY) 233 BR 32.

Amendment to N.Y. C.P.L.R. 5206(a) (amended by N.Y. Laws ch. 623, effective August 30, 2005), was remedial statute which under state law was to be applied retroactively and such retroac-tive application did not violate vested rights of any pre-August 30, 2005 general unsecured creditor in violation of U.S. Const. art. 1, § 10. In re Hayward (2006, BC WD NY) 343 BR 41 (criticized in In re Carpenter (2006, BC WD NY) 2006 Bankr LEXIS 1009).

Two obligations of debtor that arose in connection with his state court matrimonial proceedings and were previously ruled to be nondischargeable pursuant to 11 USCS § 523 were not properly avoidable by debtor who was invoking 11 USCS § 522(f) because Congress could not have intended for such result to obtain under § 522; that being so, creditor's liens were payable out of proceeds of sale of debtor's homestead as to which he had claimed state law exemption provided that such result was proper under state law, which bankruptcy court declined to decide on finding that it was ques-tion of first impression. Rupp v Elmasri (In re Elmasri) (2007, BC ED NY) 369 BR 96.

Bankruptcy court found that Chapter 13 debtor who owned homestead as tenant by entireties had right to entire estate under state law, and it valued property at its fair market value on date debtor filed his bankruptcy petition and found that debtor could not avoid judgment lien in amount of $ 428,576, pursuant to 11 USCS § 522(f), because debtor's interest in property was worth more than value of judgment lien once amount of two mortgages on property and value of debtor's home-stead exemption under N.Y. Debt. & Cred. Law § 282 were subtracted. In re Levinson (2007, BC ED NY) 372 BR 582.

129. Ohio

Chapter 7 debtors can avoid judicial liens on homestead property under 1994 amendments to 11 USCS § 522(f), as debtors' exemption under Ohio law is impaired in amount greater than judicial liens sought to be avoided. Holland v Star Bank, N.A. (In re Holland) (1998, CA6 Ohio) 151 F3d 547, 40 CBC2d 560, CCH Bankr L Rptr P 77749, 1998 FED App 235P.

Ohio homestead protection is not available to latter-day "assignments" of land once received by settlor from United States under land patent. Buroker v Raybourn (1986, SD Ohio) 61 BR 10, 14 BCD 110, 14 CBC2d 516.

Debtor is entitled to $ 5,000 exemption in real property provided under Ohio Rev. Code Ann. § 2329.66, unrestricted by § 2329.661, where judgment liens on property, not being enumerated in statute, are not exception under § 2329.661 to debtor's exemption. In re Anderson (1986, BC SD Ohio) 57 BR 953.

Where debtor had declared throughout her bankruptcy petition and schedule of exemptions that her domicile was Michigan, she could not now claim Ohio homestead exemption under 11 USCS § 522(d)(1), since her assertion that she intended to return to Ohio at some point belied her previous assertion of Michigan domicile, defined by 11 USCS § 522(d)(1) as "actual residence with present intention to remain there." In re Lusiak (2000, BC ND Ohio) 247 BR 699.

Under Ohio law, judgment lien against debtors' residence did not impair debtors' exemption within meaning of 11 USCS § 522(f) and may not be avoided, where lienholder brought his action of foreclosure, which avoided debtors' original mortgage but not assignee's mortgage, prior to rec-

Page 241 11 USCS § 522

ordation of mortgage by assignee. In re Ochmanek (2000, BC ND Ohio) 266 BR 114 (criticized in Moldo v Charnock (In re Charnock) (2004, BAP9) 318 BR 720, CCH Bankr L Rptr P 80218).

130. Oklahoma

Debtor's exemption was limited by Oklahoma law to $ 5,000 where more than twenty-five per-cent of total square footage of improvements on claimed homestead was used for business purposes. In re Klaus (1999, BC ND Okla) 228 BR 475.

Bankruptcy court erred as matter of law in holding that judicial lien did not impair debtor's ex-emption and lien is avoidable pursuant to 11 USCS § 522(f); even though Oklahoma exemption laws allow debtor to claim homestead as exempt and protect it from forced sale, Oklahoma law al-lows lien to attach to homestead, and 11 USCS § 522(f) preempts state law in determining whether judicial lien impairs homestead exemption. Coats v Ogg (In re Coats) (1999, BAP10 Okla) 232 BR 209, 16 Colo Bankr Ct Rep 112.

131. Texas

Debtor may have financial or moral obligation to adult married daughter, for purposes of deter-mining Texas rural homestead exemption; in absence of such per se rule that debtor has no such ob-ligation to married child, Bankruptcy Court in this case was entitled to credit and to rely on testi-mony that daughter and granddaughter were in physical danger when they first came to reside with debtor, had no avenue of assistance but debtor, and have depended on her for emotional and finan-cial support since that time. In re Hill (1992, CA5 Tex) 972 F2d 116.

Texas legislature's amendment of definition of homestead to provide for single adults did not change definition of word "family" to exclude any family unit in which unmarried person is head of household. In re Hill (1992, CA5 Tex) 972 F2d 116.

Debtor has proved elements of family for purpose of Texas homestead exemption where debtor, her daughter, and her granddaughter function and appear as unit in community. In re Hill (1992, CA5 Tex) 972 F2d 116.

Daughter's employment does not disprove her dependence on debtor mother, for Texas rural homestead exemption purposes, where daughter's income is insufficient to enable her to leave her mother's household--absolute dependence is not necessary; although Bankruptcy Court improperly used "any dependency" standard rather than "but for" standard, error is harmless since its factual findings fulfill correct Texas test. In re Hill (1992, CA5 Tex) 972 F2d 116.

Moral support given by debtor to her adult daughter alone does not establish dependence for purposes of establishing family rural homestead exemption under Texas law. In re Hill (1992, CA5 Tex) 972 F2d 116.

Homestead interests exist in real property under Texas law; proceeds are personal property and cannot be homestead; therefore, exemption of proceeds and exemption of homestead is not tanta-mount to exemption of 2 homesteads. In re England (1992, CA5 Tex) 975 F2d 1168, CCH Bankr L Rptr P 74979.

When one sells his homestead under Texas law, proceeds of that sale are exempt, but when one acquires new homestead after sale of previous homestead, he abandons previous homestead, chang-ing its character to former homestead; therefore, proceeds from sale of former homestead are not

Page 242 11 USCS § 522

exempt under Texas homestead exemption. In re England (1992, CA5 Tex) 975 F2d 1168, CCH Bankr L Rptr P 74979.

Texas statute exempting proceeds from sale of homestead exempts only proceeds of sale of homestead and only during 6 months following sale of homestead when claimant has not acquired another homestead do claimants have any protected rights in homestead sale proceeds; sale of homestead instantly activates protection of proceeds exemption statute and shelters proceeds up to 6 months; however, acquisition of another homestead during that 6-month period instantly changes prior homestead to former homestead and deactivates proceeds exemption statute such that proceeds of former homestead are no longer exempt. In re England (1992, CA5 Tex) 975 F2d 1168, CCH Bankr L Rptr P 74979.

Where debtor claims homestead exemption as allowed by 11 USCS § 522(b)(2)(A), bankruptcy court is not bound to follow Texas Property Code procedure for designating debtor's homestead from a larger parcel of property in order that remainder may be liquidated. Crowell v Theodore Bender Accounting (In re Crowell) (1998, CA5 Tex) 138 F3d 1031, 39 CBC2d 1389, CCH Bankr L Rptr P 77691.

Chapter 7 debtor was entitled to Texas rural homestead despite parties' prenuptial agreement limiting his legal obligations since his moral obligation of support continued, notwithstanding alle-gation that his wife had greater wealth and needed no support, so that second prong of Roco deci-sion was satisfied in that head of household had moral or legal obligation to support other members of family. Painewebber Inc. v Murray (2001, ED Tex) 260 BR 815.

Real property owned by corporation owned and controlled by Chapter 13 debtors is not within Texas homestead exemption where (1) property is used only to grow hay in order to feed hogs raised by debtors on separate property and thus does not provide debtors with meaningful or sub-stantial source of income and support; (2) property is not used as place to exercise calling or busi-ness of debtors; and (3) debtors have made no declaration of property as their homestead. In re Brokmeyer (1985, BC SD Tex) 51 BR 704.

Fact that debtors claim more than one parcel of homestead property and did not designate home-stead until after deed of trust was executed does not, under Texas law, affect their homestead claim. In re Howard (1986, BC WD Tex) 65 BR 498, 14 BCD 1291.

Chapter 7 debtor may claim homestead exemption under Texas opt-out provisions on entire 91.93 acres of mortgaged rural property used as debtor's sole residence, even though debtor signed previous agreement with mortgage bank limiting homestead to 10 acres, where: (1) property was in law and fact rural homestead of debtor at all pertinent times; and (2) this was known or should have been known to bank. In re Skinner (1987, BC ND Tex) 74 BR 571.

Texas rural homestead exemption analysis does not include economic support as required test for eligibility, but only that homestead claimant have possessory interest in land, demonstrate intent to claim it has homestead, and use it for purpose of home, which use would include economic sup-port as well as use for shelter, protection, comfort, convenience, and enjoyment of home; in present case where evidence establishes that property is clearly rural, it qualifies for homestead where it provides shelter, recreation, comfort, and convenience as well as solitude. In re Mitchell (1991, BC WD Tex) 132 BR 553.

Page 243 11 USCS § 522

Chapter 7 debtor's use and occupancy of property on which his used car business was located clearly established property as both residence and business homestead, although debtor's former spouse and children were allowed to continue residing on other property following parties' divorce, debtor continued to claim residence in which his family lived as his homestead for tax purposes, he listed that house on financial statement to creditor, and he claimed that property as his homestead in bankruptcy proceedings, as well as property on which business was located, where debtor moved into apartment located on business residence in anticipation of his divorce, he constructed larger living quarters by adding second floor to business property in which he has resided since its com-pletion, and he continues to conduct his used car business from that location; debtor is not estopped from claiming property as his homestead even though homestead affidavit, financial statements, and statement in deed of trust indicated that property in which his family continue to reside was his homestead where: (1) homestead affidavit was signed more than 3 years after creditor issued loan in question in connection with another loan; (2) with respect to financial statements, in which debtor listed family residence as his homestead both before and after 1984 loan, bank did not rely on statements given in advance of loan, and those given after loan cannot work estoppel as to loan al-ready made; and (3) there is no evidence that creditor relied upon statement in deed of trust, and debtor openly and continuously lived on and used premises as his residential and business home-stead. Julian v FDIC (In re Julian) (1994, BC ND Tex) 163 BR 478.

Under Texas law debtor may sell homestead and reinvest proceeds in new homestead without proceeds becoming part of bankruptcy estate, so long as he does so within six months. In re Reed (1994, BC WD Tex) 178 BR 707, op withdrawn, reported at (1994, BC WD Tex) 8 Tex Bankr Ct Rep 283.

Fact that Chapter 11 debtor subsequently converted to Chapter 7 did not allow creditors to at-tack homestead claim where new homestead was purchased within six months of sale of old home-stead with proceeds from that sale and had thus, under Texas law, never entered bankruptcy estate. In re Reed (1994, BC WD Tex) 178 BR 707, op withdrawn, reported at (1994, BC WD Tex) 8 Tex Bankr Ct Rep 283.

Chapter 7 debtors' leasehold interest in farm property was sufficient under Texas law to support homestead claim and homestead was not abandoned by their conveyance of life estate to one debtor's parents in order to assure latter that they would always "have a say" concerning the prop-erty. Eskew (1998, BC WD Tex) 233 BR 708.

Where debtor's homestead consisted of two tracts, second of which was not sold to buyer of first tract until court voided creditor's lien on tract, six-month period in Tex. Prop. Code Ann. § 41.001(c) within which to reinvest homestead sale proceeds ran not from sale of first tract but from sale of second tract because homestead consisted of both tracts. In re Bading (2007, BC WD Tex) 376 BR 143.

Debtor's sporadic use of 64-acre tract of property located approximately three miles from debtor's residence had insufficient nexus with debtor's homestead to qualify for exemption under Texas law; although debtor and his wife intended to use property for hay and cattle and to support dog breeding business, they had not done so prior to their bankruptcy filing. In re Palmer (2008, BC ED Tex) 391 BR 386.

132.--Business homestead exemption

Page 244 11 USCS § 522

Debtor who has several places of business can claim only one as his business homestead under law of Texas, but he may be permitted to make choice in Bankruptcy Court. Gulbransen Co. v Couch (1932, CA5 Tex) 61 F2d 932.

Chapter 7 debtors' second business location was not "essential to and necessary for" operation of business and therefore did not qualify for Texas business exception where 2 properties were not used in single, integrated business, although second property was primarily used to capture expand-ing retail market, debtors conducted both wholesale and retail businesses at first property, properties were operated separately, and debtors expressly disclaimed second property when they entered into loan arrangement with creditor. In re Webb (1992, CA5 Tex) 954 F2d 1102, CCH Bankr L Rptr P 74494, reh den (1992, CA5 Tex) 1992 US App LEXIS 6340.

Since debtor's use of building for storing boxes is only incidental to his primary business of meat processing, building was not indispensable to his business and is therefore not within Texas business homestead exemption; scope of business homestead is not intended to extend so far as to protect property which is only incidentally useful or profitable to business, such as property used to warehouse goods. In re Starns (1985, SD Tex) 52 BR 405, 13 CBC2d 853.

Bankrupt's business located in separate city approximately 8 miles from his home was not ex-empt under urban homestead provision of Texas constitution which contemplates lot or lots located in one urban community. In re Pittman (1976, BC ND Tex) 2 BCD 558.

Real property owned by corporation owned and controlled by Chapter 13 debtors is not within Texas homestead exemption where (1) property is used only to grow hay in order to feed hogs raised by debtors on separate property and thus does not provide debtors with meaningful or sub-stantial source of income and support; (2) property is not used as place to exercise calling or busi-ness of debtors; and (3) debtors have made no declaration of property as their homestead. In re Brokmeyer (1985, BC SD Tex) 51 BR 704.

Chapter 11 debtor may not claim business homestead exemption on property owned by her and leased to company in which she holds 49 percent ownership where debtor is not conducting busi-ness or calling on premises in question because there is no "business" associated with debtor's rent-ing this land to company that runs restaurant on premises and debtor is not currently in restaurant business as she is merely passive investor in company which is in restaurant business; furthermore, after she inherited her husband's interest in property, along with whatever business homestead he might have established in property, she removed herself from business operation of company, aban-doning any possible exemption that might otherwise have obtained from her late husband; finally, there is no family unit extending to include son who operates business because exemption never ap-plied to him while he was within family unit and, in any event, he is clearly head of his own family unit, and son that lives with debtor is not dependent upon her, did not begin residing with debtor until after bankruptcy was filed, and is not in any way involved in ownership of corporation under which debtor claims exemption. In re Finkel (1993, BC WD Tex) 151 BR 779.

Retroactive application of Texas business homestead exemption did not impermissibly impair existing contractual rights and/or constitute taking of property without due process of law in viola-tion of Constitution. Hughes v Team Bank (In re Hughes) (1993, BC ND Tex) 172 BR 205, amd, in part, on reconsideration, objection denied (1993, BC ND Tex) 159 BR 197.

133. Vermont

Page 245 11 USCS § 522

Protection of Chapter 7 debtor's family and purpose of homestead exemption statutes, both Vermont statute and 11 USCS § 522, are well served by allowing debtor as homestead exemption grist mill building in which family resided, stable, and storage barns with land upon which they stand and used in connection therewith, but house and land which debtor rented cannot be claimed as part of homestead despite debtor's contention that state law prohibited subdivision of property because subdivision is to crucial to protection of homestead exemption; homestead exemption is purely statutory and gives no greater right than statute itself creates and it signifies dwelling house in which family resides. In re Evans (1985, BC DC Vt) 51 BR 47.

Law of Vermont is that homestead of debtor is exempt from attachment upon debts contracted after filing of deed of homestead for record and before occupation of premises by debtor as home-stead, and thus, where Chapter 11 debtor filed deed prior to commencement of construction of resi-dence but did not move in until after completion of residence, she is not precluded from asserting homestead as against contractor's lien where debtor clearly intended premises to be her homestead; further, debtor moved into residence prior to time when contractor perfected his lien thus debtor's homestead was established before contractor's lien attached. In re Bernstein (1986, BC DC Vt) 62 BR 545.

Debtors cannot claim Vermont homestead exemption in property conveyed prepetition to part-nership, in which debtors were partners, because partnership is separate legal entity, which owned property; later deeds conveying property to debtors as tenants in common are corrective deeds for deficient deeds entered into prior to conveyance to partnership; thus debtors have not satisfied most basic requirement, that they own property they claim as exempt. In re Gorman (1986, BC DC Vt) 68 BR 541, affd (1987, DC Vt) 82 BR 253.

Increase in homestead exemption under Vermont law just prior to debtors' filing of Chapter 7 bankruptcy was available to debtors under 11 USCS § 522(b)(2)(A) with regard to all prepetition debts even though state law limited exemption to debts incurred after its effective date. In re Skjetne (1997, BC DC Vt) 213 BR 274.

Chapter 7 debtors are entitled to exempt from property of estate under 11 USCS § 522(b)(2)(A) the $ 75,000 Vermont homestead exemption regardless of fact creditor's claim arose before debtor's homestead was established, and even though creditor's judicial lien arose prior to increase in amount of homestead exemption, lien is avoided since lien would impair debtors' homestead exemption. Euber v Sheldrick (In re Euber) (1998, BC DC Vt) 217 BR 448, 39 CBC2d 970.

134. Virginia

Wife is not entitled to homestead exemption, under Virginia state law, where she continues to reside with husband, and does not maintain separate residence; state statute which allows husband and wife to claim 2 homestead exemptions only if they are maintaining separate residences is not unconstitutional, since purpose of exemption is to conserve family home from forced sales, and husband and wife with one residence, since they are not living separately, have only one home to conserve. In re Thompson (1980, ED Va) 4 BR 823, 2 CBC2d 1257.

Under Virginia law debtors each have right to claim $ 5,000 homestead exemption in their jointly held property and because only section of new Bankruptcy Code not available to Virginia debtors is 11 USCS § 522(d)(1)-(11) setting out Federal exemptions, homestead exemption may be relieved of burden of creditor's judgment lien pursuant to 11 USCS § 522(f). In re Snellings (1981, BC WD Va) 10 BR 949, CCH Bankr L Rptr P 68022.

Page 246 11 USCS § 522

Debtor who had received discharge in bankruptcy pursuant to his Chapter 7 proceeding could not invoke exemption of 11 USCS § 522(b)(2)(B) to bar creditor from foreclosing on property which debtor and his wife owned as tenancy by entirety where husband and wife were jointly liable to bank on debt secured by property and under Virginia law entirety property is not exempt from process by joint creditor of husband and wife. In re Costley (1984, BC ED Va) 39 BR 585, 10 CBC2d 1367.

Debtor's attempt in opt-out state to exempt account receivable from creditor's lien of fieri facias by amending Homestead Deed is ineffective since amendment to deed may not set apart additional items not included in original deed under Virginia Law. In re Pennington (1985, BC ED Va) 47 BR 322.

Under 11 USCS § 522, filing of homestead deed, under Virginia law, insulates fund established with proceeds from sale of Chapter 7 debtor's property from enforcement of alleged consensual lien where purchasers did not execute upon their alleged consensual lien and acquire decree ordering escrow agent to pay them proceeds prior to filing of homestead deed. In re Trammel (1986, BC ED Va) 63 BR 878, 15 CBC2d 998.

Although purchasers, who were aware of judgment liens on property purchased from Chapter 7 debtor, bargained for clear title to property and escrow agreement, which required payment of debtor's share of proceeds into escrow pending order of Bankruptcy Court, indicating debtor's inten-tion to make good on covenant of title, Bankruptcy Court cannot release under 11 USCS § 522 judgment liens against property remaining after debtor's claimed exemption in funds under Virginia homestead law. In re Trammel (1986, BC ED Va) 63 BR 878, 15 CBC2d 998.

Wife's claimed homestead exemption in husband's IRA accounts was disallowed, since she had at most expectancy interest in it and husband could withdraw funds at any time; nor did children have exemption as contingent beneficiaries. In re Cathcart (1996, BC ED Va) 203 BR 599, 8 Fourth Cir & Dist Col Bankr Ct Rep 867.

135. Wyoming

Purchase money security interest has priority over Chapter 7 debtor's homestead exemption un-der Wyoming opt-out provisions, but to extent that security interest is nonpurchase money, exemp-tion is superior; Wyoming homestead provision is not limited to real property but encompasses all property qualifying as homestead. Geist v Converse County Bank (1987, DC Wyo) 79 BR 939, 5 UCCRS2d 1267.

Chapter 7 debtor's nonfiling spouse is not entitled to homestead exemption claimed in her behalf by debtor since, even if debtor could claim exemption in her behalf, such exemption would have to be valid under applicable state law whereas spouse's exemption failed under opt-out Wyoming law because she had no ownership interest in residence. In re Johnson (1995, BC DC Wyo) 184 BR 141.

Chapter 7 trustee's objection to Chapter 7 debtor's claimed exemption for six guns was sustained where debtor was allowed to claim only one gun as exempt household goods under Alaska Stat. § 09.38.020(a). In re Shell (2003, BC DC Alaska) 295 BR 129.

136. Miscellaneous

Colorado homestead exemption is interest in real estate rather than personal right of debtor, so that where debtor and his nondebtor wife jointly own property in which homestead is claimed, value

Page 247 11 USCS § 522

of exemption is to be applied to joint interest in property and not to debtor's individual interest in proceeds of sale under 11 USCS § 363(h). In re Pruitt (1987, CA10 Colo) 829 F2d 1002.

Under Colorado law homestead exemption may not be claimed by one joint owner to exclusion of others; value of homestead must be deducted from value of entire property, rather than solely from value of debtor's interest in reaching value of property of debtor's estate. In re Pruitt (1987, CA10 Colo) 829 F2d 1002.

Homestead exemption in Illinois entitles debtor to remain in his home rent free until he receives cash value of exemption. In re Szekely (1991, CA7 Ill) 936 F2d 897, 24 CBC2d 2028, CCH Bankr L Rptr P 74070.

Bankruptcy Court's finding that Chapter 7 debtor was not farmer is not clearly erroneous for purposes of determining debtor's homestead exemption under Wisconsin law, despite debtor's con-tention that she always considered herself to be farmer, where at time she filed her petition debtor did not derive substantial part of her income from farming, and, other than through sale of mare and by participation in Conservation Reserve Program, debtor had not been engaged in farming activi-ties. In re Lloyd (1994, CA7 Wis) 37 F3d 271, 31 CBC2d 1786, CCH Bankr L Rptr P 76125.

Bankruptcy Court's finding, that 3 acres of Chapter 7 debtor's 113 acres of land was reasonable amount upon which she could construct residence and keep her 2 horses, is not clearly erroneous, where debtor was not farmer, and debtor's only objection to amount of land allocated is with respect to limitations this allocation places on her farming activities. In re Lloyd (1994, CA7 Wis) 37 F3d 271, 31 CBC2d 1786, CCH Bankr L Rptr P 76125.

Chapter 7 debtor's contingent future expectancy interest in real estate was not spared by election under 11 USCS § 522(b)(2) and homestead exemption under R.I. Gen. Laws § 9-26-4.1 (2002), where proper valuation of debtor's interest in property held via tenancy by entirety was 100 percent. In re Ryan (2002, DC RI) 282 BR 742, 49 CBC2d 140.

Under 11 USCS § 522(b), state law controls homestead exemption, and debtor cannot prevent trustee from selling his survivorship interest in tenancy by entirety because Tennessee law provides that homestead is right of occupancy, not estate in land, and remainder or reversion can be sold. In re Walls (1984, BC ED Tenn) 45 BR 145, 12 BCD 663, CCH Bankr L Rptr P 70175.

Chapter 7 debtor may properly claim homestead exemption under South Dakota law in property she owns with other family members either as joint tenants or as tenants in common. In re Johnson (1986, BC DC SD) 61 BR 858.

Property that otherwise can be classified as homestead property under Wisconsin opt-out provi-sions should be presumptively considered "reasonably necessary" for use of dwelling as home as long as it does not exceed statutorily prescribed limit and presumption can only be rebutted by spe-cific showing of unreasonableness. In re Mann (1986, BC WD Wis) 82 BR 981.

North Dakota opt-out homestead exemption allowing debtor to exempt up to $ 7,500 in lieu of homestead is not limited to cash, and Chapter 12 debtors may exempt farm equipment under provi-sion up to $ 15,000 in joint case, but any homestead exemption, no matter how small, preempts "in lieu of" exemption. In re Ptacek (1987, BC DC ND) 78 BR 986.

Chapter 7 debtors may not claim interests in employer's profit sharing retirement plan as exempt under South Dakota homestead law, because plan interests are neither houses, nor mobile homes, nor proceeds from sales of houses. In re Bowen (1987, BC DC SD) 80 BR 1012, 16 BCD 1315.

Page 248 11 USCS § 522

Disqualifying clause in Maine exemption statute that exemption does not apply to judgments based on torts involving other than ordinary negligence on debtor's part is nugatory in case of Chap-ter 7 debtor against whom judgment arising from his withdrawal of funds in joint account on date of testator's account was entered in state court, although judgment was based on tort involving other than ordinary negligence where state's opt-out provision renders disqualifying clause ineffective in bankruptcy case; thus debtor may claim $ 60,000 homestead exemption for disabled persons. Applebee v Brawn (1992, BC DC Me) 138 BR 327.

Chapter 7 debtor's homestead property, in which bedroom has been refurbished and used on ad hoc basis for business activities, is not used for business purposes within meaning of Oklahoma homestead exemption statute which provides "mixed-use" penalty when homesteader uses property for business purpose, and therefore debtor's claim of homestead is granted since exemption of whole realty as homestead is not abuse, and enforcement of mixed-use penalty is not appropriate, where: (1) realty is in residential district, is of ordinary residential type, and would be recognized by any-one as normal single family home; (2) realty itself produces no income by rent or any other means and none of its total value is attributable to any business activities which debtor conducts therein; (3) use of bedroom for business activities, or of telephones in house to make and receive business calls, has occurred on temporary, ad hoc basis, during acute collapse of debtor's ordinary business activities, and is expected to continue only until debtor's ordinary business activities resume; (4) business activities conducted from home have involved mere winding up of debtor's former busi-ness and search for new employment, which use has been de minimis and strictly incidental to nor-mal functioning of undoubted homestead. In re Ozey (1994, BC ND Okla) 171 BR 116.

Debtors may not claim as exempt 40 acres which debtor husband inherited from his father and on which they now reside as to creditor whose lien attached to this parcel of land prior to time land became debtors' homestead; relevant time period is when creditor's lien attached and at that time, not only did debtors not reside on 40-acre parcel, they showed no intent to make that 40 acres their homestead but, rather, they lived on another 190-acre tract of land, refused to move from that 190 acres for 8 months after foreclosure, continued to litigate issue of entitlement to 190 acres, secreted their ownership of 40-acre parcel, and testified under oath that 190 acres was their "home"; fact that debtors considered 230 acres as their "homeplace" does not expand their homestead rights under Arkansas law, which provides for exemption of only 160 acres, and fact that debtors did not desig-nate any portion of that 230 acres when lien attached as homestead does not given them right to des-ignate particular portion of that land for purposes of electing homestead when debtors filed bank-ruptcy; debtor husband's statement with respect to 190-acre parcel that he wanted his "home" back, combined with acreage limitations imposed under Arkansas law, compels conclusion that 160 of 190 acres was debtors' homestead during relevant time period when creditor's lien attached. In re Austin (1994, BC ED Ark) 172 BR 262.

Connecticut statute providing homestead exemption of up to $ 75,000 in value was intended to apply only to obligations or claims that arose on or after effective date of exemption statute and such result was not altered in context of bankruptcy; accordingly, objection to claim of Connecticut homestead exemption by Chapter 7 debtors had to be sustained as to claims against debtors that arose prior to effective date of exemption statute. In re Ahmed (1996, BC DC Conn) 194 BR 540.

If no deficiencies exist as to deed's form or in fees tendered, homestead deed is admitted to re-cord when properly received by clerk's office. In re Quy Van Nguyen (1998, BC ED Va) 226 BR 547, 11 Fourth Cir & Dist Col Bankr Ct Rep 115, affd (2000, CA4 Va) 211 F3d 105.

Page 249 11 USCS § 522

Chapter 7 debtors did not abandon Idaho homestead by vacating property for six months prior to filing bankruptcy and putting property up for sale where debtors did not forsake homestead but lived in dwelling supplied by relative during six-month term of temporary job in another area of state. In re Koopal (1998, BC DC Idaho) 226 BR 888.

Chapter 7 debtor was entitled to $ 7,500 Indiana exemption for personal residence where (1) property had served in that capacity for several years prior to bankruptcy filing, debtor was in pos-session of property as renter on date he filed his bankruptcy petition, (2) property had been left to debtor in landlord's will and it was undisputed that debtor would receive legal title to property after sufficient time had passed for probate of estate to be completed, and (3) allowing exemption sup-ported policy behind Indiana exemption statute which was liberally construed in favor of debtors. In re Robertson (1998, BC SD Ind) 227 BR 844.

North Carolina has opted out of exemptions provided for in 11 USCS § 522(d) and, under North Carolina law, debtor with remainder interest in property subject to life estate may claim homestead exemption where debtor is residing on property. In re Cain (1998, BC MD NC) 235 BR 812.

State court award of $ 5000 equity in marital residence occupied by debtor's former spouse may not be claimed as homestead exemption under Missouri law where debtor neither owned nor occu-pied nor intended to reoccupy property. In re Schissler (2000, BC WD Mo) 250 BR 697.

11 USCS § 522(c) preempts Rhode Island homestead act's exemption for debts contracted prior to estate in homestead; thus, debtor was entitled to exempt property, even though lien on it predated both homestead act and his ownership. In re Strandberg (2000, BC DC RI) 253 BR 584.

Debtors in Missouri, state which had opted out of federal exemption scheme of 11 USCS § 522, were bound by express language of Missouri homestead statute which allowed only one joint owner to claim entire $ 8000 homestead exemption. In re Smith (2000, BC WD Mo) 254 BR 751.

Since Idaho homestead exemption is not limited to defined amount of land and does not require that homestead consist of one parcel or legal description, Chapter 7 debtors were entitled to exempt $ 50,000 homestead consisting of three separate parcels, each with separate legal description, where debtors had acquired additional property after purchase of initial homestead property in order to meet zoning requirements and where parcels were contiguous, debtors actually resided on property, and debtors utilized parcels as single property. In re Zantman (2001, BC DC Idaho) 2001 Bankr LEXIS 708.

Debtor failed to establish that she had equitable interest in property under state law as benefici-ary of prepetition resulting trust, where she funded down payment of $ 40,000 from her inheritance for family home titled in her husband's name, from which non-rebutted presumption of gift arose, and she did not list her "trust" interest in property in schedules signed under penalty of perjury. In re Cantrell (2001, BC DC Conn) 270 BR 551.

Proceeds from voluntary sale of Kansas homestead to be used to purchase homestead in another state are not exempt under Kansas homestead exemption laws; thus, they are not exempt in bank-ruptcy. In re Ginther (2002, BC DC Kan) 282 BR 16, 48 CBC2d 1559.

North Dakota is among majority of states that has chosen to "opt out" of federal exemption scheme of 11 USCS § 522 and limits its residents to exemptions allowed under North Dakota law, pursuant to N.D. Cent. Code § 28-22-17, and N.D. Cent. Code § 47-18-01 defines limits of home-stead exemption. In re Murphy (2003, BC DC ND) 292 BR 403.

Page 250 11 USCS § 522

Pursuant to Alaska Stat. § 09.38.010(a), Chapter 7 debtor was allowed to claim full homestead exemption for six-plex where debtor met plain language requirements of statute, i.e., debtor owned building and it was debtor's principal residence, and nothing in Alaska homestead statute's legisla-tive history, purpose, or caselaw interpreting statute indicated that homestead exemption was lim-ited exclusively to residential property. In re Shell (2003, BC DC Alaska) 295 BR 129.

Bankruptcy court held that debtors' motor home was motor vehicle for purposes of Ariz. Rev. Stat. § 33-1125(8). In re Sleeth (2003, BC DC Ariz) 300 BR 351.

Debtors, husband and wife, qualified for enhanced motor vehicle exemption under Ariz. Rev. Stat. § 33-1125(8) due to husband's disability where husband had advanced atherosclerosis and heart disease, had undergone three by-pass surgery operations, placement of stints, and angioplasty, he also suffered from knee problems and diabetes, and received total and permanent disability pay-ments from Social Security Administration. In re Sleeth (2003, BC DC Ariz) 300 BR 351.

Debtor was entitled to claim $ 20,000 exemption under O.C.G.A. § 44-13-100(a)(1) where his wife did not have title to home and did not file bankruptcy with him; statute imposed no require-ment that non-titled spouse also be in bankruptcy. In re Burnett (2003, BC MD Ga) 303 BR 684 (criticized in Wright v Taylor (In re Taylor) (2005, BC ND Ga) 2005 Bankr LEXIS 269).

In 11 USCS § 522 exemption matter, bankruptcy court found that at time involuntary Chapter 7 petition was filed, debtors had equitable interest that would have been property of estate but for op-eration of Kansas homestead exemption; debtors had equitable interest in Kansas homestead and properly applied Kansas exemption to their interest. In re McGinnis (2004, BC WD Mo) 306 BR 279.

When involuntary petition was filed, Chapter 7 debtors were domiciled in Kansas for 114 days, which was well more than half of preceding 180 days required; debtors were, therefore entitled un-der 11 USCS § 522 to utilize Kansas exemption statutes. In re McGinnis (2004, BC WD Mo) 306 BR 279.

Where debtor was separated from his estranged spouse and had moved out of marital residence at time of his bankruptcy filing, debtor could not claim homestead exemption in residence under Alabama law because he did not actually occupy property; fact that debtor hoped one day to reoc-cupy home by reconciling with his estranged wife was not enough to create valid homestead exemp-tion. In re Simmons (2004, BC MD Ala) 308 BR 559.

Retired debtors could not claim exemptions in their motor vehicles under La. Rev. Stat. Ann. § 13:388 because statute required that in order to exempt vehicle, debtor was required to be em-ployed; further, nothing in statute supported debtors' contention that they could claim exemptions in their vehicles because they used their vehicles to travel to medical appointments. In re Hill (2004, BC WD La) 310 BR 294.

Pre-paid rents attributable to leasehold could have been exempt under state homestead statute, Ala. Code § 6-10-2, as leasehold interest giving debtor present right to possession as of date of bankruptcy satisfied "ownership" requirement for valid homestead exemption but, because debtor made volitional transfer to her landlord prepaying her apartment rent, if trustee was able to avoid that transfer under one of avoidance powers sections enumerated in 11 USCS § 550, then 11 USCS § 522(g) precluded debtor from claiming recovered funds as exempt. In re Rutland (2004, BC MD Ala) 318 BR 588.

Page 251 11 USCS § 522

Where debtors owned duplex in which they occupied one-half as their residence and rented other half to residential tenant on month to month basis, debtors were entitled to homestead exemp-tion of entire duplex pursuant to Kan. Stat. Ann. § 60-2301 because they demonstrated considerable control and use of entire duplex; debtors maintained and enjoyed yard surrounding duplex, they maintained interior and exterior of entire duplex, they insured and paid taxes on entire structure, and they used driveway leading to tenant-occupied portion of duplex to store their trailer. In re McCam-bry (2005, BC DC Kan) 327 BR 469.

Only sensible reading is to limit homestead exemption to aggregate maximum of $ 30,000 and hold that spouse of debtor who joins in joint bankruptcy petition under 11 USCS § 302, part of Bankruptcy Code, although entitled to also elect his or her own $ 30,000 homestead exemption, is not entitled to add such $ 30,000 homestead exemption to their spouse's homestead exemption and thereby exceed $ 30,000 cap under Mich. Comp. Laws Serv. § 600.5451(1)(n). In re Lindstrom (2005, BC ED Mich) 331 BR 267.

11 USCS § 522(p), as added by Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, limits amount Nevada debtor may claim as homestead exemption to $ 125,000 if debtor has not owned property for more than 1215 days and did not previously own property in Nevada. In re Virissimo (2005, BC DC Nev) 332 BR 201, CCH Bankr L Rptr P 80385.

As Missouri opted out of federal bankruptcy exemption scheme under Mo. Stat. Ann. § 513.427, debtor was entitled to claim entire state homestead exemption, under Mo. Stat. Ann. § 513.475, in her one-half interest in homestead because, while debtor left homestead following fight with her companion, with whom she had bought homestead, she always intended to return to and did return to homestead. Additionally, debtor's companion testified that he had not filed for bankruptcy relief, that he had no creditors pursuing him, and that he was not contemplating filing for bankruptcy re-lief. In re Nguyen (2005, BC WD Mo) 332 BR 393.

Debtors' homestead proceeds that were exempt as of petition date remained exempt notwith-standing provision in Arizona's exemption statute, Ariz. Rev. Stat. § 33-1101(C), that proceeds be reinvested in another homestead within 18 months. Pre-emptive federal law did not permit debtor's postpetition use of exempt property to change its exempt status as of date of petition. In re Konnoff (2006, BC DC Ariz) 341 BR 28.

Debtors were entitled, pursuant to 11 USCS § 522(p)(1), to claim $ 125,000 homestead exemp-tion, and because debtors rolled over equity from their previous state homestead purchased more than 1,215 days prior to filing of their petition, they could claim rolled-over equity subject to $ 150,000 homestead cap of Ariz. Rev. Stat. § 33-1101. In re Summers (2006, BC DC Ariz) 344 BR 108.

Chapter 7 trustee's objection to debtor's claimed exemption of interest in real property based upon Mich. Comp. Laws § 600.5451(1)(n) was sustained because § 600.5451 was state's attempt to create its own set of bankruptcy-specific exemptions, and, as such, violated Supremacy Clause, U.S. Const. art. VI, cl. 2. In re Wallace (2006, BC WD Mich) 347 BR 626, CCH Bankr L Rptr P 80703.

In today's mobile society and given choice of law provisions in bankruptcy code, creditor cannot reasonably anticipate borrower's future exemptions under 11 USCS § 522 at time debt contract is executed; therefore, contracting party has no reasonable expectation that any particular state's ex-emption law in existence at time debt is incurred is substantial yet unwritten part of its contract should that debtor file for bankruptcy protection in future and no contract right is substantially im-

Page 252 11 USCS § 522

paired by South Carolina Home Security Act, S.C. Code Ann. § 15-41-30(1), in federal bankruptcy setting. In re Evans (2006, BC DC SC) 362 BR 275.

Debtor could not claim exemption under Me. Rev. Stat. Ann. tit. 14, § 4422, because his right to receive $ 50,000 from his former spouse pursuant to equitable property division that attended his divorce because he held no possessory or lien interest in property; he also could not claim proceeds exempt under Me. Rev. Stat. Ann. tit. 14, § 4422(C), because he had held them for more than six months. In re Toppi (2007, BC DC Me) 378 BR 9.

Although 11 USCS § 522(m) provides that exemptions may apply separately to each debtor in joint bankruptcy case, subsection (m) does not apply where state has opted out of federal exemp-tions and, under Nevada law, joint debtors who are married but living apart, may claim only one homestead exemption. Rowe v Jackman (In re Rowe) (1999, BAP9 Nev) 236 BR 11, 99 CDOS 5814, 99 Daily Journal DAR 7599, CCH Bankr L Rptr P 77962.

Given statements by Kansas Supreme Court that equitable title supported homestead exemption under Kansas law and liberal policy supporting such finding, bankruptcy court correctly held that Chapter 7 debtors had properly claimed homestead exemption in their residence where they had transferred legal title of property to two self-settled living revocable trusts, they retained equitable interest in property under Kansas law that was sufficient to make it property of estate, and there was no evidence that language in trust instrument deviated from general rule in Kansas that property of revocable trust was subject to claims of settlor's creditors. Redmond v Kester (In re Kester) (2006, BAP10) 339 BR 749.

D.Household Goods 137. Generally

Bankruptcy Court correctly relied on Kansas court of appeals' decision that phrase "reasonably necessary," as it relates to household furnishing exemption, should not be enlarged to exempt all household furnishings, but that court should make factual determination that exempt property is rea-sonable and necessary to debtor's customary standard of living; although Bankruptcy Court is not bound by decision because it was not rendered by Kansas Supreme Court, it is some indication of how that court would rule on issue. Walnut Valley State Bank v Coots (1986, DC Kan) 60 BR 834.

Bankrupt is entitled to exemption for household goods he tried to waive in his agreement with lending agency from which he borrowed money pledging his household goods as security. In re De Cova (1975, BC DC Hawaii) 2 BCD 1536.

"Household goods" as used in listing of exempt property does not include savings account, since household goods is defined as those items found within residence. In re Smith (1986, BC ED Mo) 3 BAMSL 3355.

Although state may elect to control what property is exempt under state law, federal law deter-mines availability of lien avoidance under 11 USCS § 522(f). In re Erwin (1996, BC SD Tex) 199 BR 628, CCH Bankr L Rptr P 77111.

Debtors may exempt household goods included in 11 USCS § 522(f)(1)(B) following trustee's avoidance of liens on such property, where amount of exemptions claimed by debtors equals value of property recovered by trustee, without increasing debtors' Chapter 13 plan payments, in order to comply with best interests of creditors test of 11 USCS § 1325(a)(4), since there would be no excess equity payable to unsecured creditors in Chapter 7; however, where property was motor vehicle and lien was voluntarily granted, debtors were not entitled to benefit of exemption and must pay into

Page 253 11 USCS § 522

their plan for benefit of unsecured creditors amount of money equal to value of vehicle as of effec-tive date of plan. In re Brennan (1997, BC SD Ill) 208 BR 448, 37 CBC2d 1484.

Where household furnishings do not have community property limitation under state law, spouse claiming state law exemption may claim all furnishings and is not limited to one-half com-munity interest therein. In re Dahdah (1982, BAP9 Cal) 20 BR 665, 9 BCD 166, CCH Bankr L Rptr P 68704.

138. Construction

Terms "household goods" and "household furnishings" must be given narrow construction; household goods are those items necessary to function of household but not recreational items. In re Ruppe (1980, BC DC Colo) 3 BR 60, 5 BCD 1404, 1 CBC2d 479.

Definition of household goods must be given narrow construction, to apply to those items nec-essary to functioning of household consistent with providing debtor with fresh start contemplated by overall bankruptcy philosophy. In re Ruppe (1980, BC DC Colo) 3 BR 60, 5 BCD 1404, 1 CBC2d 479.

Debtors may claim exemption in household goods in excess of $ 200 limit prescribed by 11 USCS § 522(d)(3) by use of spillover exemption provided for in 11 USCS § 522(d)(5), inasmuch as there is no limitation or restriction of any kind with regard to type of property which may be exempt under such spillover provision. In re Boozer (1980, BC ND Ga) 4 BR 524, 6 BCD 529, 2 CBC2d 435, CCH Bankr L Rptr P 67572.

Phrases "household furnishings" and "household goods" used in 11 USCS § 522 should be given liberal construction to include any personal property normally used by debtors or dependents in or about residence, and these phrases include home entertainment items, such as stereo system, regard-less of how elaborate; such phrases are not to be given more restricted scope for determining whether creditor's lien in exempt property may be avoided, than they are given in determining whether property should be exempt, so that, if creditor challenges scope of lien avoidance, it must be through statutory provisions governing what property may be claimed as exempt. In re Coleman (1980, BC MD Tenn) 5 BR 76, 6 BCD 669, 2 CBC2d 608.

Absent future direction from Congress, Bankruptcy Court will not be bound by FTC rule defin-ing "household goods", and will continue to make case-by-case determination of validity of debtor's claim of exemption under 11 USCS § 522(f)(2)(A), despite fact that FTC rule and Bankruptcy Code section both seek to limit reach of security interests in household goods which have little value to creditors but which place great burden on consumers when such goods are taken to satisfy liens. In re Smith (1986, BC ND Ga) 57 BR 330, 13 BCD 1325, CCH Bankr L Rptr P 70977.

Term "household goods" should be broadly interpreted; such items as rifles and chain saws which may be used in and about debtor's household are therefore properly exempt under state law and fall within lien avoidance section of Bankruptcy Code. In re Barley (1987, BC ND Ind) 74 BR 450, 4 UCCRS2d 298.

Household goods and household furnishings as used in 11 USCS § 522(d) and (f) should be given liberal construction to include any personal property normally used by Chapter 7 debtors or their dependents in or about their residence. In re Barrick (1989, BC MD Pa) 95 BR 310, 18 BCD 1463.

Page 254 11 USCS § 522

Chapter 7 debtor would not be denied exemption in household goods in debtor's possession be-cause of failure to list property with any specificity where that failure was due to mere transcribing error; court would not rule on contention by former spouse that exemption should be disallowed with respect to any property in which she might have interest since, once debtor exempts property from estate, it is not appropriate for Bankruptcy Court to determine extent of interest in that prop-erty held by debtor or anyone else. In re Leucht (1998, BC MD Fla) 221 BR 1009, 11 FLW Fed B 308.

139. Furniture

Sofa, loveseat, chair, floorlamp, end table, and coffee table constitute household goods. In re Mulcahy (1980, BC SD Ind) 3 BR 454, 6 BCD 223, 1 CBC2d 887.

Issue of whether debtor's furniture must be treated as living room set or as dinning room set for purposes of applying 11 USCS § 522(d)(3) is moot where plaintiff has adequate exemption to cover furniture, $ 15.00 of other property and tax refund under § 522(d)(5), which entitles debtor to ex-empt $ 7,900.00 worth of property. In re Johnson (1981, BC WD Mo) 15 BR 681, CCH Bankr L Rptr P 68518.

Household furnishings that are truly household goods that are held in storage for security are exemptible under 11 USCS § 522(d)(3). In re Kochell (1982, BC WD Wis) 26 BR 86, 9 BCD 1329, 4 EBC 1734, CCH Bankr L Rptr P 68942, affd (1983, WD Wis) 31 BR 139, 4 EBC 1942, affd (1984, CA7 Wis) 732 F2d 564, 11 BCD 1174, 5 EBC 1289, CCH Bankr L Rptr P 69835.

Chair and table worth approximately $ 100 or less constitute living room, bedroom, and dining room furniture within meaning of Louisiana statute and thus are exempt; vehicle used in firewood business is also exempt where amount of income produced from business is within "marginal addi-tional income" doctrine. In re Baker (1987, BC WD La) 71 BR 312.

Chapter 7 trustee objected to debtor's claim of miscellaneous beach furniture at vacation home as exempt household furniture under Virginia law; purpose of Virginia exemption statute and 11 USCS § 522(f)(2)(A) were identical in that both seek to protect debtors and their families from being left destitute by creditor process, therefore beach furniture at vacation home did not fall under defi-nition of household furnishings under Virginia law, and was therefore not exempt. In re Latham (1995, BC WD Va) 182 BR 479.

Chapter 7 debtor was not entitled to exempt household furniture under Rhode Island presump-tion that household goods and furnishings in joint possession of husband and wife are prima facie owned by entirety and therefore exempt from levy and sale where married women's acts had elimi-nated presumption and there was no evidence of intent of debtor and nondebtor spouse to hold property as tenants by entirety. In re Homonoff (2001, BC DC RI) 261 BR 551, 46 CBC2d 438.

140. Flatware, china or glassware

Testimony that boxed antique glassware was included on list of antiques taken by bank as col-lateral, that boxed items were "unused," and that items were in debtors' attic compels conclusion that such items are not reasonably necessary to maintain debtors' customary standard of living and thus are not exempt under Kansas household furnishings exemption, and, consequently, bank's liens on them may not be avoided under 11 USCS § 522(f); evidence that antique stove was in debtors' basement is insufficient to show stove is household furnishing reasonably necessary to maintain

Page 255 11 USCS § 522

debtors' customary standard of living, and thus it is not exempt and liens on it may not be avoided. Walnut Valley State Bank v Coots (1986, DC Kan) 60 BR 834.

Debtor's claim for exempt property as to silverware is denied where original claim was broad and ambiguous and failed to list and describe property as required by law and where debtor claimed no legal title in silverware. In re Polk (1981, BC ED Mo) 1 BAMSL 293.

Each particular item of silverware which does not exceed $ 200 in value is exempt under 11 USCS § 522(d)(3) where aggregate worth of sterling silverware collection, not held for speculation or investment purposes, far exceeds $ 200. In re Wahl (1981, BC ED Wis) 14 BR 153, 8 BCD 98, CCH Bankr L Rptr P 68402.

Debtor's silver flatware and china qualify for exemption under Virginia statute, which permits debtor to exempt enumerated articles, which puts no limit on value of articles exempted, which specifies no time for setting aside qualifying property, and which specifies no procedure for claim-ing property as exempt. In re Maginnis (1982, BC ED Va) 24 BR 146.

Chapter 7 debtors' sterling silver flatware is exempt under South Carolina state opt-out exemp-tions where it is used for personal and business dining and entertainment of guests. In re Shaffer (1987, BC DC SC) 78 BR 783, 16 BCD 807.

141. Guns

Chapter 13 debtors' handgun is "household good" within meaning of 11 USCS § 522(f)(2)(A), where debtors' handgun protects home and facilitates daily household living. First Family Fin. Servs. v Raines (In re Raines) (1994, ND Ga) 170 BR 187.

Arms and military accoutrements exempt under state statute means one gun sufficient for per-sonal protection and not gun collection valued at between $ 200,000 and $ 225,000 and bankrupt is entitled to have one suitable weapon chosen by trustee and set aside as exempt. In re Palermo (1978, BC WD La) 4 BCD 502, 17 CBC 808, CCH Bankr L Rptr P 66916.

Debtor's guns do not fall within meaning of household furnishings or goods under 11 USCS § 522(f)(2)(A), but gun cabinet does fall within meaning of household furnishings. In re McPherson (1982, BC DC NM) 18 BR 240.

Rifle is not household good within meaning of 11 USCS § 522(d)(3) and § 522(f)(2)(A); not all property kept in household is encompassed by term household goods. In re Noggle (1983, BC ED Mich) 30 BR 303.

Bankruptcy Court will not exempt debtor's guns under state law exemption for household goods, regardless of their use in hunting game for family's consumption, without evidence that debtor's family would otherwise be unable to feed themselves. In re Greenlee (1986, BC DC Colo) 61 BR 257, 14 BCD 583.

Debtors cannot exempt under South Carolina state opt-out provisions: (1) 2 video cassette re-corders unnecessary to afford debtors reasonably comfortable existence; (2) magnum pistol and semiautomatic gun; or (3) .22 caliber pistol. In re Stroman (1987, BC DC SC) 78 BR 785.

Gun is not household good within meaning of 11 USCS § 522(d)(3) or (f)(2)(A) and therefore creditor's nonpurchase money security interest in gun may not be avoided. In re Barrick (1989, BC MD Pa) 95 BR 310, 18 BCD 1463.

Page 256 11 USCS § 522

Rifle is household good for purposes of lien avoidance provisions of 11 USCS § 522(f)(1)(B)(i), since debtors use rifle for defensive purposes in and around their home. Crawford v First Family Fin. Servs. (In re Crawford) (1998, BC ND Ga) 226 BR 484.

Since firearms are neither per se included nor per se excluded from category of household goods, resolution of issue of whether they are exempt under Idaho law which now mirrors 11 USCS § 522(f)(1)(B)(i) requires proof of use made of firearms by debtor and functional nexus between them and debtor's household. In re Mason (2000, BC DC Idaho) 254 BR 764.

Creditor failed to present any evidence that any of debtor's claimed exemptions for firearms and fishing supplies did not fall under purview of "household good" under 11 USCS § 522(d)(3) and creditor bore burden of proof that debtor was not properly entitled to claimed exemptions. Local Union No. 38 v Andershonis (In re Andershonis) (2004, BC MD Pa) 324 BR 247.

142. Motor vehicles

Jeep should not be treated as household good. In re Steele (1980, BC DC SD) 8 BR 94, 3 CBC2d 598.

Debtor's automobile is not household good under 11 USCS § 522(f)(A) merely because it is used to drive daughter to and from school. In re Ramey (1984, BC WD Va) 45 BR 562, 12 BCD 793, CCH Bankr L Rptr P 70229.

In Chapter 7 case, debtors' all-terrain vehicle (ATV) qualified for Arizona's motor vehicle ex-emption statute, Ariz. Rev. Stat. § 33-1125(8); fact that ATV could serve only recreational purposes did not disqualify it from being exempt, and it was undeniably motor vehicle. In re Buchberger (2004, BC DC Ariz) 311 BR 794.

Creditor could not dismiss Chapter 7 bankruptcy petition filed by debtor when debtor sought to exempt from estate motor vehicle in which creditor had lien interest, because debtor provided credi-tor with sufficient notice of its intent under 11 USCS § 521(2) and was not required to physically deliver motor vehicle to creditor. In re Cornejo (2005, BC MD Fla) 18 FLW Fed B 116.

Where debtor's wheelchair equipped van was converted and specifically designed for her to en-ter and exit, and debtor required van to participate in everyday activities, including weekly visits to her doctor, van was uniquely situated as health aid, and debtor was entitled to claim it as exempt under Fla. Stat. ch. 222.25(2) and 11 USCS § 522(2)(A). In re Allard (2005, BC MD Fla) 18 FLW Fed B 294.

143. Television, VCR or stereo

Television set is not exempt either as household furniture or as musical instrument within state statute. In re Michealson (1953, DC Minn) 113 F Supp 929, affd (1954, CA8 Minn) 209 F2d 625.

$ 600 used color television set is not "necessary" furniture under New York law, and was not exempt property under former 11 USCS § 24. In re De Martini (1976, SD NY) 414 F Supp 69.

Color television worth $ 100 was allowed bankrupt under Vermont statute exempting such arti-cles of household furniture as may be necessary for sustaining life, which extends to things of con-venience and comfort and is not confined to things absolutely necessary for mere subsistence. In re Cota (1975, BC DC Vt) 2 BCD 24.

Page 257 11 USCS § 522

Television recording system and stereo sound system, although not appliances or musical in-struments within meaning of such terms as used in 11 USCS § 522, are household goods, as such term is used, so that debtor may claim exemption and avoid security interests in such item. In re Beard (1980, BC SD Iowa) 5 BR 429, 6 BCD 786, 2 CBC2d 895, CCH Bankr L Rptr P 67673.

Component parts of stereo system constitute household goods. In re Sweeney (1980, BC ED Wis) 7 BR 814, 6 BCD 1377, 3 CBC2d 523, CCH Bankr L Rptr P 67834, revd on other grounds (1982, CA7 Wis) 669 F2d 468, 8 BCD 880, 5 CBC2d 1290, CCH Bankr L Rptr P 68549, different results reached on reh, en banc (1982, CA7 Wis) 688 F2d 447, 9 BCD 730, 6 CBC2d 1441, CCH Bankr L Rptr P 68792.

Television set is within ambit of exempt household furnishings and goods under 11 USCS § 522(d)(3) as are tools, even those not of trade, where there is no indication that they are other than ordinary items found in most households. In re Hagerman (1981, BC WD Mo) 9 BR 412, 7 BCD 542, 4 CBC2d 202.

Chapter 7 debtors' may exempt as household furnishings, under California law, stereo and video cassette recorder, telephone answering machine, oil painting and figurines, and German beer steins; they may not claim, however, camera, golf clubs or exercise bike. In re Lucas (1986, BC SD Cal) 62 BR 949, 14 BCD 729, affd in part and revd in part on other grounds (1987, BAP9 Cal) 77 BR 242.

Assuming that Nebraska statute intends that only necessary items may be exempted as house-hold furnishings, Chapter 7 debtors' stereo and color television are not necessities and thus not ex-empt; however, debtors may exempt these items under "wild card" exemption, whose only limita-tion is that it does not apply to wages. In re Welborne (1986, BC DC Neb) 63 BR 23.

Stereo equipment, television, and cassette player are household goods under 11 USCS § 522(f) and Missouri exemption statutes; therefore lien on them may be avoided. In re Lanzoni (1986, BC WD Mo) 67 BR 58.

Debtors cannot exempt under South Carolina state opt-out provisions: (1) 2 video cassette re-corders unnecessary to afford debtors reasonably comfortable existence; (2) magnum pistol and semiautomatic gun; or (3) .22 caliber pistol. In re Stroman (1987, BC DC SC) 78 BR 785.

Stereo and VCR are household goods and therefore creditor's nonpurchase money security in-terest in them may be avoided under 11 USCS § 522(f). In re Barrick (1989, BC MD Pa) 95 BR 310, 18 BCD 1463.

Debtors may avoid creditors' lien in camera and accessories and VCR, pursuant to 11 USCS § 522(f)(2)(A), where items are household goods which are normally found in today's average home, since camera and accessories are used to memorialize family events which supports and facilitates day-to-day living within home, and since VCR is used for personal entertainment and not for pro-fessional or commercial use; however, debtors may not avoid lien on 16-gauge shotgun and .38 caliber revolver, where such items are not household goods, since wife, who allegedly needs shot-gun for protection of herself and children while husband is away from home, had never practiced loading or firing shotgun, and since revolver is second gun in city household, and second gun will not significantly support and facilitate debtor's day-to-day living within home. In re French (1995, BC ED Tenn) 177 BR 568.

Page 258 11 USCS § 522

Bankruptcy court rejected creditor's argument, that nonpossessory, nonpurchase-money security interest in big-screen television could not be avoided because such television was "luxury" item, because "luxury" was not mentioned as factor limiting exemptions for household goods under 11 USCS § 522(f)(1)(B)(i); this fact was supported by television's low value of $ 450, and Tenn. Code Ann. § 26-2-103 exempted personal property valued at less than $ 4,000. In re Doss (2003, BC WD Tenn) 298 BR 866.

144. Miscellaneous

"Appliance" as used in 11 USCS § 522, connotes some useful domestic function, and is most likely instrument or machine utilizing power supply, especially electric current, such as vacuum cleaner, refrigerator, toaster, or air conditioner; "musical instrument" is instrument having capacity in and of itself to produce or initiate musical sound. In re Beard (1980, BC SD Iowa) 5 BR 429, 6 BCD 786, 2 CBC2d 895, CCH Bankr L Rptr P 67673.

Small garden tractor and mower attachment used by debtor for yard work and never used for any commercial venture, purchased by debtor without any evidence of intent to use for other than household purposes, are household goods subject to exemption under 11 USCS § 522. In re Jones (1980, BC MD NC) 5 BR 655, 6 BCD 848, 30 UCCRS 1697 (criticized in In re McAllister (2001, BC ND Iowa) 267 BR 614, 47 CBC2d 431, 46 UCCRS2d 1138).

Debtor's two air conditioners, vacuum cleaner, television set and stereo are exempt under Okla-homa law, as authorized in 11 USCS § 522(f). In re Fisher (1981, BC WD Okla) 11 BR 666.

Under 11 USCS § 522(d)(3), debtor may exempt mowers except to extent that value of riding mower exceeds maximum per item allowance, but debtor may not exempt bottle collection, there being no evidence that collection is necessary for fresh start. In re Norman (1983, BC WD Mo) 32 BR 562.

Debtors may not avoid lien under 11 USCS § 522(f) on speedboat, motor, and boat trailer where such are not household goods under exemption provisions of Bankruptcy Code. In re Lenczowski (1983, BC ND Ind) 79 BR 392.

Debtors' doll collection is ordered turned over to trustee under 11 USCS § 542(a) and 11 USCS § 105(a) to be sold under 11 USCS § 363(b) where dolls are worth at least $ 1300 individually and collectively and assuming they are household goods, unexhausted availability of only $ 1,000 for exempt household goods remains; after sale trustee is ordered to pay debtors, less expenses, up to $ 1,000 for their unused homestead exemption. In re Phillips (1985, BC DC SC) 54 BR 664.

Word "animals" in 11 USCS § 522(d)(3) is used to limit exemption for property held for house-hold use; fact that tool of trade exemption under 11 USCS § 522(d)(6) contains no limiting language demonstrates that Congress intended that it not be limited. In re Cook (1985, BC WD Wis) 66 BR 3.

Chapter 7 debtors' may exempt as household furnishings, under California law, stereo and video cassette recorder, telephone answering machine, oil painting and figurines, and German beer steins; they may not claim, however, camera, golf clubs or exercise bike. In re Lucas (1986, BC SD Cal) 62 BR 949, 14 BCD 729, affd in part and revd in part on other grounds (1987, BAP9 Cal) 77 BR 242.

Camera and related equipment are not subject to exemption as household goods under Colorado exemption statute, but stereo system consisting of speakers, tuner, tape decks, and equalizer is ex-empt as household good. In re Whitney (1987, BC DC Colo) 70 BR 443.

Page 259 11 USCS § 522

Term "household goods" should be broadly interpreted; such items as rifles and chain saws which may be used in and about debtor's household are therefore properly exempt under state law and fall within lien avoidance section of Bankruptcy Code. In re Barley (1987, BC ND Ind) 74 BR 450, 4 UCCRS2d 298.

Term "goods" as used in 11 USCS § 522(f)(2)(A) in considering goods subject to lien avoidance includes more than those items that are indispensable to base existence of debtor and his family and includes items which, while not being luxuries, are convenient or useful to reasonable existence such as VCR, guns, fishing equipment, golf clubs, tent, cameras, home workshop tools, drill, hand-tools, luggage, penny collection, barbecue grill, jewelry and piano/organ. In re Bowen (1988, BC ED Mo) 82 BR 102, 4 BAMSL 4051.

Chapter 7 debtor can avoid liens on lawn equipment, guns, bicycles and exercise equipment un-der 11 USCS § 522(f)(2)(A) to extent such liens impair exemptions to which debtor may be entitled, since scope of § 522(f)(2)(A) includes items which, while not being luxurious, are convenient or useful to reasonable existence. In re Ray (1988, BC ED Mo) 83 BR 670, 4 BAMSL 4063.

Creditor's nonpurchase money lien on hunting equipment would be avoided under 11 USCS § 522(f) where hunting equipment is limited to clothing because hunting clothes are wearing apparel. In re Barrick (1989, BC MD Pa) 95 BR 310, 18 BCD 1463.

Debtors may avoid creditors' lien in camera and accessories and VCR, pursuant to 11 USCS § 522(f)(2)(A), where items are household goods which are normally found in today's average home, since camera and accessories are used to memorialize family events which supports and facilitates day-to-day living within home, and since VCR is used for personal entertainment and not for pro-fessional or commercial use; however, debtors may not avoid lien on 16-gauge shotgun and .38 caliber revolver, where such items are not household goods, since wife, who allegedly needs shot-gun for protection of herself and children while husband is away from home, had never practiced loading or firing shotgun, and since revolver is second gun in city household, and second gun will not significantly support and facilitate debtor's day-to-day living within home. In re French (1995, BC ED Tenn) 177 BR 568.

Former member of champion football team may avoid lien on his championship ring which he had pledged as security, since he had formed real sentimental attachment to ring which commemo-rated seminal event and represented extensive training and competition. In re Wilson (1997, BC DC RI) 213 BR 413.

Personal computer is household good for purposes of lien avoidance provisions of 11 USCS § 522(f)(1)(B)(i). Crawford v First Family Fin. Servs. (In re Crawford) (1998, BC ND Ga) 226 BR 484.

Chapter 7 debtor's tools were exempt under Alaska Stat. § 09.38.020(c) as tools of trade even though debtor was no longer employed as carpenter where debtor used tools to maintain six-plex that debtor owned, resided, and from which debtor received rental income. In re Shell (2003, BC DC Alaska) 295 BR 129.

Golf clubs, camera equipment, exercise bike, and Hummel figurines are household property un-der California opt-out provisions. In re Lucas (1987, BAP9 Cal) 77 BR 242.

E.Tools of the Trade or Profession 145. Generally

Page 260 11 USCS § 522

There is no tools of trade exemption in proceeds of property sold during administration of estate under 11 USCS § 522 unless debtors have expressed intention to use proceeds to buy cheaper or smaller tools so that they can continue in their trade. In re Patterson (1987, CA7 Wis) 825 F2d 1140, 16 BCD 607, CCH Bankr L Rptr P 71935 (superseded by statute as stated in In re Stallsworth (1991, BC SD Ind) 133 BR 470).

Language of Vermont's exemption statute dictates consideration of function or use of property in debtor's trade, rather than its size or type, to determine whether it falls within statutory language. Parrotte v Sensenich (In re Parrotte) (1994, CA2 Vt) 22 F3d 472, 25 BCD 859, CCH Bankr L Rptr P 75860.

Trade tools must actually be used in bankrupt's trade in order to be exempt. In re Fox (1924, DC La) 2 F2d 374.

Tools of trade exemption is available if debtor can show he is in trade when he files his com-plaint or intends to continue trade in the future. Middleton v Farmers State Bank (1984, DC Minn) 41 BR 953, 12 CBC2d 401.

To be tools of trade, items must be commonly understood to be such and commonly used by persons in trade. Middleton v Farmers State Bank (1984, DC Minn) 41 BR 953, 12 CBC2d 401.

Chapter 7 debtors may avoid lien on implements and tools of trade to extent provided in 11 USCS §§ 522(d)(6) and (5); nothing in 11 USCS § 522(f)(2)(B) limits extent to which debtors can avoid liens to amount specified in 11 USCS § 522(d)(6). In re Patterson (1986, WD Wis) 64 BR 120, 14 BCD 1276, remanded on other grounds (1987, CA7 Wis) 825 F2d 1140, 16 BCD 607, CCH Bankr L Rptr P 71935 (superseded by statute as stated in In re Stallsworth (1991, BC SD Ind) 133 BR 470).

General rule is that debtor must be engaged in trade on date of bankruptcy petition in order to claim tools of trade as exemption; however, when debtor has only temporarily ceased vocation at time of petition, tools of trade still may be exemptable but debtor must show reasonable prospects for re-engaging in trade. In re Johnson (1982, BC DC Kan) 19 BR 371.

Wild card or spillover provisions of 11 USCS §§ 522(d)(1) and (5) are unlimited and may be applied to any property of debtor including whatever property constitutes tools and implements of trade under § 522(f). In re Middleton (1983, BC DC Minn) 37 BR 36, remanded (1984, DC Minn) 41 BR 953, 12 CBC2d 401.

Debtor carpenter is "mechanic" within meaning of Virginia exemption statute despite fact that he is also general contractor and therefore he may exempt his tools of trade to extent items claimed are reasonably necessary both in kind and quality to perform his craft in efficient and competent manner. In re Allen (1985, BC ED Va) 52 BR 206 (superseded by statute as stated in In re Weinstein (1995, BC ED Va) 192 BR 133).

Debtor may claim tools of trade exemptions under 11 USCS § 522 for every bona fide trade in which he proves both intent and ability to engage; thus, where debtors engage in both farming and machine repair, they may exempt tools of both trades. In re Weinbrenner (1985, BC WD Wis) 53 BR 571.

Iowa law does not use primary occupation test for allowing exemptions; thus, debtors need not show that primary occupation of each of them is farming in order to each qualify for tools of trade exemption. In re Myers (1985, BC SD Iowa) 56 BR 423.

Page 261 11 USCS § 522

Under Nevada tools of trade exemption, tools of trade will be exempt where debtor wishes to continue in his trade or profession, even if on date of filing he was not so engaged; court must re-quire at minimum, however, (1) that claimed trade or profession has actually contributed to support of debtor and his family to some reasonable and meaningful extent in past and (2) in absence of this past history of support, or where debtor has ceased using property claimed as exempt, court must require that debtor demonstrate reasonable and realistic prospect of using property to earn his living in future. In re Kolsch (1986, BC DC Nev) 58 BR 67.

Debtor may claim $ 750 tools-of-trade exemption under Illinois law and may exempt his excess equity of $ 850 pursuant to Illinois wild card provision, there being no evidence that Illinois legisla-ture intended to repeal tools-of-trade exemption by limiting exemptions to property used for per-sonal purposes; rather, combining 2 exemptions enhances debtor's opportunity to realize self-sufficiency, which is goal of exemption statutes and thus debtor may avoid bank's nonpurchase money security interest in amount of $ 1600 which is extent that it impairs debtor's exemption. In re Allman (1986, BC CD Ill) 58 BR 790.

Debtors are limited to $ 5,000 exemption in tools of trade, rather than $ 10,000 as provided for in amendment to Minnesota statute, where $ 5,000 limit was in effect at time of agreement because to allow retroactive application would so substantially and materially alter remedy existing for se-cured creditor at time contract was made that it would be in violation of both impairment of contract clause and due process clause. In re Fossum (1986, BC DC Minn) 59 BR 820 (criticized in In re Larson (2001, BC DC Colo) 260 BR 174, 2001 Colo J C A R 2723).

Where debtor carries on more than one trade or profession, he/she may only exempt those arti-cles belonging to his/her main or principal business, or to business in which he/she is primarily en-gaged; "principal business/primarily engaged" test only applies where debtor carries on more than one business and not here where debtor wife is housewife, which does not constitute profession, trade, business or occupation within meaning of Kansas exemption statute. In re Meckfessel (1986, BC DC Kan) 67 BR 277, 15 BCD 202.

Husband and wife may each claim separate small tools and implements exemption provided them under Wisconsin statute in joint bankruptcy case and $ 300 limitation on value of exemption applies only to certain articles described within statute. In re Kowalewski (1986, BC WD Wis) 78 BR 553.

Term "tools in trade" should be given its customary meaning and as ordinarily used connotes manually operated devices and property of relatively insignificant value for purposes of determining whether object is eligible for lien avoidance under 11 USCS § 522(f)(2)(B). In re Harrell (1987, BC ND Ala) 72 BR 107, CCH Bankr L Rptr P 71757.

Under Iowa tools of trade exemption provision, fifth wheel camper used by dredge operator as living quarters at remote job sites and for storage of his equipment is not exempt property under 11 USCS § 522 in Chapter 7 bankruptcy since camper primarily serves as shelter and is no different from any other basic necessity of life, and since it is also used for merely transporting work tools and in that respect is indistinguishable from nonexempt vehicle. In re Honomichl (1987, BC SD Iowa) 82 BR 92, 16 BCD 1288.

Scope of 11 USCS § 522(d)(6) and that of 11 USCS § 522(f)(2)(B) are coextensive; Congress, in using terms "implements" and "tools of the trade" in §§ 522(d)(6) and 522(f)(2)(B), did not intend that their meaning be limited in § 522(d)(6) to "tools of modest value" such as "rakes and other

Page 262 11 USCS § 522

hand tools," and their meaning then be expanded in § 522(f)(2)(B) to include capital assets. In re Hintz (1988, BC ED Wis) 86 BR 571.

Chapter 7 debtor may combine Georgia exemptions for $ 500 tools of trade and $ 5,400 wild card exemption to exempt $ 5,900 of tools of trade for purpose of 11 USCS § 522(f). In re Jones (1988, BC MD Ga) 87 BR 738.

Prior case authority under which exemption is not impaired unless its amount is diminished in value is legislatively reversed by 1994 addition of 11 USCS § 522(f)(2)(A) under which judgment lien will impair debtor's exemption to extend sum of that judgment lien, other avoidable liens, if any, and applicable exemption exceed value of debtor's interest in property. In re Moe (1995, BC DC Mont) 179 BR 654.

Creditor's objection to debtors' motion to avoid lien was sustained, as debtors failed to meet burden of proof required by preponderance of evidence that secured property at issue constituted tools of trade and, accordingly, debtors could not avoid creditor's lien as exempt in bankruptcy pur-suant to 11 USCS § 522(f); court sustained. In re Henke (2003, BC DC ND) 294 BR 105.

Bankruptcy court adopted LaFond test and held that tools necessary to trade in which debtor was engaged at time of bankruptcy petition filing could still qualify as tools of trade under 11 USCS § 522(f)(2)(B), even where debtor was presently engaged in some other pursuit, provided that debtor had only temporarily ceased vocation to which tools belonged and was sincere in his or her intent to shortly resume that vocation. In re Henke (2003, BC DC ND) 294 BR 105. 146. Animals and livestock

Lien on Chapter 7 debtor's breeding cattle may be avoided under 11 USCS § 522(f) as lien on tool of trade, up to $ 5,000 limit of state exemption which provides that debtors may exempt breed-ing stock as tool of trade, because breeding livestock to livestock farmer is functional equivalent of crop farmer's tractor, which is implement of farmer's trade. In re Heape (1989, CA10 Kan) 886 F2d 280, 19 BCD 1397, CCH Bankr L Rptr P 73160.

Debtor ranchers' livestock are "tools of trade" under 11 USCS § 522(f)(2)(B) and thus they are able to avoid nonpossessory, nonpurchase-money security interest held by creditor on their live-stock. In re Heape (1989, CA10 Kan) 886 F2d 280, 19 BCD 1397, CCH Bankr L Rptr P 73160.

Chapter 12 debtors' 3 bulls may be classified as "tools of trade" under Vermont's exemption statute, where there is no contention that bulls at issue were not used by debtors as necessary in-struments in ultimate process of producing milk for sale; there is no need to make categorical dis-tinction that precludes inclusion of animals in classification of "tools of trade" when animals are actually used by debtor as instruments which are necessary to process of carrying on debtor's trade or profession. Parrotte v Sensenich (In re Parrotte) (1994, CA2 Vt) 22 F3d 472, 25 BCD 859, CCH Bankr L Rptr P 75860.

Vermont's specific livestock exemption does not preclude use of "tools of trade" exemption by Chapter 12 debtors to exempt 3 bulls from bankruptcy estate. Parrotte v Sensenich (In re Parrotte) (1994, CA2 Vt) 22 F3d 472, 25 BCD 859, CCH Bankr L Rptr P 75860.

Debtor farmers can exempt cattle as tools of trade under Vermont law which provides exemp-tion for professional or trade books or tools of profession or trade. Parrotte v Sensenich (In re Par-rotte) (1994, CA2 Vt) 22 F3d 472, 25 BCD 859, CCH Bankr L Rptr P 75860.

Page 263 11 USCS § 522

Chapter 7 debtors' cows are not tools of trade within meaning of 11 USCS § 522(d)(6), and liens on such cows may not be avoided under 11 USCS § 522(f)(2)(B). In re Patterson (1986, WD Wis) 64 BR 120, 14 BCD 1276, remanded on other grounds (1987, CA7 Wis) 825 F2d 1140, 16 BCD 607, CCH Bankr L Rptr P 71935 (superseded by statute as stated in In re Stallsworth (1991, BC SD Ind) 133 BR 470).

Cattle are not implements or tools of trade of debtor dairy farmer for purpose of lien avoidance under 11 USCS § 522(f)(2)(B). In re Meadows (1987, WD Va) 75 BR 357.

Breeding stock owned by farmer debtor are not implements or tools of the trade for purposes of exemption under 11 USCS §§ 522(d)(6) and 522(f)(2)(B); debtor cannot avoid non-purchase money security interest in such stock under § 522(f)(2)(B), even though such stock may be exempt under 11 USCS § 522(d)(5). In re Yoder (1983, BC WD Pa) 32 BR 777, affd in part and revd in part on other grounds (1984, WD Pa) 48 BR 744 and (criticized in In re Larson (2001, BC DC Colo) 260 BR 174, 2001 Colo J C A R 2723).

Twenty-six head of cattle are necessary tools of debtor's trade as dairy farmer since description of object as "tool" necessarily implies classification based upon object's functional and utilitarian purpose in hands of its owner or user; Congress did not place limit on kinds of property that may constitute "tool" since to do so would unfairly discriminate against particular professions and un-dermine fresh start policy Code seeks to promote. In re Walkington (1984, BC WD Mich) 42 BR 67, 11 CBC2d 276, CCH Bankr L Rptr P 69987.

Word "animals" in 11 USCS § 522(d)(3) is used to limit exemption for property held for house-hold use; fact that tool of trade exemption under 11 USCS § 522(d)(6) contains no limiting language demonstrates that Congress intended that it not be limited. In re Cook (1985, BC WD Wis) 66 BR 3.

Under Missouri law, debtor dairy farmers may not exempt cows used for commercial or produc-tion purposes under statute allowing exemption for animals used for personal, family, or household use, nor may they exempt them under tools of trade exemption because term "tool" does not en-compass livestock, but instead refers to inanimate devices such as instrument or apparatus that augments or extends limits of human physical ability or power; since cows are not exempt, liens on them may not be avoided under 11 USCS § 522(f). In re Eakes (1987, BC WD Mo) 69 BR 497.

Debtors' breeding cattle were not tools of trade for purposes of avoiding lien on them, despite debtors' argument that they used them to create salable product, i.e., calves, on which they made their living, since use of property to create salable product does not automatically establish that property as tool of trade; court would follow established definition that tools of trade are instru-ments of manual operation. In re Smith (1996, BC ND Iowa) 206 BR 186.

147. Farm tools, machinery or equipment

Definition of "farmer" found in 11 USCS § 101(17) applies only where word "farmer" appears in Bankruptcy Code, and will not apply to prevent debtor, who earns less than 80 percent of his in-come from farming, from protecting the tools of his farming trade under lien avoidance provisions of 11 USCS § 522(f)(2)(B). In re La Fond (1986, CA8 Minn) 791 F2d 623, 14 CBC2d 1185, CCH Bankr L Rptr P 71143.

Chapter 7 debtor is entitled to avoid lien on large farm equipment where debtor is in business of farming, large farm equipment is "tools of trade" even though of substantial financial value, and

Page 264 11 USCS § 522

equipment is reasonably necessary to conduct of business. In re La Fond (1986, CA8 Minn) 791 F2d 623, 14 CBC2d 1185, CCH Bankr L Rptr P 71143.

Whether implement is used in Chapter 7 bankrupt's trade is fact question under 11 USCS § 522(f) based on individual's particular circumstances; temporary abatement of work in trade is not fatal to claim for exemption for tools or implements of that trade; statutory definition of farmer in 11 USCS § 101(17)-(18) is not controlling for purposes of tool or trade provisions. In re Liming (1986, CA10 Okla) 797 F2d 895, CCH Bankr L Rptr P 71261.

Debtor may avoid judicial lien pursuant to 11 USCS § 522(f) on full value of tractor, despite dollar limitation on exemption under Bankruptcy Code, where state law exemption for farm imple-ments does not contain such limitation. In re Liming (1986, CA10 Okla) 797 F2d 895, CCH Bankr L Rptr P 71261.

Debtors still operating dairy farm and in possession of cows and farm machinery at time of peti-tion for conversion of Chapter 11 bankruptcy to Chapter 7 are entitled to use tools of trade exemp-tion under 11 USCS § 522 despite fact that debtors quit farming by time they filed their motion to avoid bank's lien on such property. In re Patterson (1987, CA7 Wis) 825 F2d 1140, 16 BCD 607, CCH Bankr L Rptr P 71935 (superseded by statute as stated in In re Stallsworth (1991, BC SD Ind) 133 BR 470).

In Chapter 7 bankruptcy case filed by husband and wife debtors, wife as well as husband was entitled to claim "tools of trade" exemption for farm equipment under Kan. Stat. Ann. § 60-2304(e) as wife worked on farm, contributed income to joint account used to purchase equipment, and co-signed on loans for which equipment served as collateral; trustee failed to show that debtors oper-ated farm as partnership. Lampe v Williams (In re Lampe) (2003, CA10 Kan) 331 F3d 750, CCH Bankr L Rptr P 78864.

Bankrupt is entitled to exemption of certain farming tools as farmer even though he stopped farming temporarily and was engaged in another pursuit. where there is no permanent abandonment of his former occupation. In re Fly (1901, DC Cal) 110 F 141.

Husband and wife debtor were entitled to $ 7500 exemption each as allowed under Wisconsin law for tools of farm trade subject to nonpossessory, nonpurchase money lien, rather than $ 5000 per debtor under federal law, since where state did not expressly prohibit avoidance of lien at issue, 11 USCS § 522(f)(3) did not apply. United States v Ehlen (In re Ehlen) (1997, WD Wis) 207 BR 179, CCH Bankr L Rptr P 77392.

Debtor who carries on more than one trade or profession may claim exemption for tools of trade under Kansas opt-out legislation but exempted articles must pertain to business in which debtor is primarily engaged; debtor's testimony that she operates equipment, hauls grain, makes trip for fertil-izer, cares for hogs and does other farm chores supports contention that primary occupation is farm-ing even though she works part-time for insurance company; and thus debtor is entitled to $ 5,000 exemption for farm equipment and may therefore avoid nonpossessory, nonpurchase money lien on said equipment to that extent under 11 USCS § 522(f). In re Oetinger (1985, BC DC Kan) 49 BR 41 (criticized in Lampe v Iola Bank & Trust (In re Lampe) (2002, BAP10) 278 BR 205).

Under opt-out provision of 11 USCS § 522, Chapter 13 debtor farmers under Nebraska law are allowed exemption for tools up to value of $ 1,500, but exemption is for individual; thus husband and wife debtors may claim up to $ 3,000. In re Keller (1985, BC DC Neb) 50 BR 23.

Page 265 11 USCS § 522

Since farming is occupation requiring skilled labor, commonly engaging specialized implements and tools, farming is trade for purposes of 11 USCS §§ 522(d)(6) and 522(f)(2)(B). In re Weinbren-ner (1985, BC WD Wis) 53 BR 571.

Under Iowa exemption law, debtors' work as full time teachers does not prevent them from claiming farm equipment as exempt tools of trade where it is undisputed that debtors are engaged in farming and there has been no allegation that such work failed to contribute to their support; engag-ing in trade for profit instead of debtors' personal support does not prevent debtors from claiming tools of trade exemption; thus, custom farmer is farmer for purpose of Iowa exemption statute and, because debtors were engaged in custom farming at the time they filed their petition, they are to be considered farmers for purpose of exemption statute, and they did not by becoming custom farmers abandon trade of farming. In re Myers (1985, BC SD Iowa) 56 BR 423.

Chapter 7 debtors' avoidance of liens on farm equipment exempt under Wisconsin law is not limited to $ 750 amount contained in 11 USCS § 522(d)(6). In re Brzezinski (1985, BC WD Wis) 65 BR 336.

Farmer's wife is "farmer" for purposes of exemptions and for purposes of lien avoidance upon exemptions under 11 USCS § 522. In re Schmitt (1986, BC ND Iowa) 56 BR 708.

Debtor, who had been farmer for some time prior to filing bankruptcy, is farmer for purposes of Minnesota exemption statute and for purposes of avoiding lien under 11 USCS § 522(f)(2)(B) even though debtor is presently enrolled in vocational-technical institute taking classes in over-the-road trucking where debtor has evidenced clear intention to resume farming operations and has demon-strated that his hiatus in farming is temporary; temporary abatement of work in trade may not be fatal to claimed exemption for tools of trade and, further, abandonment of trade requires intentional abandonment. In re Schuette (1986, BC DC Minn) 58 BR 417.

Chapter 7 debtor husband is farmer for purposes of exemption and lien avoidance provisions re-garding tools of trade under 11 USCS § 522 where he has been farmer in past, although he is cur-rently employed elsewhere, and he has present intention to continue farming in future; debtor wife is also farmer even though she has full-time job outside farm, where she has helped husband with numerous farm chores, she takes care of book work for farm, she does numerous domestic chores necessary to operation of farm family, and where, if farm is to continue in operation, she will play significant role in that operation. In re Peters (1986, BC DC Minn) 60 BR 711 (criticized in In re Larson (2001, BC DC Colo) 260 BR 174, 2001 Colo J C A R 2723).

Kansas exemption statute for tools of trade does not require debtor to farm his own property for himself, as opposed to performing farm labor for someone else; mere fact that debtor's farm income was derived from landlord's share of crops does not preclude him from being farmer where he has testified that he actually engages in farming activities. In re Massoni (1986, BC DC Kan) 67 BR 195.

Kansas exemption for tools of trade does not require debtor to farm his own property for himself as opposed to performing farm labor for himself. In re Meckfessel (1986, BC DC Kan) 67 BR 277, 15 BCD 202.

Debtor wife qualifies as farmer who may exempt farm equipment as tools of trade under Kansas law, even though farm income is used for mutual benefit and even though husband may do more of farm work and may take care of financial aspects of farming operation where wife has testified that

Page 266 11 USCS § 522

she has engaged for 50 years, and continues to engage, in farming activities. In re Meckfessel (1986, BC DC Kan) 67 BR 277, 15 BCD 202.

Modern farm implements may be exempt, notwithstanding fact that they are not specifically de-scribed in state statute providing exemption for many obsolete farm implements, if they are succes-sors of antiquated exempt implements, and therefore debtor may avoid nonpossessory, nonpur-chase-money security interests in such property under 11 USCS § 522(f). In re Sutheimer (1986, BC WD Wis) 87 BR 64.

Debtor is farmer for purposes of Iowa opt-out exemption for tools of trade, even though debtor has been involved in off-farm employment, where: (1) debtor exchanged custom farming activities on father's farm for rent; and (2) debtor performed additional farming work and has desire to return to farming full time. In re Smith (1987, BC SD Iowa) 78 BR 922.

Although most of Chapter 7 debtors' farm implements are individually of modest value, taken together they are in fact debtors' capital assets, and thus, they do not qualify for lien avoidance un-der 11 USCS § 522(f)(2)(B). In re Hintz (1988, BC ED Wis) 86 BR 571.

Chapter 7 debtor may exempt tools and implements as tools of trade under Georgia exemption provisions and for purpose of lien avoidance under 11 USCS § 522(f) where: (1) debtor has been farmer for 35 years; (2) debtor states intention to resume farming as occupation; and (3) tools and implements are essential to debtor if he is to resume farming. In re Jones (1988, BC MD Ga) 87 BR 738.

For purposes of determining her rights to exemption under state exemption statute, Chapter 7 debtor wife's occupation and business continue to be farming, despite fact that she has taken part-time job off farm, where: (1) she has worked on farm since her marriage in 1966; (2) she considers herself farm owner; (3) she has shown that she performs numerous tasks that can only be classified as "farming"; and (4) her outside work can hardly be said to have contributed major portion of cou-ple's means of living, since her contribution to gross income was approximately 10 percent of total income. In re Kobs (1994, BC DC Kan) 163 BR 368, 30 CBC2d 1225.

Bankruptcy court found that after applying Kansas law, debtor wife was engaged in farming as wife's principal occupation, was entitled to tool of trade exemption in farm equipment under Kan. Stat. Ann. § 60-2304, and could avoid creditor's lien. In re Kieffer (2002, BC DC Kan) 279 BR 290.

In consideration of debtor's 11 USCS § 522(f) motion to avoid creditor's lien on tools of trade, bankruptcy court was not convinced that debtors had any reasonable prospect of return to farming business and one debtor's statements related to his hopes were not enough to satisfy LaFond test. In re Henke (2003, BC DC ND) 294 BR 105.

148.--Particular items

Bank's lien on Chapter 7 debtor's tractor impairs bankruptcy exemption to which debtor would have been entitled under state law exempting implements of husbandry necessary to farm home-stead, and may be avoided under 11 USCS § 522(f). In re Liming (1986, CA10 Okla) 797 F2d 895, CCH Bankr L Rptr P 71261.

Present-day hay "bailer" may be exempted under Wisconsin statute exempting "hay loader" as tool of trade and present-day "haybine" may be exempted as "mower," even though present-day equipment performs functions in addition to those performed by equipment named in statute and may be more valuable; fact that debtor may own "mower" as used in statute does not preclude her

Page 267 11 USCS § 522

from exempting haybine. In re Erickson (1987, CA7 Wis) 815 F2d 1090, CCH Bankr L Rptr P 71725.

Expensive farm equipment can be "tools of trade" for to hold that only inexpensive items would be tools of trade would penalize those who choose farming as profession and would be contrary to fresh start purpose of bankruptcy. Middleton v Farmers State Bank (1984, DC Minn) 41 BR 953, 12 CBC2d 401.

Hay baler and haybine are modern equivalents of "mower" and "hay loader" which are specifi-cally exempted under Wisconsin law and thus debtor may exempt them even though she also owns mower; statute should be construed to exempt modern equivalents of obsolete farm implements named in statute in order to effectuate intent of legislature and debtor has burden of proving that implement for which exemption is sought is modern successor to obsolete implement listed in stat-ute. In re Erickson (1986, WD Wis) 63 BR 632, affd (1987, CA7 Wis) 815 F2d 1090, CCH Bankr L Rptr P 71725.

Personal property which qualifies as exempt under state exemption of tools or instruments used by farmer will include tools which are commonly used by farmers in use reasonably related to farm-ing operation, such as welders and other mechanic's tools used to repair farm equipment, and car-pentry tools and construction equipment used to maintain farm buildings, as well as small and port-able buildings used in farming operation which have no other utility than in raising and care of swine; however such exemption will not include generator not shown to have relationship to normal farming operation, or truck and automobiles which, although used in farming operation, are classi-fied as vehicles, rather than tools or instruments, under applicable state exemption statutes. In re Hahn (1980, BC SD Iowa) 5 BR 242, 2 CBC2d 761.

"Tools of trade" and "implements" as used in 11 USCS § 522(d)(6) and (f)(2)(B) does not in-clude large farm machinery. In re Yparrea (1981, BC DC NM) 16 BR 33.

Farmer who is fulltime hospital employee and cannot meet 80 percent test imposed by 11 USCS § 101(17) defining "farmer" as one earning more than 80 percent of gross income from farming op-erations is nonetheless permitted under 11 USCS §§ 522(d)(6) and 522(f)(2) (B) to exempt and avoid liens upon farm implements and tools, such as large pieces of farm equipment, as "tools of the trade." In re Yoder (1983, BC WD Pa) 32 BR 777, affd in part and revd in part on other grounds (1984, WD Pa) 48 BR 744 and (criticized in In re Larson (2001, BC DC Colo) 260 BR 174, 2001 Colo J C A R 2723).

Creditor's argument that 11 USCS § 522(f)(2) exemption for tools of trade only applies to small tools of little value is too narrow; debtors may exempt expensive farm machinery necessary to beef cattle operation. In re La Fond (1984, BC DC Minn) 45 BR 195, affd (1985, DC Minn) 61 BR 303 and affd (1986, CA8 Minn) 791 F2d 623, 14 CBC2d 1185, CCH Bankr L Rptr P 71143.

Large farm equipment qualifies as tools of trade under 11 USCS § 522(f)(2)(B) if regularly used by farmers in debtor's operation, and section is not limited to small hand tools by $ 750 limit on tool exemption, because debtor can use overflow provision of 11 USCS § 522(d)(5) to add on homestead exemption of $ 7,500, which covers large equipment; especially where state (Minnesota) law ex-plicitly exempts farm equipment. In re Middleton (1985, BC DC Minn) 45 BR 744, CCH Bankr L Rptr P 70228.

Page 268 11 USCS § 522

For purposes of Virginia statute which allows exemption for plow, Chapter 7 debtors are enti-tled to exempt disc because legislature intended exemption for farm implement that farmer can use to get his land ready for planting and, at present, debtors would be unable to till land in satisfactory manner without use of disc as plow. In re Newsome (1986, BC ED Va) 60 BR 169.

Chapter 7 debtors' stock trailer, which they use to transport livestock to market, is exempt as "wagon or cart" within meaning of Virginia statute as statute intends that farmer is allowed to ex-empt piece of equipment which he needs to transport his commodities and does not require that it be pulled behind horse or tractor. In re Newsome (1986, BC ED Va) 60 BR 169.

Grain bin and "miscellaneous tools" are not farm implements or machines within meaning of Minnesota exemption statute for farm machines and implements, thus they may not be claimed as exempt and liens on those items may not be avoided. In re Peters (1986, BC DC Minn) 60 BR 711 (criticized in In re Larson (2001, BC DC Colo) 260 BR 174, 2001 Colo J C A R 2723).

Fact that debtor allowed his sons to use his tractor does not preclude debtor from claiming trac-tor as tool of trade under Kansas law. In re Massoni (1986, BC DC Kan) 67 BR 195.

Trucks, crawler loader, and fax machine used by Chapter 7 debtor in his home construction work qualified for exemption as tools of trade under Connecticut law. In re Clifford (1998, BC DC Conn) 222 BR 8, CCH Bankr L Rptr P 77728.

Debtor could not claim exemption under 735 Ill. Comp. Stat. 5/12 -1001(d) for piece of equip-ment used in construction as "tool of trade" because purpose of exemption was to enable debtors to retain tools of modest value, not large pieces of machinery. In re Gentry (2003, BC CD Ill) 297 BR 553.

149. Motor vehicles

Chapter 7 debtor may not exempt motor vehicle under Wyoming tools of trade opt-out provision where vehicle is (1) not used directly in performance of debtor's employment duties; and (2) only required by debtor to commute to his sole workplace. Johnston v Barney (1988, CA10 Wyo) 842 F2d 1221, CCH Bankr L Rptr P 72232.

Debtor may not avoid lien pursuant to 11 USCS § 522(f)(2)(A), (B), or (C) on 1980 Oldsmobile Cutlass because automobile cannot be considered tool of trade; court will not expand upon clear in-tention of Congress to treat automobiles as motor vehicles particularly where to treat them as tools in trade would allow complete avoidance of nonpossessory, non-purchase money security interests by virtue of 11 USCS § 522(f). In re Nowak (1984, WD Wis) 48 BR 290.

In providing for separate exemption for tools of trade and motor vehicles, Congress clearly did not intend that motor vehicle automatically qualify as tool of trade. In re Meyers (1980, BC ED Mich) 2 BR 603, 5 BCD 1306, 1 CBC2d 470.

Personal vehicle which debtor claims as exempt is allowable exemption under 11 USCS § 522 only as motor vehicle, and not tool of debtor's trade, where debtor is employed to operate fork lift, and is not required to, nor does he use, personal vehicle to perform such services, but uses it merely to go to and from work. In re Meyers (1980, BC ED Mich) 2 BR 603, 5 BCD 1306, 1 CBC2d 470.

Description of object as tool of trade must be based upon object's functional and utilitarian pur-pose in hands of owner or user, and enumeration of automobile elsewhere in 11 USCS § 522 does not preclude its classification as tool of trade where debtor in fact uses automobile as such, as is

Page 269 11 USCS § 522

case with real estate salesman who must have constant and immediate access to reliable transporta-tion both for himself and his clients. In re Dubrock (1980, BC WD Ky) 5 BR 353, 6 BCD 771, 2 CBC2d 776.

Enumeration of motor vehicle as exempt property does not preclude its classification as tool of trade. In re Dubrock (1980, BC WD Ky) 5 BR 353, 6 BCD 771, 2 CBC2d 776.

Automobile should not automatically qualify for tool of trade exemption, and debtor whose use of car is wholly unrelated to occupation as factory worker is not entitled to tool of trade exemption even though she lacks alternative means of transportation to work; likewise, debtor's automobile does not qualify for tool of trade exemption where he is employed as service station mechanic, not-withstanding he allegedly uses vehicle in employment to carry tools and provide necessary transpor-tation to job sites, and for use in procuring and delivering parts and items which he may repair and work on as mechanic, where vehicle has not been specifically adapted for use by roving mechanic, and is not equipped with accoutrements, such as winch or towing mechanism, which would make it uniquely suitable for on-the-road vehicle maintenance as "traveling workshop". In re Damron (1980, BC WD Ky) 5 BR 357.

Van, which is specially equipped with shelving and brackets on inside and which debtor uses to transport full stock of merchandise he sells, is tool of trade within meaning of 11 USCS § 522. In re Seacord (1980, BC WD Mo) 7 BR 121.

Debtor may exempt 2 trucks, car, bobcat, asphalt roller, air compressor, and concrete saw but not banking account used for working capital in Kansas, which opted out of federal exemptions un-der 11 USCS § 522(b)(2)(A). In re Frierson (1981, BC DC Kan) 15 BR 157.

Debtor's pick up truck qualified as "tool of trades" which can be claimed as exempt property pursuant to 11 USCS § 522(d)(6) where debtor necessarily uses truck to carry on his trades as part-time farmer and electrician; further, debtor may avoid creditor's security trust in its entirety under § 522(f)(2) (b) by employing "spillover" provision of § 522(b)(5). In re Eagan (1982, BC ND NY) 16 BR 439, 8 BCD 762.

Debtor's pickup truck is not tool or implement of his trade under 11 USCS § 522(d)(6) where he has not reasonably shown that truck is more than means of transportation. In re Maricle (1982, BC ND Tex) 25 BR 36.

Under Oregon law vehicle may not be treated as tool of trade unless it is uniquely suited for and principally used in connection with principal business activity. In re Lindsay (1983, BC DC Or) 29 BR 25.

Exemption for tools of trade under Montana opt-out provisions does not include truck or auto-mobile, but is limited to instruments of manual operation; debtor tradesman or artisan may not ex-empt truck equipped with mobile crane under Montana provisions. In re Gehnert (1983, BC DC Mont) 79 BR 17.

Motor vehicle is tool of trade exempt under 11 USCS § 522(f)(2)(B) only if it is necessary to and is used by debtor to carry on his trade; van which debtor husband used in business of cleaning and buffing floors of various establishments with use of heavy, specialized equipment, and which was modified for carriage of equipment in way which apparently significantly reduced van's utility for hauling other cargo is tool of trade. In re Dempsey (1984, BC ED Pa) 39 BR 561.

Page 270 11 USCS § 522

Pickup truck is not "tool of the trade" of installer of sound equipment in churches, pursuant to 11 USCS § 522(f)(2)(B), absent proof that truck serves as other than transportation or of capacity in which debtor is so employed. In re Parker (1984, BC ND Ala) 40 BR 490.

According to rule that exemption statutes are to be liberally construed, car used by debtor is "tool of the trade" under 11 USCS § 522(f) where debtor is salesman whose job requires him to fur-nish car in order to make sales calls; debtor may therefore avoid nonpossessory, nonpurchase-money security interest under 11 USCS § 522(f) up to $ 750 limit; value of car in excess of $ 750 limit may be exempted under "wild card" exemption in 11 USCS § 522(d)(6). In re Nowak (1984, BC WD Wis) 43 BR 545.

Debtor registered nurse's automobile is not tool of trade under 11 USCS § 522(f)(B) simply be-cause it is used to drive to and from work at hospital; thus, lien on automobile cannot be avoided. In re Ramey (1984, BC WD Va) 45 BR 562, 12 BCD 793, CCH Bankr L Rptr P 70229.

Chapter 7 debtor housekeeper's automobile, which is used primarily to transport herself and her cleaning equipment to various homes at which she is employed is not "tool of the trade: within 11 USCS § 522(f)(2)(B) and nonpossessory nonpurchase money lien on it may not be avoided. In re Weiss (1985, BC DC Colo) 51 BR 224, 13 CBC2d 506, CCH Bankr L Rptr P 70681.

Assuming that Chapter 7 debtors' fully encumbered Mercedes is tool of trade in their catering business, debtor's may not exempt it under 11 USCS § 522(b) because Texas law does not exempt property which is subject to secured lien; further, debtors may not avoid lien on vehicle because 11 USCS § 522(f) is dependent upon entitlement to exemption under 11 USCS § 522(b). In re Graham (1986, BC SD Tex) 64 BR 469.

Chapter 7 debtors may exempt their semi-truck cab under Minnesota tools of trade exemption where debtors are self-employed truckers and trucking business consists of hauling goods, com-modities, and bulk from one place to another for fee by trucks such as debtors' that are specially de-signed, equipped, and used for that sole purpose. In re Smith (1986, BC DC Minn) 68 BR 581.

Fact that both automobiles and trucks are defined as motor vehicles does not preclude debtor from exempting truck as tool of trade nor does provision in separate statute for motor vehicle ex-emptions, allowing debtor to exempt interest in personal use motor vehicle, preclude application of tools of trade exemption in appropriate cases. In re Smith (1986, BC DC Minn) 68 BR 581.

Determination of whether automobiles and trucks can be exempt under tools of trade exemp-tions must be made upon facts of each particular case and resolution should be based upon their connection with particular trade or business, not upon their connection with individual debtor. In re Smith (1986, BC DC Minn) 68 BR 581.

Chapter 7 debtors may not exempt their tractor and trailer valued at $ 30,000 under Maryland tools of trade exemption, even though they are used by debtor husband in his hauling business and debtors will be hard pressed to maintain same level of earnings without tractor and trailer, because Maryland General Assembly did not intend to exempt motor vehicles as tools of trade in light of their often large value; had legislature intended to include excessive equity in such vehicles within exemption protection, dollar limitations would have been provided as in other segments of exemp-tions; Maryland Constitution deals with preserving from execution reasonable amount of debtor's property and tractor-trailer exceeds reasonable amount contemplated by legislature. In re Chapman

Page 271 11 USCS § 522

(1986, BC DC Md) 68 BR 745 (criticized in In re Butcher (1995, BC DC Md) 189 BR 357, 8 Fourth Cir & Dist Col Bankr Ct Rep 238, CCH Bankr L Rptr P 76824).

Chair and table worth approximately $ 100 or less constitute living room, bedroom, and dining room furniture within meaning of Louisiana statute and thus are exempt; vehicle used in firewood business is also exempt where amount of income produced from business is within "marginal addi-tional income" doctrine. In re Baker (1987, BC WD La) 71 BR 312.

"Tool of trade" language found in 11 USCS § 522(f)(2)(B) was not intended by Congress to in-clude automobiles or trucks because § 522(f) applies only to items of relatively insignificant value. In re Harrell (1987, BC ND Ala) 72 BR 107, CCH Bankr L Rptr P 71757.

Van is motor vehicle and not exempt tool of trade under Montana law, despite fact debtor musi-cian used van to transport musical instruments to various locations for work, since van had no spe-cialized characteristics which enabled debtor to ply his trade by use of such vehicle and holding of such vehicles as exempt would generally endanger valid liens in motor vehicles. In re Horton (1987, BC DC Mont) 76 BR 166.

Chapter 7 debtor in Iowa cannot avoid fixing of lien on his vehicles under 11 USCS § 522(f) as "tools of trade" since Iowa law provides separate exemption categories for tools of trade and vehi-cles, and as such, vehicles are not included under tools of trade. In re Van Pelt (1987, BC SD Iowa) 83 BR 617.

Chapter 12 debtors may exempt feed truck as tool of trade pursuant to Kansas law, despite bank's allegation that exemption should be denied since debtor wife has no ownership interest in truck and her primary occupation is not farming and, therefore, she is not entitled to claim farming equipment as tool of trade, where debtor wife, who is licensed beautician, has ownership interest in feed truck since she is shown as co-owner of truck on certificate of title, and debtor wife's primary occupation is farming, even though she received some income from her beauty salon, where such income was not even close to one-half of farm income, and she spent more time farming than she did working as beautician. In re Zink (1995, BC DC Kan) 177 BR 713.

Debtor's vehicle was not "tool of the trade" within meaning of 11 USCS § 522(f)(1)(B)(ii), where he, in course of his business of buying and selling jewelry and collectibles, drove it to call on customers, conduct appraisals, and deliver goods, since it was ordinary Porsche with no adaptation for particular use as delivery car. In re Juhasz (1995, BC SD Tex) 208 BR 32, 34 UCCRS2d 212.

Tractor and trailer owned by Chapter 7 debtor/truck driver were not exempt as tools of trade un-der Tennessee's opt-out exemption statute since legislative intent behind statute was to include small items, not high dollar items. In re Nipper (1999, BC ED Tenn) 243 BR 33.

Automobile can be exempted by bankruptcy debtor as tool of trade under 11 USCS § 522(d)(6); to determine whether automobile is tool of trade, bankruptcy court must consider whether vehicle is reasonably necessary to debtor's trade or business, which requires more than showing that debtor needs vehicle to travel to and from place of employment. In re Giles (2006, BC ED Pa) 340 BR 543.

For purposes of tool-of-the-trade exemption under 11 USCS § 522(d)(6), vehicle may be neces-sary to and used by bankruptcy debtor regardless of whether or not it is specially outfitted for debtor's trade. In re Giles (2006, BC ED Pa) 340 BR 543.

Page 272 11 USCS § 522

Where bankruptcy debtor operated sole proprietorship in which debtor made women's hats at home and sold them at vending events, and debtor used automobile to obtain materials and to trans-port hats to events, debtor's need to have means of transporting materials and products indicated that automobile was reasonably necessary to debtor's business and thus automobile was properly ex-empted under 11 USCS § 522(d)(6) as tool of debtor's trade. In re Giles (2006, BC ED Pa) 340 BR 543.

Vehicle used by Chapter 7 debtor and necessary to debtor for his work, trade or occupation may be claimed as exempt tool of trade under 11 USCS § 522(d)(6) regardless of whether it is specially outfitted for debtor's trade; therefore debtor may avoid nonpossessory, nonpurchase money security interest on pickup truck needed to carry drywall tools and materials in his drywall business, and debtor may also use additional wild card exemption of 11 USCS § 522(d)(5) to avoid security inter-est in value of truck in excess of exemption for tools of trade. In re McNutt (1988, BAP9 Alaska) 87 BR 84, 19 CBC2d 660, CCH Bankr L Rptr P 72356.

150. Miscellaneous

Implements and tools of bankrupt undertaker are exempt. Steiner v Marshall (1905, CA4 Md) 140 F 710.

Under Oklahoma statute, law library of bankrupt attorney is exempt from general creditors, but not from claims for wages due employees. In re Nixon (1929, DC Okla) 34 F2d 667.

Debtor may not claim as exempt shop inventory and tools of trade of her late husband, used by him in his business of television and appliance repair, because debtor herself is not engaged in such business. In re Huffines (1985, MD Tenn) 57 BR 740.

Restaurant equipment is not subject to "tools of trade" exemption under Virginia opt out law. Dominion Bank of Cumberlands v Nuckolls (1987, WD Va) 71 BR 593.

Leased masonry tools were exempt under former 11 USCS § 24 where state statute did not men-tion ownership of exempt item as prerequisite for exemption; claim of cause of action for usury is not exempt even though it arises from financing of items which are exempt. In re Gorman (1974, BC ND Tex) 1 BCD 121.

Although artist is not entitled to exemption as family pictures art works which are not represen-tations of bankrupt's family or friends, he is entitled to exemption for art works used in his occupa-tion up to value of $ 1000 less any other business exemption. In re Teachout (1975, BC WD Mich) 1 BCD 1271, 5 CBC 511.


Determination of need, in tool-of-trade cases under 11 USCS § 522(d)(6), is essentially factual one and, accordingly, debtor's table saw, torch and welder are tools of trade of steel fabricator, how-ever, forklift and trailers are not. In re Reed (1982, BC WD Ky) 18 BR 1009, 8 BCD 1194.

Exemption permitted under Virginia law for tools and utensils of trade of debtor in bankruptcy may only be claimed in tools of debtor's primary occupation, and debtors will not be permitted to claim exemption in boat which husband debtor allegedly uses in crabbing where evidence indicates

Page 273 11 USCS § 522

that husband's primary occupation is construction. In re Samuel (1984, BC ED Va) 36 BR 312, 11 BCD 444.

Pleasure boat, converted into commercial shrimping vessel, is not exempt as tool of trade where it is not presently used as such, and debtor's claim of intent to use vessel for his livelihood is not corroborated by other evidence, so as to establish good faith and that intent is reasonable and realis-tic. In re Racca (1984, BC WD La) 40 BR 622.

Organ and speaker cabinet are tools of trade within 11 USCS § 522(d)(6) where debtor was mu-sician since items were essential to performance of debtor's chosen craft; fact that debtor engages in additional employment to supplement primary source of income does not affect right to claim items necessary to primary employment as exemptable tools of trade upon which he may avoid liens. In re Walkington (1984, BC WD Mich) 42 BR 67, 11 CBC2d 276, CCH Bankr L Rptr P 69987.

Debtors are not allowed to claim as exempt as tools of trade under Nevada law equipment used in "tanning" business where: (1) debtors intended to terminate business and did so 5 days after filing petition in bankruptcy; (2) both debtors were employed full time in other occupations; (3) business never contributed to basic support of debtors; and (4) debtors have not demonstrated intention to re-engage in business in future nor any realistic prospects for earning their livelihood from this type of business. In re Kolsch (1986, BC DC Nev) 58 BR 67.

Pursuant to 11 USCS § 522(m), Colorado constitution and exemption statute, and case law, wife, in joint Chapter 7 case, who had ownership interest in medical equipment arising from her daily use of equipment as well as her contributions to parties' medical practice, is entitled to claim exemption in tools of trade in addition to exemption claimed by her debtor husband/doctor; this conclusion is not precluded by Colorado presumption which provides that husband is owner of household goods when both spouses are living together because this case involves tools of trade and not household goods and because there is abundant evidence to contrary that wife contributed to medical practice itself, which rebuts presumption. In re Reeder (1986, BC DC Colo) 60 BR 312.

Amount of income produced by debtor from sale of firewood was within "marginal additional income" doctrine of Louisiana law, so that power chain saws and vehicle used in business are ex-empt, even though expenses of business might be equal to or possibly in excess of revenues derived from trade; under Louisiana law, where income is substantial, trade need not be debtor's sole trade nor provide substantial portion of debtor's income in order to justify exemption of its tools as tools of trade. In re Baker (1987, BC WD La) 71 BR 312.

Under Iowa law, personal computer and printer may be claimed as exempt tool of trade under 11 USCS § 522 if they are adapted to debtor's employment; computer in insurance office satisfies such standard and debtor insurance salesman need not show that computer is necessity in his busi-ness to meet standard. In re Knight (1987, BC SD Iowa) 75 BR 838.

Iowa opt-out statute exempting implements and equipment reasonably related to normal farming operation includes implements used in reasonable conduct of Chapter 7 debtor's trade and includes personal computer in light of difficulties forcing farmers to pay more attention to business aspects of farming. In re Eby (1987, BC SD Iowa) 76 BR 140, 16 BCD 539.

Debtor self-employed laborer/contractor may exempt D-7F Cat as tool of trade under Montana opt-out provisions. In re Challinor (1987, BC DC Mont) 79 BR 19, 6 UCCRS2d 299.

Page 274 11 USCS § 522

Large items of equipment are exempt under Georgia exemption provision for tools of trade, as well as for purpose of lien avoidance under 11 USCS § 522(f). In re Jones (1988, BC MD Ga) 87 BR 738.

Chapter 7 debtor's "fertilizer business" is "trade" for exemption purposes and debtor may ex-empt under Texas law front-end loader, truck, radios, and radio tower located on leased land, where debtor has used items in question on regular basis in his business for many years prior to bankruptcy filing and he continued to use them in same manner postpetition; tools of trade need not be pecu-liarly adapted to debtor's trade or profession; any legitimate self-employment is included in phrase "trade or profession." In re Legg (1994, BC ND Tex) 164 BR 69.

Chapter 7 debtor may exempt computer and software that he actually uses for work at home, al-though computer is not absolutely necessary to his continued employment because he could perform all work he currently does at home at office, where debtor's employer provides him with software necessary to work at home; where employer expends money for purpose of allowing employee to work at home, those items actually used by debtor to work at home may be considered tools of trade; second computer not actually used for work at home is not exempt. In re Biancavilla (1994, BC DC Idaho) 173 BR 930.

200-amp welder utilized by debtor who worked part-time as welder and full-time in another ca-pacity and who subsequently became full-time welder was tool of trade under 11 USCS § 522 for purposes of exemption and lien avoidance. In re Henry (1995, BC ND Tex) 183 BR 748, 33 CBC2d 1545.

F.Life Insurance 151. Generally

Former 11 USCS § 24, incorporating in bankruptcy law exemptions made available by state of bankrupt's domicile includes exemption of life insurance proceeds. Meyer v United States (1963) 375 US 233, 11 L Ed 2d 293, 84 S Ct 318, 64-1 USTC P 9111, 12 AFTR 2d 6141.

In determining whether Chapter 7 debtor's interest in life insurance policy is exempt under 11 USCS § 522, court should focus upon property interest in question and determine whether it is inter-est in unmatured insurance contract or payment under insurance contract. Cyrak v Poynor (1987, ND Tex) 80 BR 75, 18 CBC2d 479.

Policies on life of bankrupt payable to wife on death of insured prior to maturity and to insured if he survives that date are exempt, but if bankrupt changes beneficiary for his personal advantage or if he survives endowment period, cash surrender value constitutes unadministered assets of bank-rupt estate. In re Miller (1982, BC DC Md) 16 BR 790, 8 BCD 833, CCH Bankr L Rptr P 68643.

Under 11 USCS § 522(d)(8), debtor is entitled to single $ 4,000 exemption to be applied against total cash value of life insurance policies, not separate $ 4,000 exemption available for application against each and every policy of life insurance in effect at time of filing. In re Swartz (1982, BC DC Mass) 18 BR 454, 8 BCD 1122, 6 CBC2d 195, CCH Bankr L Rptr P 69182.

Life insurance proceeds payable to beneficiary are exempt property under Kansas law. In re Douglas (1986, BC DC Kan) 59 BR 836.

Chapter 7 debtor may exempt insurance policies under Kansas law where policies are payable to members of debtor's family and benefit to be paid is considerably more than cost of policies. In re Barash (1986, BC DC Kan) 69 BR 231.

Page 275 11 USCS § 522

11 USCS §§ 522(d)(7) and (8) are designed solely to protect ownership interests and cash value of life insurance policy, whereas 11 USCS § 522(d)(11) is designed to protect beneficiary interests in life insurance contract. In re Poynor (1987, BC ND Tex) 68 BR 919.

Chapter 11 debtor cannot exempt interest in life insurance policy under South Dakota opt-out provisions where he has assigned all interest in policy to creditor as part of security for loan. In re Hogg (1987, BC DC SD) 76 BR 735, 4 UCCRS2d 1254.

Chapter 7 debtor may exempt under Illinois opt-out provisions: (1) life insurance policy on debtor's life naming wife as beneficiary; and (2) life insurance policies payable to debtor's wife and children that were placed in IRA and Keough accounts, absent evidence that policies were so placed in order to defraud creditors. In re Vogel (1987, BC ND Ill) 78 BR 192.

Debtor seeking to exempt life insurance proceeds under Arkansas opt-out provisions may only exempt such proceeds in amount of $ 500, inclusive of other personal property exemptions, since Arkansas statute does not provide separate exemption for life insurance; amount of proceeds over $ 500 will be available to creditors. In re Holt (1988, BC WD Ark) 84 BR 991, affd (1988, WD Ark) 97 BR 997, affd (1990, CA8 Ark) 894 F2d 1005, 22 CBC2d 337, CCH Bankr L Rptr P 73239.

Repayment of life insurance policy loan by Chapter 7 debtor equates with payment of premiums under Oregon opt-out exemption of life insurance proceeds. In re Summers (1988, BC DC Or) 85 BR 121.

Chapter 7 debtor's life insurance policies together with any attendant cash surrender value are exempt without limit under Vermont law. In re Gabelhart (1992, BC DC Vt) 138 BR 425.

Bankruptcy court determined that allowing lien to stand against debtors that had received dis-charge would impair exemption where scope of exemption covered entire proceeds from two insur-ance policies as well as cash surrender values. In re Elmes (2003, BC ND Ill) 289 BR 100.

152. Unmatured life insurance contract

Debtor may not exempt life insurance policy purchased within 1 year of filing, under Kansas statute excepting from exemption policies obtained for purpose of defrauding creditors, where: (1) debtor was insolvent when he purchased policy; (2) policy was purchased just 1 week prior to bank-ruptcy filing; (3) debtor used his last nonexempt assets to purchase policy; (4) debtor has 2 other unencumbered policies; and (5) although debtor contends he purchased policy to provide for his daughter's education, named beneficiaries are "then living children of insured and then living chil-dren of any child of insured who is not then living." In re Mueller (1987, DC Kan) 71 BR 165, affd (1989, CA10 Kan) 867 F2d 568, 18 BCD 1496, 20 CBC2d 1431.

Life insurance policy owned by debtor on brother's life, with premiums paid by partnership but with policies owned by individuals, may be claimed as exempt property under 11 USCS § 522(d)(7), but loan value is property of estate subject to being liquidated, § 522(b)(8) only exempt-ing dollar amount where debtor is owner and is named insured or dependent is named insured. In re Norman (1983, BC WD Mo) 32 BR 562.

Chapter 7 debtor's single premium increasing whole life insurance policy was unmatured as of date of filing and is therefore exempt under Iowa law where debtor was neither dead nor age 100 on date of filing, either of which is prerequisite to maturity. In re O'Brien (1986, BC ND Iowa) 67 BR 317.

Page 276 11 USCS § 522

153. Cash surrender value

Illinois insurance exemption statute did not cover cash surrender value of life insurance policies payable to nondependent adult children of bankrupt-insured, so as to protect cash value of such policies against claim of trustee in bankruptcy. In re Schriar (1960, CA7 Ill) 284 F2d 471.

Where bankrupt died after filing of petition, beneficiaries of life insurance policy were entitled to claim exemption of portion of cash surrender value of policy under state law, trustee having failed to file report of exempt property and policy having been claimed as exempt by bankrupt prior to his death. In re Brostoff (1979, CA9 Cal) 611 F2d 733, 5 BCD 775, 21 CBC 42.

Cash surrender value of life insurance contract is as much "the proceeds of a policy," as money due on policy after death of insured, and is exempt in Tennessee and in bankruptcy proceedings un-der former 11 USCS § 24. In re Stansell (1925, DC Tenn) 8 F2d 363.

Trustee in bankruptcy has no right to cash surrender value of life insurance policies which are exempted by state law for protection of beneficiary. Klebanoff v Mutual Life Ins. Co. (1965, DC Conn) 246 F Supp 935, 65-2 USTC P 9662, 9 FR Serv 2d 22.15, Case 1, 16 AFTR 2d 5611, re-manded (1966, CA2 Conn) 362 F2d 975, 18 AFTR 2d 5025.

Under state opt-out legislation, debtor is not entitled to exempt cash surrender value of life in-surance policy because exemption does not apply to trust where payment of insurance proceeds to members of insured debtor's family is subject to contingencies created by trust agreement and, al-though trust agreement does not expressly grant trustee power to use insurance proceeds to pay in-sured's debts, it is possible that life insurance proceeds could ultimately benefit his creditors and exemption thereof would not serve policy of Texas exemption statute. Bartholow v Garner (1984, ND Tex) 43 BR 463.

Cash surrender values of insurance policies are exempt from claim of creditors' under Ohio law even though joint debtors, who owned policies on lives of each other, were also beneficiaries and thus cash surrender value is not property of estate under 11 USCS § 541. In re Bess (1985, SD Ohio) 47 BR 414.

Cash surrender values of debtor's life insurance policies are exempt from claims of creditors un-der state law, where state has "opted out" of federal exemptions provided by 11 USCS § 522(a). In re Johnson (1987, WD Ark) 85 BR 518.

Chapter 7 debtors were not entitled under Tex. Ins. Code Ann. § 1108.051 to exempt check for cash value of life insurance policy that debtors had surrendered prior to filing their bankruptcy peti-tion. Under § 1108.051, benefit subject to exemption was one that was to be provided to insured or beneficiary under insurance policy; although cash value was specifically mentioned as benefit under § 1108.051(a), there was no policy in existence on petition date for which cash value could be ex-empted. Milligan v Trautman (2006, WD Tex) 340 BR 773.

Under Minnesota law cash surrender value of insurance policy issued by fraternal benefit soci-ety is exempt from seizure by any party including trustee and should be set apart as exempt pursuant to former 11 USCS § 75a(6) and Rules of Bankruptcy, Rule 403(b). In re Heidemann (1975, BC DC Minn) 1 BCD 1157, 5 CBC 518.

Cash surrender value of life insurance policies owned by debtor is exempt under Kentucky law. In re Worthington (1983, BC WD Ky) 28 BR 736.

Page 277 11 USCS § 522

Cash surrender value of policies insuring life of spouse, owned by debtor who is beneficiary of policy, is exempt property pursuant to 11 USCS § 522(B)(2)(A), where applicable Ohio law so in-tends and provides. In re Bess (1984, BC SD Ohio) 40 BR 509, affd (1985, SD Ohio) 47 BR 414.

Joint Chapter 7 debtors may unequally divide cash surrender value on single life insurance pol-icy and entire cash value may be exempted pursuant to preamendment version of 11 USCS § 522 under different exemption statutes--wife claiming federal exemptions and husband claiming Texas exemptions. In re Tillerson (1984, BC ND Tex) 49 BR 11.

Debtors may exempt cash surrender value of certain unmatured life insurance policies under Iowa law which does not limit exemption for loan value of life insurance policy. In re Bertram (1986, BC ND Iowa) 59 BR 186.

Chapter 7 debtor may not exempt under Florida law cash surrender value of life insurance poli-cies on husband's life where debtor is not insured, but owner and beneficiary of policies. In re Butcher (1986, BC ED Tenn) 62 BR 162, affd (1987, ED Tenn) 75 BR 441, affd without op (1988, CA6 Tenn) 848 F2d 189 and affd without op (1988, CA6 Tenn) 848 F2d 189.

Cash value proceeds of debtor's life insurance policies are "incident of the life insurance policy" and thus are exempt under Arkansas law where policies contain no investment device; Arkansas statute which provides that proceeds of life, health, accident and disability insurance are exempt in federal bankruptcy proceedings exempts "all moneys," not just death benefits. In re Duckett (1986, BC WD Ark) 65 BR 545.

Cash surrender values of Chapter 7 debtor's life insurance policies may be claimed as exempt under Arkansas law because they are mere incidents of life insurance policies which contain no in-vestment device or special dividend provision. In re Weiler (1986, BC ED Ark) 65 BR 564.

"Proceeds" of life insurance policy in Oregon opt-out exemption includes cash surrender value of policy; Chapter 7 debtors may not exempt portion of cash surrender value of life insurance policy that results from debtors' fraudulent repayment of loan on policy and consequent conversion of non-exempt assets to exempt assets immediately prior to bankruptcy. In re Summers (1988, BC DC Or) 85 BR 121.

Chapter 7 debtors are permitted under Texas law to exempt full $ 77,000 cash value of their life insurance policies under Texas Insurance Code, but in so doing, they exhaust $ 60,000 personal property exemption under Property Code, and thus their request to exempt other personal property must be denied. In re Bowes (1993, BC ND Tex) 160 BR 290 (criticized in In re Young (1994, BC ED Tex) 166 BR 854) and (criticized in In re Borchers (1996, BC WD Tex) 192 BR 698).

Cash surrender value of life insurance policy owned by debtor insured as of date of bankruptcy filing is property of estate and is not exempt under New Hampshire law; debtor insured should be given reasonable opportunity to pay cash surrender value into estate, including payment in install-ments if equitably required, in order to retain policy without cancellation; trustee can exercise power to cancel policy and realize cash surrender value from insurance company in event that debtor insured does not pay that value into estate. In re Monahan (1994, BC DC NH) 171 BR 710.

Term "avails" in Colorado statute which exempts avails of policies or certificates of life insur-ance encompasses cash surrender value of such polices; absent some sort of restrictive conditions, not present here, when state statute exempts "avails" of life insurance policies from reach of credi-

Page 278 11 USCS § 522

tors, that term encompasses cash surrender value. In re Griese (1994, BC DC Colo) 172 BR 336, 11 Colo Bankr Ct Rep 118, 32 CBC2d 321.

Unless bankruptcy case is dismissed, property exempted under 11 USCS § 522(b) is not liable during or after case for any prepetition claim, except for tax, alimony, maintenance, or support claims that are exempted from discharge; applying Pennsylvania law, cash surrender value of life insurance policy taken out by Chapter 7 debtor on life of her husband lies beyond reach of trustee and may not be utilized to make distribution to debtor's creditors. Bernstein v Himel (In re Himel) (1995, BC WD Pa) 190 BR 59.

Applicable Georgia law allowed Chapter 7 debtor to exempt unmatured life insurance policy it-self but not its cash value. Flatau v Waggoner (In re Waggoner) (2000, BC MD Ga) 244 BR 492.

Bankruptcy court held that debtor's life insurance policies were exempt property under Mich. Comp. Laws § 500.2207, but debtor's brokerage account was not exempt property under Michigan law, and had to be surrendered to trustee on behalf of bankruptcy estate. In re Johnson (2002, BC ED Mich) 274 BR 473.

Term life insurance policy was property of bankruptcy estate pursuant to 11 USCS § 541, but only to extent of cash surrender value, which was zero; thus, Chapter 7 Trustee did not have power to designate beneficiary under policy and accordingly could not sell policy. Lekas v Mann (In re Lekas) (2003, BC DC Ariz) 299 BR 597.

154. Proceeds on life of person on whom debtor was dependent

Under 11 USCS § 522(d)(7) debtor may exempt proceeds from life insurance policies received upon death of his son where son's death occurred 7 days after filing of original Chapter 13 petition even though such proceeds were paid to debtor as beneficiary within 180 days of his filing of peti-tion. Bancohio Nat'l Bank v Walters (1984, CA4 W Va) 724 F2d 1081, 11 BCD 674, CCH Bankr L Rptr P 69601.

Under state law, which Chapter 11 debtor elected to apply under 11 USCS § 522(b)(2)(A), pro-ceeds of life insurance policy would be exempt under 11 USCS § 541 only to extent necessary to support him and his children. In re Woodson (1988, CA9 Cal) 839 F2d 610, 18 CBC2d 674, CCH Bankr L Rptr P 72197.

Proceeds of life insurance policies in hands of spouse are not exempt from claims of creditors of that spouse under Tennessee law, i.e., creditors of spouse of decedent may reach life insurance pro-ceeds payable to spouse on account of death of decedent in order to pay debts owed by spouse; therefore, insurance policy proceeds are not exemptable. In re Huffines (1985, MD Tenn) 57 BR 740.

Life insurance proceeds in hands of debtor on account of death of spouse are not exemptable under Tenn. Code Ann. §§ 26-2-111(1)(C) or 26-2-111(3) because they are neither disability, illness or unemployment benefits nor payments in compensation of loss of future earnings. In re Huffines (1985, MD Tenn) 57 BR 740.

Chapter 7 debtor's interest as owner and beneficiary of life insurance policy on husband is ex-empt under 11 USCS § 522(d)(7), but payments made to her under policy within 180 days after fil-ing of petition are property of estate under 11 USCS § 541(a)(5)(C) and exemptable only to extent reasonably necessary for her support. Cyrak v Poynor (1987, ND Tex) 80 BR 75, 18 CBC2d 479.

Page 279 11 USCS § 522

Debtor's wife may claim value of interest in certain death benefits and dependent spouse's inter-est in monies paid and payable as result of her husband's disability as her exempt property pursuant to 11 USCS §§ 522(d)(10) and (11). In re Rotert (1981, BC ED Mo) 1 BAMSL 594.

Major portion of $ 52,800 in life insurance benefits received by debtor within 180 days of her filing of bankruptcy petition is exempt under 11 USCS § 522(d)(11)(C) where debtor was dependent of her decedent husband as of date of his death, she earns $ 490.67 per month and incurs $ 1,419.00 in month expenses including considerable amount for medicine and medical treatment for herself and one of her dependents who suffer from diabetes, and likelihood of her improving her employ-ment and income situation in near future is small since she has limited educational background and narrow work experience; however because debtor has had considerable indebtedness discharged through bankruptcy it is equitable for her to make some payment, however nominal, into estate. In re Hendricks (1981, BC WD Mo) 11 BR 48, 7 BCD 688, 4 CBC2d 638.

Death benefits received from insurance policy within 180 days of filing of bankruptcy petition which are not contractual and are windfall are included in estate under 11 USCS § 541(a)(5) while death benefits which result from contract right of debtor as owner and beneficiary under policy are exempt under 11 USCS § 522(d)(7). In re Walters (1981, BC SD W Va) 14 BR 92, 8 BCD 190, 5 CBC2d 99, CCH Bankr L Rptr P 68354, affd (1984, CA4 W Va) 724 F2d 1081, 11 BCD 674, CCH Bankr L Rptr P 69601.

Since debtor's life insurance policy names nondependent relative, Ohio exemption for life insur-ance contracts, which is more restrictive than federal, is not available. Juergens v Rice (1982, BC SD Ohio) 17 BR 898.

Where surviving spouse in Chapter 7 joint case is ill with progressive disease which will seri-ously impair, if not destroy, earning capacity, has 2 children to support and has no identifiable pro-fession or occupation, if total proceeds of yet uncollected life insurance policies do not substantially increase the $ 275,000 estimated total of proceeds, court may find proceeds are reasonably neces-sary to support of spouse and dependents and thus exempt under 11 USCS § 522(d)(11)(c). In re Gallo (1985, BC ND Tex) 49 BR 28, 12 BCD 1272, 12 CBC2d 1138.

Chapter 7 debtor wife may not exempt life insurance proceeds under applicable Tennessee law because they are not compensation for loss of future earnings. In re Crowell (1985, BC MD Tenn) 53 BR 555, 13 CBC2d 878.

Chapter 7 debtor may not exempt proceeds of life insurance policy insuring her deceased hus-band under North Carolina statute exempting "compensation" for personal injury or death of person upon whom debtor was dependent for support, because statute was not intended to include life in-surance proceeds; evidence that debtor received $ 350 per month from husband for child support is insufficient to establish that debtor was dependent upon her husband. In re Ragan (1986, BC ED NC) 64 BR 384.

11 USCS § 522(d)(11) allows Chapter 7 debtor wife to exempt proceeds of deceased debtor husband's life insurance policy, even though debtor wife is not owner of policy, but only to extent proceeds are reasonably necessary for support. In re Poynor (1987, BC ND Tex) 68 BR 919.

Under 11 USCS § 522(d)(11)(C) and state law, nondependent beneficiary may not claim exempt from bankruptcy estate proceeds of life insurance policy issued to Chapter 7 debtor's stepfather. In re Heins (1988, BC SD Ohio) 83 BR 504.

Page 280 11 USCS § 522

Possibility that debtor's children will repay "loans" made to them by debtor from proceeds of life insurance policy insuring debtor's now deceased husband will not be considered as income in assessing whether proceeds of policy are reasonably necessary for support as required by Vermont life insurance exemption statute, where payments to children were actually gifts, rather than loans, as evidenced by facts that there were no specific terms of repayment, no interest rates, and no writ-ten notes or contracts; furthermore, even if they were really loans, possibility of repayment is too uncertain to include in calculations of debtor's future income; additionally, debtor is entitled to her exemption whether or not loans are repaid, because although $ 23,000 that debtor gave to her chil-dren is significant sum, debtor would still be facing financial shortfall if loans were repaid--debtor's expected income is entirely insufficient for her needs, and accounts containing life insurance pro-ceeds will be necessary for her support. In re Tooker (1994, BC DC Vt) 174 BR 33.

Proceeds of debtor's deceased wife's life insurance policies were exempt under Maryland law. In re Kleinman (2001, BC DC Md) 272 BR 339.

Debtor wife's monthly deficit of $ 352 was subsistence deficit of type that Congress sought to avoid with exemption provisions of 11 USCS § 522(d)(11)(C); thus, court must deny trustee's objec-tion to debtor's claim of exemption in life insurance proceeds upon debtor husband's death. In re Collins (2002, BC MD Pa) 281 BR 580.

155. Miscellaneous

Arkansas statute providing unlimited exemption for life, health, accident and disability insur-ance proceeds is unconstitutional as applied to Chapter 7 debtors because it is in direct conflict with overriding $ 500 limitation on exempt personal property in Arkansas constitution. In re Holt (1990, CA8 Ark) 894 F2d 1005, 22 CBC2d 337, CCH Bankr L Rptr P 73239.

Dividends declared by insurers of bankrupt and left by him to accumulate at interest are for benefit of beneficiaries and exempt under New York law. In re Keil (1936, DC NY) 16 F Supp 862, affd (1937, CA2 NY) 88 F2d 7, cert den (1937) 301 US 708, 81 L Ed 1362, 57 S Ct 941.

Amendment to Kansas life insurance policy exemption statute excepting from exemption claims of creditors of policy holders filing bankruptcy within 1 year of date policy is issued if policy was obtained by debtor for purpose of defrauding one or more of debtor's creditors, does not incorporate "peculiar equity" requirement of prior Kansas case law, but rather any creditor, with or without "pe-culiar equity," may attack issuance of policy if creditor can show that it was obtained for purpose of defrauding creditors. In re Mueller (1987, DC Kan) 71 BR 165, affd (1989, CA10 Kan) 867 F2d 568, 18 BCD 1496, 20 CBC2d 1431.

Although trustee argues that Bankruptcy Court should have deemed all prepetition expenditures from insurance proceeds which depleted debtor's estate to have come out of exempt portion of pro-ceeds rather than nonexempt portion, trustee did not have any claim over debtor's money prepetition and he could not have stopped her from spending nonexempt proceeds, or recovered any of pro-ceeds she spent prepetition unless he could prove that such spending constituted avoidable transfer, and while trustee asserts that it is inequitable to allow debtor to both spend insurance proceeds and claim full deduction for exempt portion, had debtor known that some of proceeds were exempt and some were not, she could have placed money in 2 separate accounts, spending only nonexempt funds, thus also preserving full amount of her exempt funds; further, prepetition commingling of exempt and nonexempt proceeds could not have functioned to cause proceeds of 2 exempt policies

Page 281 11 USCS § 522

to lose their status as exempt proceeds because such status had not yet been created. In re Rundlett (1993, SD NY) 153 BR 126.

11 USCS § 522(d)(7) and 11 USCS § 541(a)(1) indicate that life insurance on life of another has sufficient existence or choatness at all times to be property of bankruptcy estate. In re McCulloch & Son, Inc. (1983, BC DC Or) 30 BR 7, 10 BCD 752, CCH Bankr L Rptr P 69238.

Nothing in Ohio statute exempting proceeds of insurance policy from attachment by decedent's creditors would expand exemption to protect proceeds from beneficiary's creditors, even though beneficiary is codebtor with deceased husband in Chapter 7 case. In re McAlister (1985, BC DC Or) 56 BR 164.

Chapter 7 debtor who is beneficiary of single incident disability policy which would be payable should he become injured and unable to perform his duties as professional football player may claim state exemption for property rights incident to this insurance policy in accordance with Flor-ida opt-out exemptions; thus, debtor need not cancel policy and receive pre-paid premiums in un-specified amount as requested by trustee. In re Dennison (1988, BC SD Fla) 84 BR 846.

In determining what constitutes alimony for purposes of exemption under 11 USCS § 522(d)(10)(D) in accordance with 11 USCS § 523(a)(5) principles, life insurance proceeds which debtor received upon her former husband's death pursuant to divorce decree were not alimony, since parties' had mutual obligation to maintain each other as beneficiaries which was not contingent upon remarriage or based upon income disparity. In re Sheffield (1997, BC MD Fla) 212 BR 1019, 11 FLW Fed B 87 (criticized in In re Bentley (2000, BC DC Kan) 245 BR 684).

State provides exemption under Colo. Rev. Stat. Ann. § 10-7-205 pursuant to which named beneficiary may claim exemption in proceeds of policy of group life insurance, as against debts of insured or of beneficiary himself; consequently, Chapter 7 debtor, post-petition recipient of life in-surance proceeds from his deceased wife, was able to exempt proceeds pursuant to § 10-7-205. In re Fahey (2006, BC DC Colo) 352 BR 288.

G.Benefit Payments 156. Generally

Benefit referred to in 11 USCS § 522(d)(10)(C), and payment referred to in 11 USCS § 522(d)(10)(E), are not limited to single events and may include extended or periodic payments; benefit or payment to which debtor is entitled under terms of disability policy may be claimed as his exempt property to extent reasonably necessary for support of debtor and any dependent of debtor, even though benefit or payment is periodic or continuing. In re Rotert (1981, BC ED Mo) 1 BAMSL 594.

Teacher retirement account is not exempt under 11 USCS § 522(d)(10)(A), which provides ex-emption status for social security benefit, unemployment compensation or local public assistance benefit, since, unlike with retirement account, social security wage earner does not have option to resign from employment and secure repayment of funds paid into social security fund and, under social security law, employee does not have authority to designate beneficiary and it is clear from other plans included in § 522(d)(10)(A), intent was to preserve subsistence level benefit plans for debtors who are in need, category of which teacher retirement fund is not included. In re Werner (1983, BC DC Minn) 31 BR 418, 10 BCD 1117, 9 CBC2d 371, CCH Bankr L Rptr P 69289.

Funds deposited by debtor in deferred compensation program cannot be exempted out under 11 USCS § 522(b)(2)(A) as property exempt under federal law because benefits to be derived under 26

Page 282 11 USCS § 522

USCS § 457 are not entitlement benefits, but derive from voluntary participation and are not present periodic payments needed for current support; § 457 does not itself contain anti-alienation provi-sion, it is merely inferred and federal exemptions must be explicitly granted in statute. In re Osburn (1986, BC SD Ohio) 56 BR 867, 7 EBC 1136 (criticized in In re Mueller (2000, BC DC Md) 256 BR 445, CCH Bankr L Rptr P 78353).

11 USCS § 522(d)(10)(E) is meant to protect benefits akin to future earnings of debtor, and thus intent is to insure that such benefits are available for retirement purposes, disability, or termination of employment; qualification of plan for exemption under § 522(d)(10)(E) hinges upon strictness of restraints on withdrawal of funds for present, as opposed to future, needs. In re Pettit (1986, BC WD Wash) 61 BR 341, 14 CBC2d 1111.

157. Social security

Social Security Administration cannot be required to pay all or some of Chapter 13 debtors' so-cial security benefits to bankruptcy trustee inasmuch as antiassignment provisions of 42 USCS § 407 were not impliedly repealed by Bankruptcy Code simply because 11 USCS § 522(b)(2)(A) and (b)(10) permit social security payments to become part of debtor's estate only if he chooses to in-clude them. In re Buren (1984, CA6 Tenn) 725 F2d 1080, 11 BCD 655, 10 CBC2d 236, CCH Bankr L Rptr P 69582, cert den (1984) 469 US 818, 83 L Ed 2d 34, 105 S Ct 87.

It was error to dismiss under 11 USCS § 707(b) debtor's Chapter 7 petition on grounds that she could pay her unsecured creditors with income from her monthly Social Security check, which is exempt property from her bankruptcy estate under 11 USCS § 522. In re Brady (1987, WD Mo) 86 BR 616.

Pursuant to 11 USCS § 522(b)(2)(A), Social Security proceeds did not lose their exempt status when they were placed in checking account with non-exempt retirement funds. In re Moore (1997, BC DC Kan) 214 BR 628, 38 CBC2d 1823.

Exemption under 11 USCS § 522(d)(10)(A) of right to receive Social Security benefits does not exempt accumulated Social Security benefits. In re Sluis (1998, BC MD Fla) 228 BR 775, 59 Soc Sec Rep Serv 664, 12 FLW Fed B 98.

158. Veteran's benefits

While Congress failed to provide that Navy retirement pensions are free from levy and attach-ment, or that they are not transferable and hence are property rights to extent that rights to benefits are vested, they are designed to function as wage-substitute at some future period, and to support basic requirements of life for debtor during that future period, and do not pass to trustee in bank-ruptcy. In re Nunnally (1975, CA5 Tex) 506 F2d 1024, 34 ALR Fed 308, reh den (1975, CA5 Tex) 509 F2d 576 and reh den (1975, CA5 Tex) 509 F2d 576 and (superseded by statute as stated in In re Goff (1983, CA5 Tex) 706 F2d 574, 10 BCD 986, 8 CBC2d 894, 4 EBC 1653, CCH Bankr L Rptr P 69301).

Veterans' retirement benefits, mailed directly to bankrupt's savings account and used by bank-rupt for his support and maintenance, are exempt under 38 USCS § 3101. In re Phillips (1976, BC DC Kan) 3 BCD 433.

In view of limited eligibility of life insurance policies issued by Veterans' Administration, lib-eral construction accorded to veteran's legislation, and benefits policy affords to veteran, Chapter 7 debtor's life insurance policy is "benefit due" as contemplated by 38 USCS § 3101(a) and inclusion

Page 283 11 USCS § 522

in that section allows debtor to claim exemption in policy under provisions of both 11 USCS § 522(b)(2)(A) and Ohio law, which exempts property which is exempt under federal law; even in ab-sence of Ohio law allowing exemptions under federal law, Ohio's opting out of federal scheme does not preclude debtor from asserting exemption which is available under statutes other than § 522. In re Szabo (1986, BC ND Ohio) 60 BR 144.

Funds in debtor's retirement account were exempt assets, and fact that some of funds came from retirement fund that belonged to debtor's former spouse pursuant to QDRO rather than from debtor's own employment did not change exempt character of funds. In re Farmer (2003, BC WD Wis) 295 BR 322.

159. Disability benefits

Obligation of insurance company to pay disability benefits exempt under former 11 USCS § 24 where state statute provided for exemption of life insurance policies or annuity contracts made for benefit of, or assigned to, wife and/or children or dependent relatives but did not provide for exemp-tion of disability benefits; disability benefits are not after-acquired property or future earnings but are in essence annuity purchased and paid for prior to adjudication with benefits payable to bank-rupt. Legg v St. John (1936) 296 US 489, 80 L Ed 345, 56 S Ct 336.

Arkansas statute providing unlimited exemption for life, health, accident and disability insur-ance proceeds is unconstitutional as applied to Chapter 7 debtors because it is in direct conflict with overriding $ 500 limitation on exempt personal property in Arkansas constitution. In re Holt (1990, CA8 Ark) 894 F2d 1005, 22 CBC2d 337, CCH Bankr L Rptr P 73239.

Florida statute providing exemption for disability payments applies only to disability benefits that have not yet been paid to beneficiaries; hence, lump-sum disability benefit paid to bankrupt prior to bankruptcy is not exempt; alternatively, exemption will be denied because of dishonesty of bankrupt, Florida law providing that exemptions are designed for honest debtor. In re Prestien (1977, SD Fla) 427 F Supp 1003 (superseded by statute as stated in In re Ryzner (1997, BC MD Fla) 208 BR 568, 10 FLW Fed B 351).

Chapter 7 debtor's claimed exemption in "Disability, 11 USCS 522(d)(10)C, 100 percent" is claim for 100 percent of disability payment, despite debtor's argument that language means claim for "one-hundred percent of future settlement as disability payment," where on exemption sheet, debtor broke down his settlement into 4 different categories, and only plausible purpose and evident meaning of breakdown is that debtor wanted to cover all his bases--whether settlement turned out to be "disability" or "personal injury" or "future earnings," debtor would be able to claim exemption--and, therefore, fact that trustee did not object to debtor's claimed exemption within 30 days does not preclude turnover of remainder of $ 50,000 settlement, after payment to debtor of exempted amount of $ 7,500 for personal bodily injury and $ 3,750 for so-called "catch-all" exemption pursuant to 11 USCS § 522(d)(5), since exemptions claimed were exactly what § 522(d) allows, and had trustee filed objection it probably would have been without merit, and perhaps even constituted frivolous pleading subject to Bankruptcy Rule 9011 sanctions. Mercer v Monzack (In re Mercer) (1994, DC RI) 170 BR 759, affd (1995, CA1 RI) 53 F3d 1, 33 CBC2d 841, CCH Bankr L Rptr P 76484, cert den (1996) 517 US 1103, 134 L Ed 2d 471, 116 S Ct 1317.

Insured was estopped from suing two insurance companies, alleging, inter alia, that they com-mitted breach of contract when they denied her claim for benefits under two disability income pro-tection policies, because she failed to list her claims against companies when she and her husband

Page 284 11 USCS § 522

filed pro se petition under Chapter 7 of Bankruptcy Code; it did not matter that disability benefits were potentially exempt from insured's bankruptcy estate, pursuant to 11 USCS § 522(d)(10)(C) and Tex. Ins. Code Ann. § 1108.051. Acuna v Conn. Gen. Life Ins. Co. (2008, ED Tex) 560 F Supp 2d 548.

Proceeds of disability insurance, subject to bankrupt's right to one claim of exemption of $ 1,000 allowed by state of bankrupt's domicile, owing and unpaid to bankrupt and all sums to accrue in fu-ture, are nonexempt. In re Dent (1976, BC ND Ala) 2 BCD 462.

11 USCS § 522(d)(10) does not limit debtor to only one disability payment or benefit; debtor who is receiving medical disability payments is not limited to claiming only one such payment as exempt. In re Johnson (1981, BC ED Mo) 1 BAMSL 471.

Debtor's wife may claim value of interest in certain death benefits and dependent spouse's inter-est in monies paid and payable as result of her husband's disability as her exempt property pursuant to 11 USCS §§ 522(d)(10) and (11). In re Rotert (1981, BC ED Mo) 1 BAMSL 594.

Disability benefit granted debtor is exempt under both 11 USCS § 522(d)(10)(C) and 11 USCS § 522(d)(11)(E) since although order granting redemption award was signed prior to filing of volun-tary bankruptcy petition it was not final until after petition was filed and there was no payment until after filing. In re Lambert (1981, BC WD Mich) 9 BR 799, 7 BCD 508, 4 CBC2d 213 (criticized in In re Williams (1995, BC WD Mich) 181 BR 298, 33 CBC2d 1118).

Partial permanent disability under state law comes within meaning of disability benefit under 11 USCS § 522(d)(10)(C) that is exempt where disability is satisfied by personal injury which detracts from former efficiency of workman's body or its members in ordinary pursuits of life. In re Evans (1983, BC DC NJ) 29 BR 336, 10 BCD 1037, 8 CBC2d 531, CCH Bankr L Rptr P 69395.

Temporary disability benefits received by debtor are exempt in entirety under 11 USCS § 522(d)(10)(C) where they represent partial substitute for loss of current wages. In re Evans (1983, BC DC NJ) 29 BR 336, 10 BCD 1037, 8 CBC2d 531, CCH Bankr L Rptr P 69395.

Under opt-out state's exemption for disability payments reasonably necessary for support of debtor and any dependent of debtor, a provision identical to 11 USCS § 522(d)(10(E), 50 year old debtor receiving $ 3,108.44 per month in disability payments is entitled to exemption of $ 2,600 per month for reasonable expenses; claimed expenses of $ 200 per month as grocery expenses for grown son living with debtor, debtor's own expenses for long distance telephone, gifts, visitation with daughter, vacations and entertainment, and monthly car payment of $ 335 are excessive; trus-tee has power to sell right to excess income, hold open the case so as to collect income or reach principal in order to administer excess funds. In re Bari (1984, BC DC Minn) 43 BR 253.

Treating physician and hospital claiming common law and statutory liens in proceeds of debtor's settlement with insurance company arising out of automobile accident fail to meet burden under Bankruptcy Rule 4003(c) of proving debtor's claimed exemption in proceeds is improper under 11 USCS §§ 522(d)(11)(D) and (E) where no evidence was presented that indicated all or part of pro-ceeds was awarded for pain and suffering, and thus not subject to exemption, or that debtor was not entitled to compensation for loss of future earnings. In re Harris (1985, BC ED Wis) 50 BR 157, CCH Bankr L Rptr P 70601.

Chapter 7 debtor who is beneficiary of single incident disability policy which would be payable should he become injured and unable to perform his duties as professional football player may

Page 285 11 USCS § 522

claim state exemption for property rights incident to this insurance policy in accordance with Flor-ida opt-out exemptions; thus, debtor need not cancel policy and receive pre-paid premiums in un-specified amount as requested by trustee. In re Dennison (1988, BC SD Fla) 84 BR 846.

Chapter 7 debtor is not required to claim as exemption from property of estate Social Security disability benefits received before filing of bankruptcy petition if debtor is claiming exemptions from property of estate provided by 11 USCS § 522(b)(1); debtor claiming exemptions under § 522(b)(1) is not required to turn over accumulated social security benefits to trustee in bankruptcy; however, debtor may fund Chapter 13 plan through receipt and use of Social Security benefits. In re Barron (1988, BC ND Ala) 85 BR 603.

Settlement of debtor's claim against employer under Federal Employers' Liability Act (45 USCS § 51) for disability that has prevented debtor from returning to work is disability benefit exemptible under 11 USCS § 522(d)(10)(C). In re Albrecht (1988, BC DC Mont) 89 BR 859, 19 CBC2d 982.

Chapter 7 debtor may not exempt proceeds of personal injury lawsuit under Iowa exemption for disability benefits because use of term "benefit" limits exemption to contractual entitlements, not tort recoveries. In re Buchholz (1992, BC ND Iowa) 144 BR 443.

11 USCS § 522(d)(10)(C) does not permit Chapter 7 debtor to exempt from bankruptcy estate $ 25,000 insurance disability payment received 9 days prior to filing of his petition, even though payment remained segregated in debtor's bank account on date of filing, where on filing date, debtor had no "right to receive" payment on which to base valid exemption, because right to receive logi-cally terminated upon receipt and there is no allegation of special circumstances to justify exemp-tion. In re Chapman (1994, BC DC Conn) 177 BR 161.

Although debtor's right to receive disability benefit is exempt under Florida law and 11 USCS § 522, and settlement proceeds deposited into bank continue to represent debtor's right to receive dis-ability benefit and are exempt, interest paid while funds were on deposit is unrelated to right to re-ceive disability benefit and is not exempt; however, amount of interest is known, and commingling of non-exempt interest with exempt settlement proceeds does not affect exempt status of settlement proceeds. In re Green (1995, BC MD Fla) 178 BR 533.

Insurance benefits paid to debtor upon loss of his eye were exempt under 11 USCS § 522(d)(11)(D) up to maximum allowed of $ 15,000, although they were not exempt under § 522(d)(10)(C) or § 522(d)(11)(E), since they were not analogous to worker's compensation or oth-erwise in nature of compensation for lost future earnings. In re Chavis (1997, BC WD Pa) 207 BR 845, CCH Bankr L Rptr P 77375.

Exemption set forth at 11 USCS § 522(d)(10)(C) for debtor's right to receive disability payments did not apply to funds debtor sets aside in savings account prior to filing of bankruptcy petition that were directly traceable to such benefit, where provision governing restrictions on legal process against federal employee disability benefits, 5 USCS § 8346, did not exclude bankruptcy law from affecting exempt status of funds or preclude amendment by subsequent federal law in this case. Ma-koroff v Panza (In re Panza) (1998, BC WD Pa) 219 BR 95, 39 CBC2d 1261.

Pursuant to 11 USCS § 522(d)(10)(E), debtor's private disability insurance proceeds could be exempted only to amount found to be reasonably necessary for support of debtor and any depend-ents. In re Wegrzyn (2003, BC DC Mass) 291 BR 2, 49 CBC2d 1972, CCH Bankr L Rptr P 78828.

Page 286 11 USCS § 522

Debtor's long term disability insurance benefit was found to be exempt from inclusion in her bankruptcy estate, pursuant to Va. Code Ann. § 38.2-3406 and 11 USCS § 522(b)(1); objecting trus-tee failed to show policy was not issued within state. In re Neal (2004, BC WD Va) 344 BR 456.

Where policy of disability insurance was initially maintained by debtor's employer, but debtor later became policy-holder in her individual capacity, whether policy was exempt under Minn. Stat. § 550.37, subd. 24, depended on whether debtor became owner of policy before her date of disabil-ity or after; if debtor became owner of policy before her date of disability, it was not exempt be-cause benefit would not have derived from employment relationship; there were not enough facts for court to make this determination. In re Reiland (2008, BC DC Minn) 382 BR 779.

Because Ohio exemption statute, Ohio Rev. Code Ann. § 2329.66(A)(6)(e), is substantially simi-lar to corresponding federal bankruptcy provisions, 11 USCS § 522(d)(10), and because there is no Ohio case law nor legislative history addressing same issue, federal court that is seeking to construe state statute may look to intent of Congress in adopting similar exemption; court may then logically infer intent of Ohio legislature in adopting similar exemption. Baumgart v Alam (In re Alam) (2006, BAP6) 359 BR 142.

160. Worker's compensation

Bank's security interest in certificate of deposit representing proceeds from lump sum work-men's compensation settlement is unenforceable under Kansas statute prohibiting assignment of workmen's compensation benefits. In re Delgado (1992, CA10 Kan) 967 F2d 1466, 18 UCCRS2d 278.

New Hampshire Supreme Court would likely hold that exemption for workers' compensation benefits was intended to and does extend to tangible assets purchased with benefit proceeds, and therefore automobile would be exempt where it was unquestionably purchased with money identifi-able and identified as debtor's compensation benefits. In re Williams (1994, DC NH) 171 BR 451.

Lump-sum workers' compensation settlement proceeds received prepetition are exempt under Minnesota Workers' Compensation Act; because legislature has provided exemption in Workers' Compensation Act, proceeds of workers' compensation lump-sum settlement are not types of claims covered under Minnesota statute exemption statute. Gagne v Christians (1994, DC Minn) 172 BR 50.

Workers' compensation benefits are kind of future earnings for debtor where his ability to gen-erate future earnings have been reduced or completely lost because of work related injury and entire benefit may be exempted pursuant to 11 USCS § 522(d)(10)(C). In re La Belle (1982, BC DC Me) 18 BR 169, 8 BCD 1198.

11 USCS § 522(d)(11) is most reasonably interpreted as applying to general tort-related awards, and not worker's compensation awards. In re Evans (1983, BC DC NJ) 29 BR 336, 10 BCD 1037, 8 CBC2d 531, CCH Bankr L Rptr P 69395.

Worker's compensation benefits received by debtor prior to filing Chapter 13 petition, and seg-regated from other assets, are exempt from payment to unsecured creditors in view of Arkansas statute providing for continuing exemption of worker's compensation proceeds after money has reached hands of injured employee. In re Covey (1984, BC WD Ark) 36 BR 696, CCH Bankr L Rptr P 69603.

Page 287 11 USCS § 522

Debtor cannot exempt workers' compensation benefits because these benefits are not included as exempt property under Montana opt-out exemption statute, even though another state statute pro-tects these benefits from levy and execution against all claims. In re Larson (1985, BC DC Mont) 56 BR 154.

Unclear New Mexico exemption for workmen's compensation benefits applies to lump sum payment deposited in Chapter 7 debtor's checking account, because exemption applies not just to claim, but to funds received after claim is resolved, as long as funds in question are, as here, trace-able to claim, because court uses as guide general policy of 11 USCS § 522(d)(11)(E) in absence of clear statement by New Mexico legislature. In re Nolen (1986, BC DC NM) 65 BR 1014, 15 BCD 387.

Debtor may exempt payment received in settlement of workers' compensation claim pursuant to Missouri opt-out exemption statute which provides that debtor may exempt any property that is ex-empt from attachment and execution, since Missouri law provides that workers' compensation, whether awarded or due, is exempt from attachment, garnishment, and execution. In re Votruba (1987, BC ED Mo) 4 BAMSL 3418.

Moneys received by Chapter 7 debtor under workers' compensation settlement are not wages and cannot be exempt under Florida statute exempting money due for personal labor or services; however, money in bank account that is directly traceable to workers' compensation settlement is exempt under statute exempting workers' compensation "due and payable." In re Fraley (1992, BC MD Fla) 148 BR 635, CCH Bankr L Rptr P 75049, 6 FLW Fed B 317 (criticized in Broward v Jack-sonville Medical Ctr. (1996, Fla App D1) 673 So 2d 962, 21 FLW D 1232).

Chapter 7 debtor may not claim exemption in automobile purchased with proceeds traceable to workers' compensation benefits where under Rhode Island law which exempts "claims or payments due" for workers' compensation, claims are exempt only during period before they are actually paid to claimant and once injured claimant receives lump-sum payments of workers' compensation bene-fits, protection previously afforded ends. In re Bonzey (1993, BC DC RI) 153 BR 105.

Chapter 7 debtor may exempt workers' compensation action pursuant to Illinois statute exempt-ing workers' compensation payments, claims, or awards from liens, attachments, and garnishments, despite trustee's argument that both general Illinois exemptions and provision of Illinois law prohib-iting use of federal exemptions in bankruptcy are included in Illinois Code of Civil Procedure and that, therefore, any state law that is not in Code of Civil Procedure must specifically state that it is available as exemption in bankruptcy in order to be so available, because Bankruptcy Code does not allow states to prohibit use in bankruptcy of exemptions otherwise available under state law, and, thus, if exemption is available under state law, it must be available in bankruptcy; Illinois statute, while not employing words "exemption" or "exempt" does state that workers' compensation claims shall not be "subject to" any lien, attachment, or garnishment, or be held liable in any way for any lien, debt, penalty, or damages. In re McClure (1994, BC ND Ill) 175 BR 21.

Workers' compensation benefits are exempt under 11 USCS § 522(d)(10)(C), rather than § 522(d)(11)(D) and (E). In re Williams (1995, BC WD Mich) 181 BR 298, 33 CBC2d 1118, affd (1995, WD Mich) 1995 US Dist LEXIS 17212.

Workers' compensation benefits claimed but not yet awarded at time of filing of chapter 7 peti-tion were exempt under Florida law and 11 USCS § 522(d)(10)(C), since such benefits essentially

Page 288 11 USCS § 522

replaced employee's regular source of income, and disallowing exemption would deny him or her ability to support family. In re Ladomer (1997, BC SD Fla) 215 BR 265.

In light of diminished importance of exemptions in Chapter 13 and plain language of 11 USCS § 1325(b)(2), worker's compensation proceeds not claimed as exempt under 11 USCS § 522(c) were subject to disposable income analysis and distribution by trustee, where debtors did not offer evi-dence that proceeds were reasonably necessary for their maintenance or support or that of their de-pendents. In re Tolliver (2000, BC MD Fla) 257 BR 98, 45 CBC2d 833, 14 FLW Fed B 158 (criti-cized in In re Graham (2001, BC MD Fla) 258 BR 286, 45 CBC2d 905, 14 FLW Fed B 165).

Workers' compensation awards, and tracing of those awards into certain specific items, are be-yond scope of 11 USCS § 522(d)(11)(E). Szybist v Michael (In re Michael) (2001, BC MD Pa) 262 BR 296, 46 CBC2d 52.

Exemptions set forth in 11 USCS § 522(d)(10)(C) in debtor's right to receive disability, illness or unemployment benefit do not apply to proceeds debtor sets aside prior to filing of bankruptcy proceeding that are directly traceable to such benefit. Szybist v Michael (In re Michael) (2001, BC MD Pa) 262 BR 296, 46 CBC2d 52.

Minn. Stat. Ann. § 176.175(2)did not provide exemption for debtor's proceeds of workers' com-pensation settlement; debtor's rights in fund account was subject to administration for distribution to her creditors. In re Johnson (2003, BC DC Minn) 300 BR 471, revd, exemption allowed (2004, DC Minn) 314 BR 779.

Workers' compensation benefits invested in publicly-traded securities, such as stocks, bonds, and mutual funds, retain their character as workers' compensation benefits "in hands of beneficiary," as defined by Broward, and are thus exempt pursuant to Fla. Stat. Ann. § 440.22. In re Harrelson (2004, BC MD Fla) 311 BR 618, 17 FLW Fed B 211.

Pursuant to Fla. Stat. Ann. § 440.22, publicly-traded securities purchased with workers' com-pensation benefits were exempt; therefore, Chapter 7 trustee's objection, to debtor's claim of exemp-tion on bonds and mutual funds she bought with such benefits, was denied. In re Harrelson (2004, BC MD Fla) 311 BR 618, 17 FLW Fed B 211.

Debtor's workers' compensation award did not lose its exempt status under Cal. Code Civ. Proc. § 704.160 because funds were invested in house; workers' compensation benefits were expected to be put to useful purposes, such as buying food, clothing, shelter, transportation, and other necessi-ties. In re Gardiner (2005, BC SD Cal) 332 BR 891.

Although debtors failed to initially list large lump sum settlement of workers' compensation claim in their schedules, bankruptcy court found that debtors' actions were innocent, and debtors were entitled to claim exemption of settlement under state law and 11 USCS § 522, subject to reim-bursing trustee's costs and attorney's fees for trustee's challenge to exemption. In re McVay (2006, BC ND Ohio) 345 BR 846.

Debtor's settlement made with debtor's former employer and its workers' compensation insur-ance carrier did not meet requirements of settlement under Mich. Comp. Laws Serv. § 418.535(1), because it was made before there had been any adjudication of amount that might be owed to debtor for her alleged work-related injury; as such debtor could not claim workers' compensation settle-ment proceeds as exempt under 11 USCS § 522(d)(10)(C), but could still claim exemption under 11

Page 289 11 USCS § 522

USCS § 522(d)(11)(E) to extent that proceeds were necessary for support of debtor and any depend-ents of debtor. In re Sanchez (2007, BC WD Mich) 362 BR 342.

161. Other payments

Earned income tax credit payments under 26 USCS § 32 are not exempted from property of es-tate by operation of Louisiana statute making all assistance exempt from levy or execution. Luster v Collins (In re Collins) (1999, CA5 La) 170 F3d 512, 99-1 USTC P 50414, 83 AFTR 2d 1794, reh, en banc, den (1999, CA5 La) 180 F3d 267 and (criticized in In re Tomczyk (2003, BC DC Minn) 295 BR 894, 2003-1 USTC P 50384, 92 AFTR 2d 6574).

Fuel assistance grants under Low Income Energy Assistance Program, paid directly to utility on behalf of debtor recipient, are property of estate under 11 USCS § 541(a) and can be exempted from distribution to creditors under 11 USCS § 522(d)(10) exemption for entitlement programs; thus util-ity could not apply grant to debtor's pre-petition debt, but must use grant to meet debtor's post-petition fuel costs despite restrictions on transfer in grant, because purpose of grant is not to assist utilities in collecting otherwise uncollectible debts. Morris v Philadelphia Electric Co. (1984, ED Pa) 45 BR 350, 12 BCD 897.

Under Ohio statute exempting pensions and annuities, which tracks language of 11 USCS § 522(d)(10)(E), court includes debtor's severance pay because it protects future earnings, is under complete control of employer, and is not subject to withdrawal at will; thus, trustee cannot recover prepetition payments and must turn over postpetition payments when all are reasonably necessary for debtor's support. In re Phillips (1984, BC ND Ohio) 45 BR 529.

Under 11 USCS § 522(b)(1) and (d), state may prohibit debtor from exempting his unemploy-ment benefits, but state may not compel debtor to exempt them or prohibit him from assigning these benefits to Chapter 13 trustee: if state has not declared those benefits per se nonexempt, decision of whether or not to exempt them rests with debtor, not state. In re Jenkins (1986, BC WD Mich) 58 BR 702, CCH Bankr L Rptr P 71063, affd (1986, WD Mich) 64 BR 195, 16 CBC2d 206.

Deficiency payments payable to Chapter 7 debtor from U.S. Department of Agriculture under farm program entitlement programs are not exempt under applicable state law, nor under 11 USCS § 522(b)(2)(A), since anti-assignment provisions contained in 7 USCS § 1444e(k) and 16 USCS § 590h(g) invalidate only consensual assignments by debtor-beneficiary of payments under such pro-grams and do not create true exemption cognizable in bankruptcy; nor does fact that creditor cannot attach entitlement payment while in possession of U.S. Treasury due to government's sovereign immunity make such payments exempt, because judgment debtor may not invoke sovereign immu-nity on his own behalf. In re Pritchard (1987, BC DC Minn) 75 BR 877.

Feed and Grain Program payments which are part of debtor's estate are not exempt as wages un-der Iowa law because payments are not equivalent to wages since there is no relationship between program payments and farmer's labor. In re Mattice (1987, BC SD Iowa) 81 BR 504, 6 UCCRS2d 214.

Under Minnesota law, Chapter 7 debtor's right to postpetition payments from prepetition con-servation reserve program contract are not earnings for purposes of exemption statutes. In re Holte (1988, BC DC Minn) 83 BR 647.

Page 290 11 USCS § 522

Earned income credit is money grant to poor working families with dependent children, fitting within definition of "public assistance" exempt under Kentucky law. In re Goldsberry (1992, BC ED Ky) 142 BR 158, 81 AFTR 2d 1985.

Looking to Kentucky law to determine allowability under 11 USCS § 522(b)(2)(A) of exemption of Chapter 7 debtor's federal earned income tax credit, Bankruptcy Court overruled trustee's objec-tion to exemption of credit where court found that earned income tax credit is public assistance grant program falling within definition of public assistance classified as exempt under state law. In re Brown (1995, BC WD Ky) 186 BR 224, 81 AFTR 2d 1978 (criticized in In re Duvall (2002, BC WD Ky) 281 BR 646, 90 AFTR 2d 5938).

Debtor's severance payments received from former employer did not qualify as "earnings" for purposes of exemption under Kentucky state law since they were not compensation for personal services nor payments pursuant to pension or retirement program. In re Johnson (1995, BC WD Ky) 199 BR 155.

Money debtor received from her uninsured motorist insurer for bodily injury she received as re-sult of auto accident involving uninsured motorist was exempt from creditors under § 522(d)(11)(D), since she sustained substantial and permanent bodily injury, and fact that money was payment made in fulfillment of her insurer's contractual obligation did not matter since it was re-ceived on account of personal bodily injury. In re Martinez-Whitford (1996, BC DC Mass) 199 BR 74, 36 CBC2d 1130.

To extent state court awards "maintenance and cure," recovery available only to seamen and analogous to workers' compensation benefits, it is also exempt under 11 USCS § 522(d)(10)(D). In re Coltellaro (1997, BC SD Fla) 204 BR 640, 10 FLW Fed B 207 (criticized in Venn v Sherman (In re Sherman) (2004, BC ND Fla) 322 BR 889, 18 FLW Fed B 173).

Although "earned income credit" may be exempt under state law, different policy and purpose of child tax credit, and its availability to higher income taxpayers, force it outside reach of state law exempting benefits received under public assistance legislation, and is not nondischargeable. In re Dever (2000, BC DC Idaho) 250 BR 701, 2000-2 USTC P 50616, 87 AFTR 2d 1072.

There was no exemption for crop disaster payments made under 7 USCS § 1509 by virtue of 11 USCS § 522(b)(2), since § 1509 and attendant regulations protect covered funds for administrative convenience of administering federal agencies, but do not create post-distribution property exemp-tions in favor of beneficiaries. In re Burke (2000, BC DC Minn) 251 BR 720, CCH Bankr L Rptr P 78249.

Additional child tax credit under federal law for families with three or more children could not be exempted under Idaho exemption for benefits individual is entitled to receive under public assis-tance legislation. In re Steinmetz (2001, BC DC Idaho) 261 BR 32, 2001-2 USTC P 50477, 87 AFTR 2d 1915 (criticized in In re Koch (2003, BC CD Ill) 299 BR 523, CCH Bankr L Rptr P 78944, 92 AFTR 2d 6410).

Trustee's objection to debtors' claim that per capita Tribal casino proceeds were exempt under 11 USCS § 522(d)(10)(A), as violative of best interest of creditors test, 11 USCS § 1325(a)(4), was sustained; however, Chapter 13 debtors could not be required to turn over distributions, given their powers under 11 USCS § 1303. In re Hutchinson (2006, BC DC Kan) 354 BR 523.

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Unpublished: Where debtor exempted pending tort action, which alleged violation of § 1983, malicious prosecution, and negligence, in connection with false arrest, trustee's objection to exemp-tion under 11 USCS § 522(d)(10)(C) was sustained because exemptions under § 522(d)(10)(C) were limited to benefits that were akin to future earnings, rather than tort awards. In re David (2004, BC DC Dist Col) 2004 Bankr LEXIS 2245.

H.Stock Bonus, Pension, Profit-Sharing, Annuity or Similar Plans


Context of 11 USCS § 522(d)(10)(E) does not suggest that Congress deviated from ordinary meaning of term "on account of;" thus, "on account of" in § 522(d)(10)(E) requires that right to re-ceive payment be "because of" illness, disability, death, age, or length of service. Rousey v Jacoway (2005, US) 161 L Ed 2d 563, 125 S Ct 1561, 44 BCD 144, 34 EBC 1929, CCH Bankr L Rptr P 80263, 2005-1 USTC P 50258, 18 FLW Fed S 223.

Chapter 11 debtor may exempt pension plan, Keogh plan, and IRA pursuant to 11 USCS § 522(d)(10) to extent reasonably necessary for debtor's support or that of his dependents because debtor, at age 66, enjoys present right to receive his interest in plans, and because plans are quali-fied under IRC; for purposes of determining who are debtor's dependents, court will include debtor's law-school and college-age children, even though none are under 19 or in secondary school as pro-vided in state law governing aid to dependent children, where to do so does not produce different result than if they were not included; further, just as expenses of debtor's wife will be considered in support determination by virtue of her status as statutory dependent of debtor, so, too, will her in-come and assets be considered in computation of basic-needs of debtor and dependents, but non-debtor wife's income and assets should be considered under § 522(d)(1)(E) basic needs analysis only in amount necessary to cover present and anticipated personal expenses of spouse as well as that spouse's proportionate share of present and anticipated common expenses. In re Velis (1991, DC NJ) 123 BR 497, 21 BCD 591, affd in part and revd in part on other grounds (1991, CA3 NJ) 949 F2d 78, 22 BCD 414, 25 CBC2d 1362, 14 EBC 1922, CCH Bankr L Rptr P 74329, reh den (1991, CA3) 1991 US App LEXIS 30075 and (criticized in Reitmeyer v Gralka (In re Gralka) (1997, BC WD Pa) 204 BR 184, 37 CBC2d 490, CCH Bankr L Rptr P 77301).

In action by client against law firm and attorney alleging that law firm and attorney committed legal malpractice when they advised her to establish certain trust and transfer her property prior to her husband's bankruptcy filing, law firm and attorney were granted summary judgment under Fed. R. Civ. P. 56(c) where client's legal malpractice claim failed as matter of law because client failed to show that any negligence by law firm or attorney caused her damages as client conceded that, if her husband's creditors could have reached her assets prior to formation of trust, she could not demon-strate that any alleged malpractice was proximate cause of her loss, and client failed to demonstrate that, but for transfers to trust, her husband could meet this burden to establish his inability to pay disgorgement order against him, and neither release executed in bankruptcy proceeding of client's husband nor exemption of certain stock pursuant to 11 USCS § 522(c) in husband's bankruptcy pre-vented Securities and Exchange Commission from either seeking to avoid transfers to client or from pursuing some other direct claim against her or her assets. Steffen v Gray, Harris & Robinson, P.A. (2003, MD Fla) 283 F Supp 2d 1272, 16 FLW Fed D 655.

Page 292 11 USCS § 522

Debtor's Keogh plan, pension and profit-sharing plan, and IRA are included in Kentucky statute exempting stock bonus, pension, profit-sharing, annuity or similar plan to extent reasonably neces-sary for support of debtor and his dependents. In re Fisher (1986, BC WD Ky) 63 BR 649.

Chapter 7 debtor may not exempt his interest in retirement or stock ownership plan where Mis-souri exemption statute exempts only payments received and not corpus of trust. In re Wallace (1986, BC ED Mo) 66 BR 834, 3 BAMSL 3153.

State opt-out exemption of pensions and annuities to extent reasonably necessary for support of debtor must be valued according to: (1) debtor's present and anticipated living expenses, (2) debtor's present and anticipated income from all sources, (3) age of debtor and dependents, (4) health of debtor and dependents, (5) debtor's ability to work and earn, (6) debtor's skill, training, and educa-tion, (7) debtor's other assets, including exempt assets, (8) liquidity of debtor's assets, (9) debtor's ability to save for retirement, (10) special needs of debtor and dependents, and (11) debtor's finan-cial obligations. In re McCabe (1986, BC ND Iowa) 74 BR 119 (criticized in In re Huebner (1992, ND Iowa) 141 BR 405).

State opt-out exemption of payment under pension or annuity on account of age includes private annuity, which, because of age of debtor-annuitant, is payable immediately upon purchase and which is purchased shortly before, and apparently in contemplation of, filing bankruptcy proceed-ings. In re McCabe (1986, BC ND Iowa) 74 BR 119 (criticized in In re Huebner (1992, ND Iowa) 141 BR 405).

Pursuant to Texas statute exempting pensions plans, profit-sharing plans, ERISA-qualified plans, and other similar plans, all of Chapter 7 debtors' retirement plan, as expressed through their various IRA accounts and profit-sharing account, is exempt; retirement plan may encompass more than one account. In re Volpe (1989, BC WD Tex) 100 BR 840, affd (1990, WD Tex) 120 BR 843, affd (1991, CA5 Tex) 943 F2d 1451, 25 CBC2d 1006, CCH Bankr L Rptr P 74319.

11 USCS § 522(d)(10)(E) is not limited to those funds which debtor is presently receiving under stock bonus, pension, profit-sharing, annuity, or similar plan, but rather is limited only by debtor's right to receive payments under plan. In re Cilek (1990, BC WD Wis) 115 BR 974, 11 UCCRS2d 937.

Pertinent inquiry under 11 USCS § 522(d)(10)(E) regarding potential for exemption is not whether debtor is presently receiving payments from retirement plan or contract but whether debtor is presently entitled to receive said payments on account of, for instance, age, or disability. Ma-koroff v Booth (In re Booth) (2005, BC WD Pa) 331 BR 233.

If allowing 11 USCS § 522(d)(10) (E) exemption would confer windfall on debtor, it should be disallowed. Walsh v Benson (In re Benson) (2007, BC WD Pa) 363 BR 415.

163. Extent reasonably necessary for support

Bankruptcy Court properly takes into account debtor-doctor's monthly income of $ 36,000 in determining that debtor-doctor did not have right to exempt his contributions to retirement plans under 11 USCS § 522(d)(10)(E) which gives debtor right to exempt pension plan to extent reasona-bly necessary for support of debtor and his dependence. In re Kochell (1984, CA7 Wis) 732 F2d 564, 11 BCD 1174, 5 EBC 1289, CCH Bankr L Rptr P 69835.

Funds deposited in pension plans are not exempt under 11 USCS § 522(d)(10)(E) where debtor, who is 44-year-old doctor, has shown neither present nor future conditions which demonstrate plans

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are reasonably necessary for his support and that of his children as debtor has gross income of $ 38,000 per month and debtor is neither disabled nor in failing health. In re Kochell (1983, WD Wis) 31 BR 139, 4 EBC 1942, affd (1984, CA7 Wis) 732 F2d 564, 11 BCD 1174, 5 EBC 1289, CCH Bankr L Rptr P 69835.

Reasonably necessary standard under 11 USCS § 522(d)(10)(E) requires that court take into ac-count other income and exempt property of debtor, present and anticipated; appropriate amount to be set aside for debtor ought to be sufficient to sustain basic needs, not related to his former status in society or lifestyle to which he is accustomed but taking into account special needs that retired and elderly debtor may claim. In re Kochell (1983, WD Wis) 31 BR 139, 4 EBC 1942, affd (1984, CA7 Wis) 732 F2d 564, 11 BCD 1174, 5 EBC 1289, CCH Bankr L Rptr P 69835.

Chapter 11 debtor may exempt pension plan, Keogh plan, and IRA pursuant to 11 USCS § 522(d)(10) to extent reasonably necessary for debtor's support or that of his dependents because debtor, at age 66, enjoys present right to receive his interest in plans, and because plans are quali-fied under IRC; for purposes of determining who are debtor's dependents, court will include debtor's law-school and college-age children, even though none are under 19 or in secondary school as pro-vided in state law governing aid to dependent children, where to do so does not produce different result than if they were not included; further, just as expenses of debtor's wife will be considered in support determination by virtue of her status as statutory dependent of debtor, so, too, will her in-come and assets be considered in computation of basic-needs of debtor and dependents, but non-debtor wife's income and assets should be considered under § 522(d)(1)(E) basic needs analysis only in amount necessary to cover present and anticipated personal expenses of spouse as well as that spouse's proportionate share of present and anticipated common expenses. In re Velis (1991, DC NJ) 123 BR 497, 21 BCD 591, affd in part and revd in part on other grounds (1991, CA3 NJ) 949 F2d 78, 22 BCD 414, 25 CBC2d 1362, 14 EBC 1922, CCH Bankr L Rptr P 74329, reh den (1991, CA3) 1991 US App LEXIS 30075 and (criticized in Reitmeyer v Gralka (In re Gralka) (1997, BC WD Pa) 204 BR 184, 37 CBC2d 490, CCH Bankr L Rptr P 77301).

In determining whether Chapter 11 debtor's pension plan, Keogh plan, and IRA are reasonably necessary for support within meaning of 11 USCS § 522(d)(10)(E), expenses will be reduced by $ 2,400 for vacation expenses, $ 2,040 for gift expenses, $ 1,200 for political and medical society contributions, and $ 14,000 budgeted for younger daughter's college expenses since she has gradu-ated; $ 17,820 annual expense for eldest daughter's law school education will cease after completion of her last year, as will $ 16,520 expense of son's college education; because allowable budget of $ 71,950 reflects only common expenses from which debtor and his nondebtor wife appear to benefit equally, $ 35,975 will be offset against income and assets of wife; debtor's interest in plans is not reasonably necessary where wife, who is in good health, who has no special needs at age 50, and who earns after-tax income of $ 47,000 that can be expected to remain constant, can cover $ 35,975 in annual expenses, her proportionate share of common expenses, with her income and assets, and remaining expenses can be satisfied from debtor's annual after-tax income of $ 56,000, which can continue for as long as he remains in good health, and his other assets, including $ 200,000 equity in home; furthermore, fact that debtor was able to accumulate $ 355,578 in pension and retirement benefits between 1980 and 1988 suggests that with careful planning debtor can also provide for ba-sic needs of retirement. In re Velis (1991, DC NJ) 123 BR 497, 21 BCD 591, affd in part and revd in part on other grounds (1991, CA3 NJ) 949 F2d 78, 22 BCD 414, 25 CBC2d 1362, 14 EBC 1922, CCH Bankr L Rptr P 74329, reh den (1991, CA3) 1991 US App LEXIS 30075 and (criticized in

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Reitmeyer v Gralka (In re Gralka) (1997, BC WD Pa) 204 BR 184, 37 CBC2d 490, CCH Bankr L Rptr P 77301).

Standard set forth in 11 USCS § 522(d)(10)(E) limiting pension payment exemptions to extent reasonably necessary for support of debtor and any dependent of debtor requires that court take into account other income and exempt property of the debtor, present and anticipated, and that appropri-ate amount to be set aside for debtor ought to be sufficient to sustain basic needs, not related to his former status in society or lifestyle to which he is accustomed, but take into account special needs that retired and elderly debtor may claim; therefore where debtor has available total annual income of $ 37,146.00 of which $ 29,226.84 represents pension payments, 50 percent of payments received are not exempt, are part of estate, and may be collected by trustee from date of filing of debtor's pe-tition. Warren v Taff (In re Taff) (1981, BC DC Conn) 10 BR 101, 7 BCD 493, 4 CBC2d 65, CCH Bankr L Rptr P 67938.

Debtor's pension fund assets are not exempt under 11 USCS § 522(d)(10)(E) when pension funds cannot be considered necessary for support of debtor; if Congress intended exemption to be broad enough to encompass all contingencies, it would not have included limiting words "reasona-bly necessary for the support of the debtor". In re Kochell (1982, BC WD Wis) 26 BR 86, 9 BCD 1329, 4 EBC 1734, CCH Bankr L Rptr P 68942, affd (1983, WD Wis) 31 BR 139, 4 EBC 1942, affd (1984, CA7 Wis) 732 F2d 564, 11 BCD 1174, 5 EBC 1289, CCH Bankr L Rptr P 69835.

Pension of teacher-debtor is not exempt under 11 USCS § 522(d)(10)(E) where it is not reasona-bly necessary for debtor where debtor is 48 years old, employed full time, and in good health and where plan falls under all 3 exceptions to 11 USCS § 522(c)(10)(E) in that (1) state, employer of debtor, is insider, (2) payments are based on acquired years in service and thus falls within excep-tion created by § 522(c)(10)(E)(II) and (3) fund fails to qualify under any applicable Internal Reve-nue Code sections falling within third exception of § 522(d)(10)(E)(III). In re Werner (1983, BC DC Minn) 31 BR 418, 10 BCD 1117, 9 CBC2d 371, CCH Bankr L Rptr P 69289.

Proper standard in deciding whether pension and profit sharing benefits are reasonably neces-sary for support of debtor and dependents is to take into account income and exempt property of debtor and compare to amount needed for sustaining basic needs, including any special needs of debtor, but not prior life style. In re Grant (1984, BC ND Tex) 40 BR 612.

No part of lump sum payment under Chapter 7 debtor's pension plan is necessary for support of debtor or his dependents because debtor has substantial postpetition income and enjoys moderate amount of uncommitted income after expenses each month and therefore debtor may not claim ex-emption under Illinois law; neither federal nor Illinois law permits debtor to exempt his entire inter-est in lump sum distribution from pension plan but rather payment is exempt only to extent neces-sary for support. In re Wilson (1985, BC ED Mo) 54 BR 796, 3 BAMSL 1737.

In deciding what is reasonably necessary for support of debtor and dependents for purposes of Iowa pension plan exemption, court must look to debtor's existing income and other exempt prop-erty in relation to basic needs; debtor wife's pension plan qualifies as exempt property under Iowa pension plan exemption where (1) debtor became eligible to receive her entire portion of plan fund upon her termination of employment, (2) most of assets exempted by debtors are needed for poten-tial fresh start and high percentage are fixed assets not readily suited for liquidation, and (3) due to debtor husband's disability, funds to meet everyday expenses are limited primarily to wife's income. In re Pettit (1985, BC SD Iowa) 55 BR 394, affd (1985, SD Iowa) 57 BR 362.

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Funds deposited by debtor in deferred compensation plan with her employer, the state, are ex-emptible under Ohio pension plan exemption because plan provides for payments to begin on par-ticipant's disability, death or retirement and minimal amount of $ 489.98 is reasonably necessary for support of debtor where debtor has earned less than $ 12,000 in years prior to bankruptcy, owns no real estate, has 12 year old car, minimal other personal property, and majority of her debts are for medical expenses incurred in past 2 years. In re Osburn (1986, BC SD Ohio) 56 BR 867, 7 EBC 1136 (criticized in In re Mueller (2000, BC DC Md) 256 BR 445, CCH Bankr L Rptr P 78353).

Determination of whether debtor's interest in fund is reasonably necessary for his support, ren-dering it exemptable, must be arrived at on case-by-case basis with workable standard based on definite criteria, widely applicable to variety of circumstances, and consistent with purposes of bankruptcy and state exemption law whose purposes are: (1) to provide debtor enough money to survive, (2) to protect his dignity and his cultural religious identity, (3) to afford means of financial rehabilitation, (4) to protect family unit from impoverishment, and (5) to spread burden of debtor's support from society to his creditors; and to this end, court will look to debtor's present and future needs as demonstrated by particular circumstances of each case. In re Flygstad (1986, BC ND Iowa) 56 BR 884, CCH Bankr L Rptr P 70938.

In considering whether debtor's right to payment in profit-sharing or pension plan is reasonably necessary for support, court will look to many factors, among them: (1) debtor's present and antici-pated living expenses; (2) debtor's present and anticipated income from all sources; (3) age of debtor and dependents; (4) health of debtor and dependents; (5) debtor's ability to work and earn living; (6) debtor's job skills, training, and education; (7) debtor's other assets, including exempt as-sets; (8) liquidity of other assets; (9) debtor's ability to save for retirement; (10) special needs of debtor and dependents; and (11) debtor's financial obligations, e.g., alimony or support payments. In re Flygstad (1986, BC ND Iowa) 56 BR 884, CCH Bankr L Rptr P 70938.

Because pension funds are to be exempted under Minnesota law only if reasonably necessary for debtor's support, office expenses of Chapter 7 debtor will not be considered in determining what amounts are necessary for debtor's support; exemption statutes are not intended to provide money for setting oneself up in business. In re Schlee (1986, BC DC Minn) 60 BR 524, 14 BCD 526.

Chapter 7 debtor husband is not entitled to exempt under Minnesota law his vested interest in profit sharing plan where debtors have no present need of plan benefits to support themselves or their dependents and future need is speculative; further, there is no reason why postpetition accruals vesting under plan, along with supplemental programs funded out of future income, cannot ade-quately provide for potential disability and retirement needs of 36-year-old debtors. In re Loe (1986, BC DC Minn) 63 BR 259, CCH Bankr L Rptr P 71405.

In absence of sufficient evidence of number of Chapter 7 debtor's dependents and his family's current and future expenses, hearing will be scheduled to allow debtor to submit additional proof on issue of what is reasonably necessary for support of himself and his dependents for purposes of de-termining to what extent his interest in retirement plans is exempt under Kentucky law. In re Slezak (1986, BC WD Ky) 63 BR 625.

To determine if debtor's interest in Keogh plan, pension and profit-sharing plan, and IRA are reasonably necessary for his support and that of his dependents as required by Kentucky exemption statute, court must examine all facts and circumstances including debtor's age, earning capacity, present and future financial needs, ability to insure against future disruptions in earning capacity

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and his ability to reestablish retirement fund; 61-year-old debtor's ability to reestablish retirement fund is not great, and therefore debtor may exempt entire $ 69,072.86 net value of funds. In re Fisher (1986, BC WD Ky) 63 BR 649.

Under New York law which allows Chapter 7 debtor to exempt profit or pension plans to extent reasonably necessary for support of dependent of debtor, debtor cannot include as reasonably neces-sary his funding of son's graduate education, since son is 21 years old and under New York law, no longer legal dependent. In re Fill (1988, BC SD NY) 84 BR 332, 17 BCD 427 (superseded by stat-ute as stated in In re Iacono (1990, BC ED NY) 120 BR 691, 20 BCD 1950) and (superseded by statute as stated in In re Orlebeke (1992, BC SD NY) 141 BR 569).

Determination of what funds are reasonably necessary for support, for purposes of determining entitlement to Illinois pension plan exemption, is factual determination, and court may consider such factors as debtor's age, health, future earning capacity, and necessary expenditures in making this determination; where debtor is relatively young and has present earning capacity, exemption is generally denied. In re Boggess (1989, BC SD Ill) 105 BR 470, 21 CBC2d 1015.

Twelve thousand dollars is reasonable threshold below which it ordinarily should be presumed that funds meet Missouri statutory requirement for exemption and therefore sum of $ 9,000 at issue in present case which is being accumulated for debtor's retirement is reasonably necessary for debtor's support. Rimmel v Ramirez (1992, BC ED Mo) 139 BR 220.

Although retirement benefits may not be currently necessary for support, court may consider fu-ture needs of debtor in determining whether or not, or to what extent, retirement benefits are ex-empt. In re Bowder (2001, BC DC Minn) 262 BR 919, 37 BCD 280, CCH Bankr L Rptr P 78470.

"Reasonably necessary" language that is contained in Ohio Rev. Code Ann. § 2329.662 and 11 USCS § 522 is not primarily designed to preclude high-salaried professionals and executives from exempting retirement funds. In re Guikema (2005, BC SD Ohio) 329 BR 607.

Although husband debtor was not actually receiving payments from annuity and IRA, bank-ruptcy court found these assets were exempt under 11 USCS § 522(d)(10)(E) because he was enti-tled to receive distributions, and these assets were reasonably necessary for support given that hus-band debtor was unemployable to due disability, his wife earned minimal income, and her ability to earn living or to save for retirement would not have significantly improved prior to her retirement. Makoroff v Booth (In re Booth) (2005, BC WD Pa) 331 BR 233.

If events occurring after petition date establish that 11 USCS § 522(d)(10)(E) exemption is not necessary to enable debtor to avoid becoming destitute and hence public charge, exemption is not required for "fresh start" and is not "reasonably necessary" within meaning of § 522(d)(10)(E); ob-jection to such exemption should be sustained. Walsh v Benson (In re Benson) (2007, BC WD Pa) 363 BR 415.

2.ERISA Qualified Plans 164. Generally

Congress did not intend that Employee Retirement Income Security Act be regarded as federal law upon which 11 USCS § 522(b)(2)(A) exemption could be based so as to allow debtor to exempt benefits of plan governed by Act. In re Graham (1984, CA8 Iowa) 726 F2d 1268, 11 BCD 626, 10 CBC2d 111, 5 EBC 2573, CCH Bankr L Rptr P 69705.

Debtor's interest in pre-ERISA and ERISA-qualified portions of retirement fund are reasonably necessary for his support and are therefore exempt under Iowa exemption statute where: (1) debtor's

Page 297 11 USCS § 522

other assets are not substantial, (2) if he retires on date of filing, he would be eligible to receive monthly payments of $ 420 when he reached age 65, (3) monthly payment will vary depending on how long he continues work and at what age he retires, (4) monthly amount even when coupled with Social Security benefits is within contemplation of reasonably necessary standard, and (5) pre-ERISA contribution of $ 1,015.50 to retirement fund which he can withdraw in lump sum upon termination is also reasonably necessary for support; there is insufficient evidence, however, to de-termine whether $ 40,000 in profit-sharing plan which could be payable to debtor in one lump sum is reasonably necessary for support. In re Flygstad (1986, BC ND Iowa) 56 BR 884, CCH Bankr L Rptr P 70938.

Under Indiana's opt-out scheme, Chapter 7 debtor's interest in ERISA profit-sharing plan, not qualifying as spendthrift trust under Indiana law and therefore part of estate, is exemptible only as part of $ 100 personal property exemption. In re McVade (1987, BC ND Ind) 72 BR 560.

Debtors' interest in pension and Keogh plans are exempt under New York law notwithstanding trustee's argument that debtor husband is 100 percent owner of professional corporation sponsoring plans, and conclusive presumption under New York law that ERISA-qualified plans are spendthrift trusts forecloses trustee's argument to contrary. In re Shailam (1992, BC ND NY) 144 BR 626.

Funds received from qualified retirement account were not exempt from bankruptcy estate un-der Mo. Rev. Stat. § 513.430(10)(e) because debtor no longer had "right to receive" funds, but in-stead had actually received funds; plain meaning of "right to receive" in § 513.430(10)(e) and 11 USCS § 522(d)(10)(e) precluded court from exercising its equitable powers to construe phrase to encompass funds already received pre-petition. In re McCollum (2002, BC ED Mo) 287 BR 750.

165. Exempt under "other federal law" under § 522(b)(2)(A)

Chapter 7 debtor's interest in his ERISA-qualified pension plan is included in bankruptcy estate and is not exempt under 11 USCS § 522(b)(2)(A), since House and Senate reports on § 522(a)(2)(A) contain list of exempt property and failure to include ERISA-qualified plan is highly indicative of congressional intent that such are not exempt; additionally, enumerated exemptions under § 522(a)(2)(A) are federally created pensions or related to industries protected by federal government, whereas ERISA pensions are privately established and privately funded. In re Gribben (1988, SD Ohio) 84 BR 494.

ERISA plans do not fall within 11 USCS § 522(b)(2)(A) provision allowing exemption of "any property that is exempt under Federal law " when debtors utilize state exemption system and there-fore debtor's interest in ERISA profit-sharing plan is included in bankruptcy estate under 11 USCS § 541. In re O'Brien (1988, WD Mo) 94 BR 583.

Federal exemption for tax-qualified ERISA plan may be successfully claimed under 11 USCS § 522(b)(2)(A); although ERISA plan funds are not specifically mentioned in House Report, similarity between provisions of those statutes that are recognized as constituting federal exemption and pro-visions of 29 USCS § 1056 and 26 USCS § 401(a)(13) support conclusion that federal exemption for ERISA plans was intended. In re Hinshaw (1982, BC DC Kan) 23 BR 233, 9 BCD 769, 7 CBC2d 323, 3 EBC 2535, CCH Bankr L Rptr P 69066, 83-1 USTC P 9104, 51 AFTR 2d 686.

Debtor's interest in profit sharing and trust plan is not exempt pursuant to 11 USCS § 522(b)(2)(a) since ERISA was enacted prior to Code yet Congress failed to include statutes in illus-trative list of exempt statutes and each of listed exempt statutes directly precluded all benefits from

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alienation or assignment while ERISA and 26 USCS § 401(a)(13) prohibit alienation merely as condition for obtaining qualified tax status. In re Nichols (1984, BC MD Fla) 42 BR 772.

Private ERISA qualified pension and profit sharing plans are not exempt property under 11 USCS § 522(b)(2)(A). In re Gillett (1985, BC SD Fla) 46 BR 642.

Trust res of ERISA-qualified Keogh retirement plan may not be exempted under provision of 11 USCS § 522(b)(2)(A) for other "federal law." In re O'Brien (1985, BC ED Va) 50 BR 67, 13 BCD 97, 12 CBC2d 1161.

ERISA, 29 USCS § 1001, does not provide basis for additional exemption under 11 USCS § 522(b)(2)(A). In re Slezak (1986, BC WD Ky) 63 BR 625.

ERISA-qualified plans are not exempt under 11 USCS § 522(b)(2)(A) since statutes authorizing such retirement plans are clearly distinguishable from other federal laws allowing exemptions con-templated by Congress when enacting § 522(b)(2)(A). In re Ewald (1987, BC WD Tex) 73 BR 792.

ERISA-qualified employee pension plans, containing mandated anti-alienation language, are available for exemption under 11 USCS § 522(b)(2)(A) as exempt under "other federal law." In re Komet (1989, BC WD Tex) 104 BR 799.

Debtors in opt-out state such as Montana may look to 11 USCS § 522(b)(2)(A) to assert valid exemption, either by way of state exemption or any nonbankruptcy federal exemption; but ERISA statute is not federal exemption statute within § 522(b)(2)(A) and Chapter 7 debtor may not exempt ERISA-qualified employee stock ownership plan pursuant thereto. In re Conroy (1990, BC DC Mont) 110 BR 492.

Debtor's interest in ERISA-qualified pension benefit plan is exempt under "other federal law" rubric of 11 USCS § 522(b)(2)(A); ERISA § 206(d)(1) establishes "federal law" exemption in ER-ISA-qualified pension benefit plan available to debtor who elects to claim his exemptions under § 522(b)(2)(B). In re Messing (1990, BC ED Tenn) 114 BR 541, 20 BCD 819, 23 CBC2d 650, CCH Bankr L Rptr P 73432, affd (1991, CA6) 1991 US App LEXIS 19755.

Even if ERISA-qualified plan is not excludable from estate, debtors may exempt their interest in such plan under "other federal law" exemption contained in 11 USCS § 522(b)(2)(A). In re Majul (1990, BC WD Tex) 119 BR 118.

Chapter 7 debtor's ERISA-qualified pension plans are protected by ERISA § 206(d)(1) (29 USCS § 1056) and therefore are property that is exempt "under federal law" within meaning of 11 USCS § 522(b)(2)(A). In re White (1991, BC DC Mass) 131 BR 526.

Massachusetts statute exempting ERISA-qualified annuity, pension, profit-sharing, or other re-tirement plans and individual retirement accounts is preempted by ERISA; ERISA entirely pre-empts statute, despite debtor's contention that its operation in bankruptcy should be saved because otherwise election of state exemptions pursuant to 11 USCS § 522 would be impaired, because § 522 permits debtor to elect exemption provided by federal law other than Bankruptcy Code in addi-tion to electing state exemptions, and antiassignment provision of ERISA is such law, so that § 522 is effective to permit claimed exemption even with preemption of Massachusetts statute. In re Hennessey (1992, BC DC Mass) 135 BR 711.

166. Exempt under § 522(d)(10)(E)

Page 299 11 USCS § 522

ERISA qualified pension benefits constitute exemption under 11 USCS § 522(d)(10)(E); since this section deals specifically with pension plans, § 522(d)(10)(E) must take precedence over gen-eral language of 11 USCS § 541(c)(2); passage of Bankruptcy Code implicitly repealed antialiena-tion requirement of ERISA. In re McLean (1984, DC SC) 41 BR 893, 11 CBC2d 406, 6 EBC 1273, CCH Bankr L Rptr P 70022, revd on other grounds (1985, CA4 SC) 762 F2d 1204, 13 BCD 367, 12 CBC2d 1431, 7 EBC 1440, CCH Bankr L Rptr P 70578.

11 USCS § 522(d)(10)(E), exempting plans under Employee Retirement Income Security Act, 29 USCS §§ 1001 et seq., (ERISA) as well as many other types of support payments, is not incon-sistent with interpretation of 11 USCS § 541(c)(2) excluding ERISA plans from property of estate even though there may be overlap between 2 provisions in that one excludes plans from property and other provides exemption but overlap does not constitute inconsistency. In re Pruitt (1983, BC DC Colo) 30 BR 330, 10 BCD 760, 8 CBC2d 912, 4 EBC 2130, CCH Bankr L Rptr P 69355.

Employee savings and profit-sharing plan which is part of ERISA qualified plan is entitled to exemption under 11 USCS § 522(d)(10)(E) only for retirement fund portion of plan. In re Berndt (1983, BC ND Ind) 34 BR 515, 9 CBC2d 848, CCH Bankr L Rptr P 69467.

Debtor may change his exemptions from state exemptions under 11 USCS § 522(b)(2) to federal exemptions under § 522(d)(10) so that he can claim as exempt his contributions to ERISA pension plan and profit sharing plan to extent that exemptions are necessary for support; if debtor claims exemption of contributions made to qualify pension and profit sharing plans, he is entitled to evi-dentiary hearing to determine amount of contribution reasonably necessary for support of debtor and debtor's dependents. In re La Fata (1984, BC ED Mich) 41 BR 842, 11 CBC2d 298, CCH Bankr L Rptr P 70020.

Chapter 7 debtors are not entitled to exempt, under 11 USCS § 522(d)(10)(E), ERISA-qualified plan because trust is not akin to future earnings where debtor husband has effective control of trust funds and can withdraw them at any time and where he has invested almost entire amount of trust fund in joint venture owned by himself and his wholly-owned corporation, in contravention of trust agreements, thereby treating trust funds as personal savings. In re White (1986, BC WD Wash) 61 BR 388.

In determining whether restriction on transfer of beneficial interest of debtor in trust is enforce-able under applicable nonbankruptcy law, for purposes of USCS § 541(c)(2), "applicable nonbank-ruptcy law" means state spendthrift trust law; application of state spendthrift trust law does not in any way prejudice participants in ERISA-qualified plans since ERISA-qualified funds not excluded under 11 USCS § 541(c)(2) can still be exempted if they meet criteria outlined in 11 USCS § 522(d)(10)(E); similarly, application of state spendthrift trust law is not inconsistent with 29 USCS § 1144(d), which provides that ERISA preempts state law, since this is not application of state law to ERISA plan, but rather application of federal bankruptcy law, which happens to mandate use of state spendthrift trust law. In re Hysick (1988, BC ED Pa) 90 BR 770.

Chapter 11 debtor is not entitled to exempt his interest in retirement plans under 11 USCS § 522(d)(10)(E) where funds are not needed to sustain basic needs of debtor and his dependents be-cause debtor and his wife have total combined salary of $ 156,000, sufficient to provide comfortable living for themselves and their family and education for their children. In re Velis (1989, BC DC NJ) 109 BR 64, affd (1991, DC NJ) 123 BR 497, 21 BCD 591, affd in part and revd in part on other grounds (1991, CA3 NJ) 949 F2d 78, 22 BCD 414, 25 CBC2d 1362, 14 EBC 1922, CCH Bankr L

Page 300 11 USCS § 522

Rptr P 74329, reh den (1991, CA3) 1991 US App LEXIS 30075 and (criticized in Reitmeyer v Gralka (In re Gralka) (1997, BC WD Pa) 204 BR 184, 37 CBC2d 490, CCH Bankr L Rptr P 77301).

IRAs were property of bankruptcy estate, since they did not include spendthrift provisions en-forceable under applicable nonbankruptcy law; debtors' IRA was not exempt under 11 USCS § 522(d)(10)(E), since they were not only allowed control over their IRA funds but in fact exercised such control by withdrawing total of $ 17,000 from IRAs during two years prior to filing their Chapter 7 petition. In re Zott (1998, BC ED Mich) 225 BR 160.

Debtor's interest in retirement plans could be exempted to extent reasonably necessary for her support, even though her entitlement to payment in event of unforeseen emergency was not one of events listed under 11 USCS § 522(d)(10)(E), since fact that payment could be triggered by addi-tional factor did not destroy exemptability, so long as her right to receive payment under plan could be triggered by one or more of five listed events. In re Lightbody (1999, BC ED Mich) 240 BR 545, CCH Bankr L Rptr P 78036. Unpublished Opinions

Unpublished: Pro se debtor was subject to court-imposed sanctions under 11 USCS § 105 for re-peatedly refiling claim to proceeds of litigation paid to her bankruptcy estate in spite of adverse rul-ing by court that claim proceeds were not excluded under 11 USCS § 522(d)(10). Goodheart v Maggio (In re Goodheart) (2006, BC DC NJ) 2006 Bankr LEXIS 2290.

3.Other Plans 167. Annuities

Single premium immediate annuity is matured annuity and not reasonably necessary to support Chapter 7 debtor and his spouse, and therefore is not exempt under California law where issue date of annuity was June 28 and effective date was July 1, debtor chose to have payout period commence on October 1, following filing of his bankruptcy petition on September 21, payout date chosen by debtor cannot rationally be deemed to make policy unmatured as of date of bankruptcy filing, and given debtor's assets, income, and living expenses, annuity payments are not reasonably necessary for support. In re Moffat (1992, CA9) 959 F2d 740, 92 CDOS 2405, 92 Daily Journal DAR 3791, CCH Bankr L Rptr P 74513.

Chapter 7 debtor may not exempt corpus of flexible premium annuities under Iowa statute ex-empting rights in payment under pension, annuity, or similar plan or contract on account of illness, disability, death, age, or length of service where debtor's present right to receive annuity payments does not depend upon his having reached age 65, nor upon occurrence of any other triggering events enumerated in statute such as illness, disability, or death, but rather, contracts give debtor unfettered discretion to receive payments at any time under any of 3 payment options: (1) cash payment in any amount up to cash value; (2) periodic payments for chosen length of time; or (3) periodic payments for life of annuitant with guaranteed amount for chosen number of years; debtor's access and com-plete control over timing of annuity payments mean that any payments received under contracts would not be "on account of" his age. Huebner v Farmers State Bank (In re Huebner) (1993, CA8 Iowa) 986 F2d 1222, 28 CBC2d 1124, 16 EBC 1770, CCH Bankr L Rptr P 75132, cert den (1993) 510 US 900, 126 L Ed 2d 223, 114 S Ct 272.

Chapter 7 debtors may not exempt annuity, purchased with funds borrowed against equity in their homestead 10 days before bankruptcy filing, as unmatured life insurance policy under Califor-

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nia law where statute is limited to life insurance policies and, in this case, annuity provides guaran-teed stream of income over term of contract, there are no contingencies that can divest debtors of their right to receive payment, should debtor husband die during life of contract, all remaining pay-ments will be made to his designated beneficiaries, and annuity of this type is investment, not life insurance policy. Bernard v Coyne (In re Bernard) (1994, CA9 Cal) 40 F3d 1028, 94 CDOS 8793, 94 Daily Journal DAR 16364, 32 CBC2d 508, CCH Bankr L Rptr P 76206, cert den (1995) 514 US 1065, 131 L Ed 2d 559, 115 S Ct 1695.

Chapter 7 debtors may not exempt annuity, purchased with funds borrowed against equity in their homestead 10 days prepetition, under California statute exempting individual retirement annui-ties to extent necessary to provide support upon retirement, where debtor husband, who is now 60 years old, earns in excess of $ 200,000 annually, he can expect to earn this amount for several more years, and debtors are entitled to substantial income from other sources upon retirement, including Social Security and pension benefits. Bernard v Coyne (In re Bernard) (1994, CA9 Cal) 40 F3d 1028, 94 CDOS 8793, 94 Daily Journal DAR 16364, 32 CBC2d 508, CCH Bankr L Rptr P 76206, cert den (1995) 514 US 1065, 131 L Ed 2d 559, 115 S Ct 1695.

Annuity policy is not life insurance within purview of Minnesota exemption statute since such policy is primarily for benefit of insured and not for protection of dependents and cash surrender value of retirement annuity vests in trustee in bankruptcy. In re Walsh (1937, DC Minn) 19 F Supp 567.

Debtor may not exempt retirement annuities under Iowa law exempting payments under annuity contract on account of illness, disability, death, age, or length of service, where annuity contracts provide that owner may withdraw all or part of cash value of certificate on any date while annuitant is alive, annuitant may chose among several payment options including lump-sum cash payment, periodic payments over period of time, or payment for life with guaranteed number of years, and debtor's ability to withdraw from annuities is substantially unrestricted except for penalties estab-lished by tax code and minor contractual restrictions established in one of annuities; further, "on account of age" requirement is not satisfied merely because of debtor's expressed intent to begin receipt of payments after his 65th birthday because although debtor may have personally intended to begin payments from annuity when he reached age 65, his options under annuity were not so lim-ited; "on account of" is more appropriately interpreted to mean "triggered by." In re Huebner (1992, ND Iowa) 141 BR 405, affd (1993, CA8 Iowa) 986 F2d 1222, 28 CBC2d 1124, 16 EBC 1770, CCH Bankr L Rptr P 75132, cert den (1993) 510 US 900, 126 L Ed 2d 223, 114 S Ct 272.

Both plain meaning of Vermont exemption statute and policies underlying it compel conclusion that statute can apply to future as well as present income and that it does not limit debtor's right to receive payments to which he is currently entitled. Delaney v Obuchowski (In re Delaney) (2001, DC Vt) 268 BR 57.

Finding of bankruptcy court that annuity that bequeathed to wife under her mother's will did not qualify for exemption under 11 USCS § 522(d)(10)(E) was affirmed where debtors could not have satisfied requirement that wife's payments were replacement for lost income or akin to future earn-ings and, thus, annuity did not qualify for exemption under § 522(d)(10)(E). Weidman v Shapiro (2003, ED Mich) 299 BR 429.

Where state exemption statute requires determination of necessity of annuities and the like for support of Chapter 7 debtor and debtor's dependents, determination can be made on basis of future

Page 302 11 USCS § 522

needs at time of retirement and consists of what income ought to be sufficient to sustain basic needs, not related to debtor's former status in society or lifestyle to which debtor is accustomed but taking into account special needs that retired and elderly debtor may claim; since debtor's expenses exceed basic needs test, i.e., life insurance on her husband, mortgage payments in future where none exist now, and excessive transportation expense, annuities are not reasonably necessary and claimed exemption is disallowed. In re Sederstrom (1985, BC DC Minn) 52 BR 448.

Annuity purchased 4 years earlier by husband and wife, ages 63 and 56, which has paid monthly dividends from date of purchase is exempt under liberal interpretation of Iowa statute providing for exemption of rights in annuity on account of age, because to strictly interpret "on account of age" as limited to annuity where rights accrue only upon reaching specified predesignated age would defeat protective purposes of exemption laws intended to avoid impoverishment, enable survival, and af-ford means of rehabilitation. In re Gilbert (1985, BC ND Iowa) 74 BR 1 (criticized in In re Hueb-ner (1992, ND Iowa) 141 BR 405).

Debtor may not claim annuity as exempt under Minnesota statute which provides for exemption of retirement annuities, despite fact that it may have been debtor's intention to provide income and property for his retirement years, and that money to purchase annuity came from 5 other life insur-ance policies which were canceled, where payments to debtor under annuity are not "on account of illness, disability, death, age, or length of service," but, rather, payments he received are "on ac-count of" his investment in annuity. In re Gagne (1993, BC DC Minn) 166 BR 362, affd in part and revd in part on other grounds (1994, DC Minn) 179 BR 884.

Florida statute exempting proceeds of annuity contracts from reach of beneficiary's creditors ex-empts annuity proceeds from claims of creditors of third-party beneficiaries who become entitled to annuity proceeds upon death of annuitant, such as Chapter 7 debtor who received proceeds of annu-ity following death of her uncle, not just from creditors of annuitant. In re Zeitz (1994, BC SD Fla) 171 BR 903.

$ 35,000 in annuity funds were not reasonably necessary for support of Chapter 7 debtors and their dependents and thus could not be claimed as exempt under 11 USCS § 522(d)(10)(E) where (1) debtors' had $ 29,148 annual excess income, (2) debtors could work for another 12 and 21 years respectively before reaching age 65, (3) debtors would retain, after discharge, all their household furnishings and wearing apparel as well as $ 250 in cash and $ 16,000 equity in their home, and (4) debtors would have $ 349,776 excess upon husband debtor's retirement if they each retained their current salaries until that time. In re Mann (1996, BC ED Mich) 201 BR 910.

Single premium annuity owned by debtor could not be exempted under Missouri statute as an-nuity on account of illness, disability, death, age or length of service where annuity could be traced directly back to testamentary gift from debtor's late aunt and thus amounted to nothing more than nonexempt inheritance received in form of annuity. In re Collett (2000, BC WD Mo) 253 BR 452, 45 CBC2d 45.

Exemption of payments under annuity is intended to protect payments which function as wage substitutes after retirement. In re Wallace (2001, BC ED Mo) 260 BR 482.

Debtor's annuity did not qualify as (1) stock bonus, (2) pension, (3) profitsharing, (4) annuity, or (5) similar plan or contract as required by Bankruptcy Code, and therefore was not exempt. In re Weidman (2002, BC ED Mich) 284 BR 837, affd (2003, ED Mich) 299 BR 429.

Page 303 11 USCS § 522

Sixteen-month period between debtor's withdrawal of funds from exempt retirement account and debtor's subsequent purchase of annuity contract, combined with loss of tax deferred status, was inconsistent with concept of transfer set forth in La. Rev. Stat. Ann. § 13:3881(D)(2); accordingly, annuity contract was not exempt from bankruptcy estate. In re Roberts (2005, BC MD La) 96 AFTR 2d 5767.

Where debtor used distribution from tax deferred arrangement to buy annuity contract, annuity purchase was not transfer protected by La. Rev. Stat. Ann. § 13:3881(D)(2); plain language of stat-ute preserved exemption only if funds were transferred from one tax deferred arrangement to an-other, or one annuity to another. In re Roberts (2005, BC MD La) 96 AFTR 2d 5767.

Annuity contracts purchased by Chapter 7 debtor are not exempt under California life insurance exemption statute where annuity contracts involve no risks, contingencies, or unknown events and thus are not life insurance policies, but rather are investments that debtor made under which sums certain are payable at fixed dates for fixed periods. In re Pikush (1993, BAP9 Cal) 157 BR 155, 93 CDOS 6473, 93 Daily Journal DAR 11039, 29 CBC2d 747, CCH Bankr L Rptr P 75427, affd (1994, CA9) 27 F3d 386, 94 CDOS 4462, 94 Daily Journal DAR 8257.

Facts that debtor who received inheritance at age 58 purchased annuity with single payment and that there were no other contributors were not determinative nor deserving of great weight in deter-mining whether annuity was exempt as wage substitute where debtor had no other opportunity to obtain pension plan since her employer did not offer that benefit; accordingly, debtor's right to re-ceive annuity payments constituted retirement plan within ambit of 11 USCS § 522(d)(10)(E). An-dersen v Ries (In re Andersen) (2001, BAP8 Minn) 259 BR 687, 45 CBC2d 1251, CCH Bankr L Rptr P 78390.

Where debtors purchased annuity from proceeds from sale of remainder interest in farm land and used annuity to generate self-employment income, annuity was not exempt under Minn. Stat. Ann. § 550.37(24) (2003). Martin v Bucher (In re Martin) (2003, BAP8) 297 BR 750, CCH Bankr L Rptr P 78906. Unpublished Opinions

Unpublished: Even though Fed. R. Bankr. P. 7024 applied only to adversary proceedings, court used its discretion under Fed. R. Bankr. P. 9014 to allow issuer of annuity to intervene on permis-sive basis, in interest of judicial economy, in contested matter brought by trustee to challenge debtor's claimed exemption under 11 USCS § 522(d) of his interest in annuity. In re Quinn (2004, BC WD Mich) 2004 Bankr LEXIS 2368.

Unpublished: When issuer of annuity was allowed to intervene, it had to accept case as it cur-rently stood and could only seek determination under Fed. R. Bankr. AP. 9023 as to whether previ-ous order finding debtor's interest in annuity as property of estate under 11 USCS § 541 and not ex-empt under 11 USCS § 522(d) should be amended; although Mitch. Comp. Laws Serv. § 38.1683 restricted transfers of retirement interests, law was unenforceable under U.S. Const. art. VI as to debtor's interest in annuity, where rights were found not held in trust, because 11 USCS § 541(a)(1) required all of debtor's interests, including interests in retirement plans, to transfer to estate notwith-standing applicable non-bankruptcy law. In re Quinn (2004, BC WD Mich) 2004 Bankr LEXIS 2368.

168.--Resulting from lawsuit settlement

Page 304 11 USCS § 522

Settlement agreement, which resolved debtor's lawsuit against employer and authorized em-ployer to substitute annuity for its continuing obligation under noncompetition agreement, does not preclude annuity from being exempt under Texas statute which exempts money and benefits to be paid to insured or beneficiary under insurance policy or under any plan or program of annuities and benefits in use by employer; although substitution of annuity for collateral was made possible by settlement agreement, annuity payment represents employer's obligations under pre-existing non-competition agreement, validity of which was simply reaffirmed by settlement agreement; parties' agreement to treat debtor's employment as having terminated at earlier date, prior to settlement agreement, and fact that employer waited until several months after agreement had been executed to purchase annuity cannot change fact that annuity payments represent employer's obligations to make monthly payments to debtor under noncompetition agreement which was ancillary to his em-ployment; and, therefore, employer purchased annuity in its capacity as debtor's employer, thus sat-isfying requirement that annuity was "in use by" employer as required under exemption statute. Walden v McGinnes (In re Walden) (1994, CA5 Tex) 12 F3d 445 (criticized in In re Orso (1998, BC MD La) 219 BR 402).

Annuity purchased by debtor's employer pursuant to settlement agreement is part of "plan or program of annuities and benefits" as required under Texas exemption statute because it was one of 3 purchased by employer in order to arrange for accomplishment of particular "object" or "goal": funding continuing/future noncompetition payments and securing release of its assets from liens held by debtor and other 2 key employees as collateral for those payments; it is not necessary that plan or program provide annuities for all employees, or that it be of particular type, and, therefore, employer's provision of annuities to only 3 former employees does not make it any less "plan" or "program" within meaning of statute. Walden v McGinnes (In re Walden) (1994, CA5 Tex) 12 F3d 445 (criticized in In re Orso (1998, BC MD La) 219 BR 402).

Under laws of Louisiana that establish exemptions from seizure, proceeds of annuity contracts purchased by obligors to fulfill personal injury settlement structured to comply with 26 USCS § 104(a)(2) and 130 were exempt from claims of creditors of payee who was debtor in bankruptcy. Canfield v Orso (In re Orso) (2002, CA5 La) 283 F3d 686.

Chapter 13 debtor may not exempt annuity which is part of structured tort settlement agreement under Ohio exemption for pensions, annuities or similar plans, because that statute appears con-cerned mainly with annuities as used in retirement and disability planning; debtor may exempt it only under statute exempting payments on account of personal injury. In re Simon (1987, BC ND Ohio) 71 BR 65.

Property settlement payments to debtor former spouse provided in judgment of dissolution of marriage are not proceeds of annuity contract exempt under Florida law where it is clear from 4 corners of agreement that debtor and her former husband did not intend for settlement agreement to be annuity because debtor and husband entered into contract and bargained for exchange of debtor's half interest in their joint property for cash, bargain was structured so that former husband could pay installments, and agreement refers to exchange as "equitable distribution" and refers to debtor and her former husband as parties to contract, not as beneficiaries or payees; payment stream alone is insufficient to establish annuity contract--some other indication of intention to create annuity must be shown. In re Conner (1994, BC MD Fla) 172 BR 119, CCH Bankr L Rptr P 76153, 8 FLW Fed B 222.

Page 305 11 USCS § 522

Where Chapter 7 debtors discharges were revoked because they failed to disclose that debtor husband received annual payments from settlement of lawsuit, debtors were denied leave to amend their exemptions to add payments as exempt under 11 USCS § 522(d)(10)(E) because debtors knowingly and fraudulently did not report husband's interest in annual payments. Walsh v Helsel (In re Helsel) (2005, BC WD Pa) 326 BR 591.

Where Chapter 7 debtors sought leave to amend their exemptions to add annual payments from settlement of lawsuit as exempt under 11 USCS § 522(d)(10)(E), leave was denied because, based on their income and expenses as of commencement of bankruptcy case, payments were not rea-sonably necessary for debtors' support. Walsh v Helsel (In re Helsel) (2005, BC WD Pa) 326 BR 591.

Although debtors did not own annuity contracts issued as part of structured settlement and thus, could not claim exemption for them under 11 USCS § 522, La. Rev. Stat. Ann. § 13:3881(D) only barred from exemption contributions made to annuity contracts within year prior to bankruptcy fil-ing and clearly did not prohibit exemption under La. Rev. Stat. Ann. § 22:647(B), 20:33 for annuity payments received by debtors within year preceding bankruptcy filing. In re Clement (2005, BC MD La) 327 BR 249.

N.Y. Ins. Law § 3212 governed question of whether annuity payments Chapter 11 debtor re-ceived were exempt property because New York State opted out of federal exemption scheme, pur-suant to N.Y. Debt. & Cred. Law § 284, and debtor provided consideration to obtain annuities when he settled personal injury action; although payments were at least partially exempt, § 3212(d)(2) allowed court to order debtor to pay creditors portion of benefits he received if it appeared that benefits exceeded amount that was reasonably necessary to meet his needs and his dependents' needs, and court ordered hearing to determine extent to which payments could be exempted under § 3212(d)(2). In re Lyons (2008, BC SD NY) 381 BR 444.

169.--Lottery winnings

Debtor is not entitled under 11 USCS § 522(d)(10) to exempt winnings from lottery to be paid in annuity installments in future years, where, although debtor's interest is future interest in some re-spects, winnings became property of estate under 11 USCS § 541(a), restriction in § 541(c)(2) being applicable to spendthrift trust, and where only form of annuity contract subject to exemption is one provided by § 522(d)(10)(E). In re Miller (1982, BC DC Md) 16 BR 790, 8 BCD 833, CCH Bankr L Rptr P 68643.

Chapter 7 debtors' lottery winning are not exempt under 11 USCS § 522(d)(10)(E) as in nature of annuity or similar plan on account of illness, disability, death, age, or length of service, even though debtors have difficult financial condition and personal health problems. Wallick v Rhode Island State Lottery Com. (1992, BC DC RI) 144 BR 221.

Chapter 7 debtor, who won over $ 3 million in state lottery, may not exempt winnings which she receives in annual payments pursuant to annuity contract purchased by state from insurance com-pany under Florida statute exempting annuity contracts because annuity contract was issued to state, and therefore fails to meet statutory requirement of issuance to citizen or residents of State of Flor-ida, and because debtor is not beneficiary of contract but only nominee and her rights are solely against state; nor are yearly payments paid to debtor exempt as annuity payments or proceeds thereof; although debtor argues that annuity itself need not be issued to Florida resident if proceeds are received by Florida resident, proceeds are not issued, contracts are issued, and even accepting

Page 306 11 USCS § 522

her interpretation, "proceeds" were not issued to debtor, but rather, only state has rights to monies under contract; unpaid lottery winnings must be paid over to trustee. In re Pizzi (1993, BC SD Fla) 153 BR 357, CCH Bankr L Rptr P 75272, 7 FLW Fed B 69 (criticized in In re Bennett (1998, BC MD Fla) 217 BR 654, 11 FLW Fed B 156).

Chapter 7 debtor's right to receive future lottery payments pursuant to lottery annuity was not exempt from property of estate under 11 USCS § 522(d)(10)(E) as phrase "on account of illness, disability, death, age, or length of service" modified "annuity" and not just "similar plan or contract" as asserted by debtor, debtor's right to receive future payments was not triggered by any events set forth in section, and equity favored result. In re Neto (1997, BC DC NJ) 215 BR 939, 31 BCD 1043 (criticized in In re Schuster (2000, BC DC NJ) 256 BR 701, 37 BCD 28, 45 CBC2d 956).

Installments in which state lottery winnings were paid to Chapter 11 debtor could not be ex-empted as "annuity" payments under Florida exemption. In re Bruce (1998, BC MD Fla) 224 BR 505, CCH Bankr L Rptr P 77825, 12 FLW Fed B 29.

170. Debtor's participation interest in retirement system

Bankrupt's interest in city employee's retirement system was exempt from his creditors under state law, which extended exemption not only to bankrupt but to any beneficiary, and therefore, bankrupt's interest did not pass to trustee pursuant to former 11 USCS § 110(a); contention that bankrupt had waived exemption by initially appointing his wife as beneficiary and by subsequently reducing her interest in order to appoint creditor bank as beneficiary of stated sum in order to secure note was without merit since scope of exemption would be determined by state law, and no state decision had indicated any such consequence by reason of bankrupt's transfer. Negin v Salomon (1945, CA2 NY) 151 F2d 112, 161 ALR 1005.

Chapter 7 debtor's private retirement plan was not so abused as to lose its retirement purpose where debtor had taken unsecured loans from plan, because (1) debtor followed procedure set out in Trust Agreement for obtaining loans, (2) debtor was charged reasonable rate of interest on loans, (3) she regularly made interest payments due, over period of several years, (4) there is no indication that debtor used plan to hide otherwise ineligible assets from bankruptcy administration; thus, plan retains its exempt status under 11 USCS § 522(b). In re Bloom (1988, CA9) 839 F2d 1376, 9 EBC 1845.

"Self-employment retirement plans" within meaning of California exemption statute include corporate plans in which one person controls corporation and plan; therefore, debtor who is sole shareholder, director, and chief executive officer of professional corporation may fully exempt his interest in corporate retirement plan as private retirement benefit, and is not limited to partial ex-emption for self-employed retirement plans. In re Cheng (1991, CA9 Cal) 943 F2d 1114, 91 CDOS 6992, 91 Daily Journal DAR 10668, CCH Bankr L Rptr P 74229.

Although Florida has specifically vetoed exemptions contained in 11 USCS § 522(B)(1), so that such federal exemptions are not applicable in such state, debtor's interest in employer's retirement plan is exempt as enforceable spendthrift trust, in view of Florida case law holding bankrupt's equi-table interest in trust is beyond reach of creditors where trustee is not required to turn property over to bankrupt, as where employee has no right to withdraw contributions or benefits except upon separation from company, retirement, death or disability. In re Nichols (1980, BC SD Fla) 1 CBC2d 765.

Page 307 11 USCS § 522

Debtor's participation interest in state retirement system, which only entitled debtor to receive future payments and had no present right of access, is not property interest of debtor as of com-mencement of bankruptcy case, and is exempt property under 11 USCS § 522(d)(10)(E). In re Sheridan (1983, BC DC Vt) 38 BR 52.

Individual debtor's interest in retirement trust fund controlled and administered by state public school employees' retirement system is excluded by 11 USCS § 541(c)(2) from becoming part of bankruptcy estate and therefore is not as to be subject to federal exemption claims under 11 USCS § 522(d)(10)(E); debtor's interest retains its exempt status under state law, even though funds were claimed and disallowed as federal exemption, because trust provides for debtor's future instead of his present needs; right to take federal exemptions is in alternative with those provided under state, local, or other federal law and even though debtor's claimed federal exemptions are disallowed he, does not, on that basis alone, lose alternative right to claim exemptions under applicable state law. In re Sawdy (1985, BC WD Pa) 49 BR 383, 13 BCD 140, 12 CBC2d 1143.

Minnesota exemption statute, which exempts from execution by creditors all funds that state's teachers have in their teachers' retirement fund, is not unconstitutional under state constitution, even though it contains no dollar limitation or limitation to "extent reasonably necessary," because con-tributions to program are strictly limited to modest amount, teachers' salaries are inherently limited, and that percentage limitation provides "reasonable amount" limitation. In re McKeag (1990, BC DC Minn) 111 BR 815.

Because debtor timely filed exemption claim and no party in interest objected thereto, his re-tirement accounts were exempt property and not property of debtor's bankruptcy estate, pursuant to 11 USCS § 522(d). In re O'Brien (2007, BC DC Mass) 367 BR 242.

171. Contributions to pension or retirement plan

Public school teacher's payments into state retirement system are exempt under 11 USCS § 522 where statute whereby retirement system was created provides for exemption; exemption right does not need to be included in general state exemption statute to create exemption in bankruptcy. Hovis v Wright (1985, CA4 SC) 751 F2d 714, 5 EBC 2763, CCH Bankr L Rptr P 70214.

Issue of whether Chapter 7 debtor's contributions to South Carolina Retirement System are ex-empt property is governed by 11 USCS § 522(b)(2), and under this provision, exemptions estab-lished by South Carolina Code § 9-1-1680 is valid and exempts funds held by Retirement System. In re Wright (1983, DC SC) 39 BR 623, affd (1985, CA4 SC) 751 F2d 714, 5 EBC 2763, CCH Bankr L Rptr P 70214.

Bankruptcy Code permitted debtor to exempt certain property from bankruptcy estate, including distribution from qualified retirement plan, and that exempt status remained for 60-day time period that debtor had to rollover that distribution into another qualified retirement account; since debtor directly distributed those withdrawn funds to another qualified retirement account within 60-day period, trustee's objection that funds should not have been permitted to be listed on debtor's amended exempt property schedule had to be rejected. Wolff v Gibson (In re Gibson) (2003, DC Md) 300 BR 866, 31 EBC 2443, CCH Bankr L Rptr P 80003.

Lump-sum proceeds in Civil Service Retirement Fund are exempt from execution under 5 USCS § 8346(a) as exemption under 11 USCS § 522(b)(2)(A). In re Bizon (1983, BC DC Md) 28 BR 886, affd (1984, DC Md) 42 BR 338, 5 EBC 2579.

Page 308 11 USCS § 522

Retirement contributions must be included in calculation of disposable income in Chapter 13 plan, except when failure to make retirement contribution would result in actual adverse conse-quence such as loss of employment; retirement contributions are not, however, fatal to plan confir-mation if debtor elects to extend plan term by sufficient number of months to assure that creditors are paid as much as they would receive under 36-month plan in which retirement contributions are included in calculation of disposable income. In re Mendoza (2002, BC DC Ariz) 274 BR 522.

172. Individual Retirement Accounts

Eighth Circuit erred in affirming bankruptcy court's conclusion that Individual Retirement Ac-counts (IRA) of debtors, husband and wife, were not exempt from Chapter 7 bankruptcy estate un-der 11 USCS § 522(d)(10)(E); Eighth Circuit erroneously concluded that even if debtors' IRAs were "similar plans or contracts" to plans specified in § 522(d)(10)(E), their IRAs gave them no right to receive payment "on account of age," but were instead savings accounts readily accessible at any time for any purpose. Rousey v Jacoway (2005, US) 161 L Ed 2d 563, 125 S Ct 1561, 44 BCD 144, 34 EBC 1929, CCH Bankr L Rptr P 80263, 2005-1 USTC P 50258, 18 FLW Fed S 223.

Because 10 percent penalty under 26 USCS § 72(t) applies proportionally to any amounts with-drawn from account that qualities as Individual Retirement Account (IRA) under 26 USCS § 408(a), it prevents access to 10 percent that individual would forfeit should he withdraw early, and thus it effectively prevents access to entire balance in IRA; penalty therefore limits individual's right to "payment" of balance of his IRA; and because this condition is removed when accountholder turns age 59 1/2, individual's right to balance of his IRA is right to payment "on account of" age within meaning of 11 USCS § 522(d)(10)(E). Rousey v Jacoway (2005, US) 161 L Ed 2d 563, 125 S Ct 1561, 44 BCD 144, 34 EBC 1929, CCH Bankr L Rptr P 80263, 2005-1 USTC P 50258, 18 FLW Fed S 223.

IRA qualifies for exemption under statutory language tracking 11 USCS § 522(d)(10)(E), in-cluding language of California exemption statute. Farrar v McKown (In re McKown) (2000, CA9) 203 F3d 1188, 2000 CDOS 1160, 2000 Daily Journal DAR 1655, 35 BCD 189, 23 EBC 2895, CCH Bankr L Rptr P 78113 (criticized in In re Kramer (2000, BC ED Mich) 249 BR 147) and (criticized in In re Skipper (2002, BC WD Ark) 274 BR 807) and (criticized in In re Rousey (2002, BC WD Ark) 275 BR 307, 48 CBC2d 380).

Debtors were not entitled to claim exemption for portion of their individual retirement accounts (IRAs) under 11 USCS § 522(d)(10)(E), which were rolled over from former employer pension funds, when debtors had unlimited access to withdraw funds, subject only to tax penalties, and were not required to show illness, disability, age, or length of service before making withdrawal. Rousey v Jacoway (In re Rousey) (2003, CA8 Ark) 347 F3d 689, 31 EBC 1622, CCH Bankr L Rptr P 78934, reh den, reh, en banc, den (2004, CA8) 2004 US App LEXIS 493 and revd, remanded (2005, US) 161 L Ed 2d 563, 125 S Ct 1561, 44 BCD 144, 34 EBC 1929, CCH Bankr L Rptr P 80263, 2005-1 USTC P 50258, 18 FLW Fed S 223.

Debtor who filed for bankruptcy at age 58 could potentially exempt individual retirement ac-count (IRA) from bankruptcy estate under 11 USCS § 522(d)(10)(E); fact that debtor had not reached age when payments could be received from IRA without penalty at time of bankruptcy fil-ing did not bar exemption; factual determination was needed as to whether debtor could establish that right to receive payment under IRA was reasonably necessary to support debtor and debtor's dependents. In re Krebs (2008, CA3 Pa) 527 F3d 82, CCH Bankr L Rptr P 81241.

Page 309 11 USCS § 522

IRA is exempt from bankruptcy estate under 11 USCS § 522(d)(10)(E). Hermes v Ribitwer (In re Hermes) (1999, ED Mich) 239 BR 491, 42 CBC2d 1624 (criticized in In re Kramer (2000, BC ED Mich) 249 BR 147).

Because debtor had not demonstrated right to receive payment from her individual retirement account (IRA) based upon any of relevant statutory factors - age, illness, or disability - she, there-fore, did not possess present right to payments from her IRA and, thus, could not exempt her IRA from bankruptcy estate pursuant to 11 USCS § 522(d)(10)(E). Skiba v Auman (2006, WD Pa) 2006 US Dist LEXIS 4261 (criticized in Frank v Wiggins (In re Wiggins) (2006, MD Pa) 341 BR 506, 97 AFTR 2d 2241).

Whether debtor has present right to payment under her Individual Retirement Account (IRA) is irrelevant to analysis of whether or not her IRA is exempt under 11 USCS § 522(d)(10)(E). Walsh v Benson (2006, WD Pa) 56 CBC2d 869.

Although 11 USCS § 522 permits debtor to exempt Individual Retirement Accounts from prop-erty of estate, former 11 USCS § 70a did not allow such exemption and debtor's interests in IRA's passed to trustee in bankruptcy since funds in debtor's IRA's at date of filing of voluntary petition became property of estate. In re Boderman (1980, BC ED Pa) 23 CBC 302.

Exemption claimed under state law by debtor is not available for individual retirement account (IRA) established under 26 USCS § 408, where it can be distinguished as account, rather than pen-sion or annuity plan or policy, it may be distributed in lump sum payment, and it is subject to con-trol of depositor by arrangement with depository as opposed to contractual arrangement between employer and employee. In re Talbert (1981, BC WD La) 15 BR 536, 8 BCD 768, CCH Bankr L Rptr P 68425.

Debtors' interest in individual retirement accounts are not exempt under 11 USCS § 522(b)(2); § 522(b)(2) allows exemption from estate of property exempt under state law; although exemption laws are to be construed liberally in favor of debtor, court is not at liberty to create exemptions which do not exist; real nature of individual retirement accounts is tax deferment plan over which debtors exercise great deal of control; since debtors have unlimited capacity to reach these funds, so does bankruptcy trustee. In re Howerton (1982, BC ND Tex) 21 BR 621, 9 BCD 296, CCH Bankr L Rptr P 68800.

Funds deposited in individual retirement accounts are nonexempt property of bankruptcy estate since debtors have substantial control over funds and there is no guarantee that funds deposited in account will be retained until retirement. In re Shackelford (1983, BC WD Va) 27 BR 372, 10 BCD 941.

Debtor's individual retirement account is not exempt under 11 USCS § 522(d)(10)(E), where debtor may withdraw account funds at any time with no restriction except as to reservation of an early withdrawal assessment, debtor may divert account proceeds from retirement purposes, debtor may have access to funds in account at his election, debtor may use any funds withdrawn for any purpose, there is no tie-in between access to funds and incidence of retirement, disability, death or termination of employment, and there is no guaranty that account funds will be used for exclusive purpose of providing benefits akin to future earnings for debtor or his beneficiaries. In re Pauquette (1984, BC DC Vt) 38 BR 170.

Page 310 11 USCS § 522

Debtor's IRA annuity plan is not exempt under Ohio laws exempting annuities "upon life of any person" or protections of future earnings payable because of "illness, disability, death age, or length of service" because IRA is not equivalent of life insurance and debtor is "beneficiary" of IRA, IRA is not paid for by employer, but by employee, who retains control of fund, and IRA is essentially tax deferment plan, not traditional retirement plan. In re Fichter (1984, BC ND Ohio) 45 BR 534.

Monies in Individual Retirement Account do not constitute wages to head of family exempt from claims of creditors under opt-out state's legislation because wages, once paid by employer and deposited in bank, are not longer protected. In re Gillett (1985, BC SD Fla) 46 BR 642.

Under state's "opt-out" statute, where debtor had complete and unfettered control over Individ-ual Retirement Account, fund is not an "annuity account issued to citizens or residents of state, upon whatever form" and thus fund is available to satisfy claims of judgment creditors. In re Gillett (1985, BC SD Fla) 46 BR 642.

Balances in Chapter 7 debtors' IRAs are not exemptible under 11 USCS § 522(d)(5) are not rea-sonably necessary for support of debtors and their dependent children and therefore not exemption under 11 USCS § 522(d)(10)(E); relatively young debtors with good health, substantial earning ca-pacity, and current ability to meet his and his dependents' regular living expenses is not generally entitled to exemption from retirement benefits. In re Montavon (1985, BC DC Minn) 52 BR 99, 14 CBC2d 1195, CCH Bankr L Rptr P 71010.

Debtor's individual retirement account cannot be exempted under Wisconsin statute which by its express terms exempts only those plans created by employer and debtor is not employer or self-employed as required by statute. In re Woods (1986, BC WD Wis) 59 BR 221.

Chapter 7 debtor may not exempt entire corpus of IRA under California law because statute al-lows only "payment" under stock bonus, pension, profit sharing, annuity or similar plan or contract to be exempt; debtor can withdraw funds from IRA at any time and for any reason and this total control over account distinguishes IRA's from traditional pension plans. In re Innis (1986, BC SD Cal) 62 BR 659 (criticized in Rawlinson v Kendall (In re Rawlinson) (1997, BAP9 Cal) 209 BR 501, 97 CDOS 4819, 97 Daily Journal DAR 8585).


Under Iowa exemption statute very similar to 11 USCS § 522(d)(10)(E), debtor may not exempt IRA where debtor has free access upon 10 percent penalty payment, and access is not conditioned on illness, disability, death, age, or length of service, and debtor can use funds for any purpose. In re Matthews (1986, BC ND Iowa) 65 BR 24, 14 BCD 1199.

Individual Retirement Account in state or federally chartered depository institution is within purview of definition of cash and properly exemptible as cash if in accordance with other provisions of New York's exemption scheme. In re Chasen (1987, BC ED NY) 78 BR 400.

Chapter 7 debtor's IRA is not exempt under 11 USCS § 522(d)(10)(E) because debtor has no present right to receive payments from plan. In re Heisey (1988, BC DC NJ) 88 BR 47 (criticized in In re Yuhas (1995, BC DC NJ) 186 BR 381, 34 CBC2d 594, CCH Bankr L Rptr P 76656).

Individual Retirement Accounts funded by self-employed persons are exempt under Wisconsin statute exempting employees' benefit plans, pursuant to 11 USCS § 522. In re Staniforth (1990, BC

Page 311 11 USCS § 522

WD Wis) 116 BR 127, 20 BCD 962 (criticized in Hartje Lumber v Brach (In re Brach) (1995, BC WD Wis) 195 BR 897) and (criticized in Hartje Lumber v Boshardy (In re Boshardy) (1995, BC WD Wis) 1995 Bankr LEXIS 2043).

IRAs are included within 11 USCS § 522(d)(10)(E) exemption, subject to condition that debtor must have present right to payment; debtor in present case has no right to present payment because he has not reached retirement age set by IRC for unpenalized withdrawals from IRAs and he does not allege disability. In re Chick (1991, BC DC Conn) 135 BR 201.

Individual retirement accounts are not exempt under New York law that exempts trusts, custo-dial accounts, Keogh plans, and other plans established by corporations, because IRAs are not es-tablished by corporations and are not qualified pension plans but rather are savings accounts con-trolled by depositor from which funds can be withdrawn at option of depositor, subject to penalty payment, and funds are not exempt from attachment by judgment creditors. In re Orlebeke (1992, BC SD NY) 141 BR 569.

Chapter 7 debtors may not exempt individual retirement annuities into which individual retire-ment accounts were rolled over under 11 USCS § 522(d)(10)(E) where funds are available to debt-ors on demand, even though significant penalties may attach if they are cashed out, and even though debtors assert that they will wait until retirement to draw upon funds. In re Moss (1992, BC WD Mich) 143 BR 465, 27 CBC2d 918 (criticized in Hermes v Ribitwer (In re Hermes) (1999, ED Mich) 239 BR 491, 42 CBC2d 1624).

Individual Retirement Account is "similar plan" under 11 USCS § 522(d)(10)(E) because it is substitute for future earnings. In re Hickenbottom (1992, BC WD Wash) 143 BR 931, 27 CBC2d 1467.

Chapter 7 debtor's interest in Individual Retirement Account (IRA) is exempt under 11 USCS § 522(d)(10)(E), despite assertions that debtor has no present right to receive payments, that IRAs are not "similar plans" to stock bonus or profit-sharing plans or annuities, and that IRA payments were not reasonably necessary for debtor's support, because debtor need not be presently receiving pay-ments to qualify as exemption; IRAs are, in fact, "similar plans" since they are in same general category as other retirement plans and enjoy similar tax benefits as pensions, profit-sharing and stock bonus plans, and IRA valued at only $ 3,115 offers little chance of becoming so large that it would generate stream of income greater than debtor's retirement needs. In re Yee (1992, BC DC Mass) 147 BR 624.

Chapter 7 debtor may not exempt her Individual Retirement Account (IRA) under 11 USCS § 522(d)(10)(E), where IRA plan does not restrict debtor's right to receive payment except on account of illness, disability, death, age, or length of service, although she has to wait until she is at least 59 and one-half to withdraw penalty-free as she presently has right to receive payment for IRA. In re Evenson (1994, BC ED Mich) 165 BR 27 (criticized in Hermes v Ribitwer (In re Hermes) (1999, ED Mich) 239 BR 491, 42 CBC2d 1624).

Self-directed individual retirement account (IRA) is "similar plan" within meaning of Maine ex-emption statute exempting payment under stock bonus, pension, profit-sharing, annuity, or similar plan or contract on account of illness, disability, death, age or length of service; IRC's provision for treatment of IRAs supports conclusion that they are sufficiently "similar" to other plans aimed to enable working taxpayers to accumulate assets during their productive years so that they might draw on them during retirement; that debtor has control over and (penalty notwithstanding) access

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to IRA assets before retirement does not defeat exemption, because, irrespective of such control, IRA is "plan" providing "right to receive" "payments" on account of "age"; exemption does not re-quire that plans within its scope be ironclad or irrevocable; exemption applies to debtor's right to receive payments from IRA whether or not right is fully and freely exercisable on date of his or her bankruptcy petition. In re Bates (1994, BC DC Me) 176 BR 104, 32 CBC2d 1269.

Chapter 11 debtors' IRA's did not qualify for exemption under 11 USCS § 522(d)(10)(E) in view of Third Circuit authority that tax penalty for early withdrawal is sufficient to destroy debtor's "right to receive" payment. In re Snyder (1996, BC MD Pa) 206 BR 347.

Chapter 7 debtors were not entitled to exempt individual retirement accounts (IRA's) under 11 USCS 522(d)(10)(E), even though IRA's are sufficiently similar to stock bonuses, pension, profit sharing, or annuity plans or contracts to fall within scope of exemption, where debtors were not presently entitled to receive payments since they did not meet prerequisites of age 59 and one-half, death, or disability. Reitmeyer v Gralka (In re Gralka) (1997, BC WD Pa) 204 BR 184, 37 CBC2d 490, CCH Bankr L Rptr P 77301.

Debtor need not have present right to receive payments in order to exempt otherwise-qualified IRA pursuant to state law. In re Outen (1998, BC DC SC) 220 BR 26, 10 Fourth Cir & Dist Col Bankr Ct Rep 479.

Debtor may potentially exempt IRA annuities under 11 USCS § 522(d)(10)(E) since IRA is similar to stock bonus, pension, profit-sharing, or annuity plan or contract and debtor, at time of fil-ing of petition, had sufficiently present right to receive payment from IRA annuities; however, ex-emption turns on whether IRA annuities are reasonably necessary for support of debtor and debtor's dependents and trial is required. Pineo v Fulton (In re Fulton) (1999, BC WD Pa) 240 BR 854 (criticized in In re Haney (2004, BC ED Pa) 316 BR 827).

Term "individual retirement accounts" includes both IRA's and IRA annuities for purposes of Iowa exemption, and annual dollar limit on tax-year contributions did not apply to debtors' annuity which was individual retirement account created from transfer from ERISA-qualified retirement plan so that Chapter 7 debtor was entitled to exempt entire value of annuity pursuant to 11 USCS § 522. In re Kemmerer (2000, BC ND Iowa) 245 BR 335, revd (2000, BAP8) 251 BR 50, 25 EBC 1624 (criticized in In re Pepmeyer (2002, ND Iowa) 273 BR 782, 47 CBC2d 1235).

Individual retirement account (IRA) is not payable on account of age or other statutory trigger-ing event where debtor can withdraw funds at any time, even though withdrawals are subject to penalty if made before specified age. In re Bowder (2001, BC DC Minn) 262 BR 919, 37 BCD 280, CCH Bankr L Rptr P 78470.

In 11 USCS § 522(d)(10)(E), Congress intended to exempt 26 USCS § 408 IRAs to extent they are similar plans or contracts, payable on account of illness, disability, death, age or length of ser-vice, and reasonably necessary for support of debtor and any dependent of debtor. In re Rousey (2002, BC WD Ark) 275 BR 307, 48 CBC2d 380, affd (2002, BAP8) 283 BR 265, 49 CBC2d 308, 28 EBC 2629, CCH Bankr L Rptr P 78726, 90 AFTR 2d 6467, affd (2003, CA8 Ark) 347 F3d 689, 31 EBC 1622, CCH Bankr L Rptr P 78934, reh den, reh, en banc, den (2004, CA8) 2004 US App LEXIS 493 and revd, remanded (2005, US) 161 L Ed 2d 563, 125 S Ct 1561, 44 BCD 144, 34 EBC 1929, CCH Bankr L Rptr P 80263, 2005-1 USTC P 50258, 18 FLW Fed S 223.

Page 313 11 USCS § 522

Where IRA agreements established that debtors had right to withdraw from their IRAs at any time subject only to 10 percent excise tax penalty, debtors' right to payment under IRAs was not conditioned on account of illness, disability, death, age, or length of service; IRAs were not "similar plans or contracts" within meaning of 11 USCS § 522(d)(10)(E) and not entitled to exemption. In re Rousey (2002, BC WD Ark) 275 BR 307, 48 CBC2d 380, affd (2002, BAP8) 283 BR 265, 49 CBC2d 308, 28 EBC 2629, CCH Bankr L Rptr P 78726, 90 AFTR 2d 6467, affd (2003, CA8 Ark) 347 F3d 689, 31 EBC 1622, CCH Bankr L Rptr P 78934, reh den, reh, en banc, den (2004, CA8) 2004 US App LEXIS 493 and revd, remanded (2005, US) 161 L Ed 2d 563, 125 S Ct 1561, 44 BCD 144, 34 EBC 1929, CCH Bankr L Rptr P 80263, 2005-1 USTC P 50258, 18 FLW Fed S 223.

Most harmonious interpretation of 11 USCS § 522(d)(10)(E) is that Congress intended to ex-empt IRAs governed by I.R.C. § 408 to extent they are "similar plans or contracts," payable "on ac-count of illness, disability, death, age or length of service," and "reasonably necessary for the sup-port of the debtor and any dependent of the debtor;" this interpretation gives meaning to require-ments of paragraph 11 USCS § 522(d)(10)(E), without ignoring mention of I.R.C. § 408 in subpara-graph 11 USCS § 522(d)(10)(iii), and under this interpretation, no part of statute is surplusage. In re Rousey (2002, BC WD Ark) 275 BR 307, 48 CBC2d 380, affd (2002, BAP8) 283 BR 265, 49 CBC2d 308, 28 EBC 2629, CCH Bankr L Rptr P 78726, 90 AFTR 2d 6467, affd (2003, CA8 Ark) 347 F3d 689, 31 EBC 1622, CCH Bankr L Rptr P 78934, reh den, reh, en banc, den (2004, CA8) 2004 US App LEXIS 493 and revd, remanded (2005, US) 161 L Ed 2d 563, 125 S Ct 1561, 44 BCD 144, 34 EBC 1929, CCH Bankr L Rptr P 80263, 2005-1 USTC P 50258, 18 FLW Fed S 223.

Bankruptcy court found that trustee failed to demonstrate that conditions of claimed individual retirement account (IRA) exemption were not met and court exempted debtor's IRAs only to extent it was reasonably necessary for debtor's support. In re Burkette (2002, BC DC Dist Col) 279 BR 388, 48 CBC2d 711.

Trustee could not prevail on assertion that, pursuant to ERISA, debtors' individual retirement accounts were excepted from exemption under Ohio Rev. Code. Ann. § 2329.66(a)(10)(C), where trustee failed to present copy of subject benefit plan. In re Fixel (2002, BC ND Ohio) 286 BR 638, 49 CBC2d 883.

Court examined Employee Retirement Income Security Act of 1974 (ERISA), 29 USCS § 1001 et seq., and its relation to federal bankruptcy law and found that (1) ERISA did not preempt Ohio Rev. Code Ann. § 2329.66(A)(10)(c); and (2) debtors were entitled to related state bankruptcy ex-emptions claimed in their individual retirement accounts. In re Buzza (2002, BC SD Ohio) 287 BR 417, 49 CBC2d 1651, 29 EBC 2948.

Funds that debtors placed in contract pursuant to state's Prepaid Affordable College Tuition Program were property of debtors' children and for this reason were not property of debtors' bank-ruptcy estate, as opposed to being merely exempt. In re Cheatham (2004, BC MD Ala) 309 BR 631.

Debtors were not entitled to claim their individual retirement accounts (IRA) as exempted prop-erty from bankruptcy estate under Ohio Rev. Code Ann. § 2329.66(A)(10)(c) to extent that debtors had pledged funds in their IRAs as security to guarantee certain business loans. In re Roberts (2004, BC SD Ohio) 326 BR 424, 95 AFTR 2d 2972.

Where documents related to debtor's individual retirement accounts (IRA) contained no restric-tion on alienation or transfer that was enforceable under non-bankruptcy law so as to exclude

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debtor's interest in two funds from his estate, IRAs were part of bankruptcy estate. In re Thomas (2005, BC WD Ark) 331 BR 798.

Property owned individually by debtor and co-owned with his non-debtor wife became part of bankruptcy estate; accordingly, where debtor's non-debtor wife had filed for divorce post-petition and state court had not entered divorce decree and divided marital property, wife could not claim any rights or "exemptions" to debtor's retirement funds as wife's rights to retirement funds were in-choate at best. In re Thomas (2005, BC WD Ark) 331 BR 798.

Trustee's objections to debtors' claim of IRA as exempt property, pursuant to 11 USCS § 522(d)(10)(E), was sustained because IRA amount, minus wild card exemption, was not reasonably necessary for debtors' support, given debtors' age, education, experience, and disposable income post-bankruptcy. In re Gosnell (2005, BC WD Ark) 336 BR 133.

The debtor's claim that individual retirement account was exempt property under 11 USCS § 522(d)(12) or Mo. Rev. Stat. § 513.430.1(10)(f), failed where debtor failed to raise arguments before bankruptcy court in response to Chapter 7 trustee's objection, and could not present them for first time on appeal. Walton v Sosne (In re Walton) (2008, BAP8) 391 BR 827.

173.--Deference to IRS determinations

Bankruptcy Court erred in not deferring to Internal Revenue Service's (IRS) determination that Chapter 7 debtor's retirement plan was qualified and that rollover distribution was nontaxable, for purposes of determining whether debtor's Individual Retirement Account (IRA) is exempt under 11 USCS § 522, since Bankruptcy Court does not have authority to answer question of whether plan is "qualified" independently, where Texas legislature intended for bankruptcy courts applying Texas law to defer to IRS in determining whether retirement plan is "qualified" under Internal Revenue Code, and where IRS had already determined that plan, which was rolled over into IRA, was "quali-fied," and did not tax debtor's distribution from retirement plan. Youngblood v FDIC (In re Youngblood) (1994, CA5 Tex) 29 F3d 225, 74 AFTR 2d 5910, 94 TNT 170-5.

Texas legislature intended for its own state courts or Bankruptcy Courts applying Texas law to defer to Internal Revenue Service (IRS) in determining whether retirement plan is "qualified" under Internal Revenue Code, where there is no reason that legislature would want its courts, which are inexperienced in federal tax matters, to second-guess IRS in such complex, specialized area, and it is more reasonable to assume that legislature contemplated creating exemption from seizure for debtor's retirement funds that could be simply and readily determined by referring to federal tax treatment of those funds; moreover, Court of Appeals does not believe that legislature wanted to adopt scheme that invites frequent, unseemly, conflicting decisions between state court or Bank-ruptcy Court and IRS. Youngblood v FDIC (In re Youngblood) (1994, CA5 Tex) 29 F3d 225, 74 AFTR 2d 5910, 94 TNT 170-5.

174.--Particular accounts

Chapter 13 debtors may exempt 75 percent of entire balance of their IRAs under Colorado ex-emption statute exempting "avails" of any pension or retirement benefits or deferred compensation plan, and they are not limited to exempting accumulated interest. In re Kulp (1991, CA10 Colo) 949 F2d 1106, CCH Bankr L Rptr P 74344.

Qualified IRA was exempt under 11 USCS § 522(d)(10)(E) as similar plan or contract to those listed in § 522, even though it had no anti-alienation provision, since control of debtor over funds

Page 315 11 USCS § 522

was irrelevant to exemption once asset was included in estate. Carmichael v Osherow (In re Carmi-chael) (1996, CA5 Tex) 100 F3d 375, CCH Bankr L Rptr P 77179 (criticized in In re Kramer (2000, BC ED Mich) 249 BR 147) and (criticized in Dale v Puerner (2001, WD Mich) 264 BR 875, CCH Bankr L Rptr P 78370) and (criticized in In re Skipper (2002, BC WD Ark) 274 BR 807) and (criti-cized in In re Rousey (2002, BC WD Ark) 275 BR 307, 48 CBC2d 380) and (criticized in Rousey v Jacoway (In re Rousey) (2002, BAP8) 283 BR 265, 49 CBC2d 308, 28 EBC 2629, CCH Bankr L Rptr P 78726, 90 AFTR 2d 6467).

Chapter 7 debtor/surgeon against whom $ 4,000,629 malpractice judgment had been recovered was entitled to Florida exemption in $ 2,546,319 in IRAs, notwithstanding line of Florida cases stat-ing that its homestead exemption should not be applied so as to make it an instrument of fraud or imposition upon creditors, where debtor conceded that IRAs were not acquired by surgeon with proceeds of fraud perpetrated upon debtor, that IRAs did not represent transfer of nonexempt assets into exempt assets on eve of bankruptcy and that "on their face" IRAs met description of assets ex-empted under Florida statute. Sawczak v Goldenberg (In re Goldenberg) (2000, CA11 Fla) 218 F3d 1264, 13 FLW Fed C 862.

Oklahoma statute which specifically exempts Individual Retirement Accounts does not repre-sent unconstitutional impairment of contract as to debts incurred prior to its effective date as debts in instant case were incurred under broad view of exemption which has been legislatively restored and no substantial impairment has occurred; exemption statute is not preempted by ERISA as these retirement annuities are non-ERISA-qualified plans. In re Walker (1990, ND Okla) 139 BR 31, affd (1992, CA10 Okla) 959 F2d 894, 22 BCD 1284, CCH Bankr L Rptr P 74528, 133 ALR Fed 577.

Although "on account of" factors in 11 USCS § 522(d)(10)(E) may serve as exclusive triggers with respect to age, they cannot work to exclude those qualified IRAs permissibly exempted by negative implication of § 522(d)(10)(E)(iii); accordingly, debtor's IRA which permitted penalty-free withdrawals only after age 59 1/2 was exempt. Jurgensen v Chalmers (2000, WD Mich) 248 BR 94 (criticized in Dale v Puerner (2001, WD Mich) 264 BR 875, CCH Bankr L Rptr P 78370).

Funds held by debtors in IRA account are not exempt as wages under Florida statute, which ex-empts wages of head of household, since at least initial deposit in account were monies earned while living in another state and since funds were not sufficiently identified as monies derived from earnings of head of household. In re Szuets (1982, BC MD Fla) 22 BR 805.

Individual Retirement Account of approximately $ 6,000 is includible as exempt under Ken-tucky law. In re Worthington (1983, BC WD Ky) 28 BR 736.

Under Illinois legislation enacted pursuant to 11 USCS § 522, payments under any pension plan of contracts may be exempted--not asset itself--and thus debtor's Individual Retirement Account containing approximately $ 4,580, because it is asset and not payment, is not within exemption; in addition, IRA differs from pension plan in that (1) IRA is savings account with tax benefits and gra-tuitous contributions by debtor rather than plan or policy provided by employer or other party; (2) annuities and pensions contemplate only future periodic payments whereas IRA is payable in lump sum; (3) depositor/debtor has complete control over account rendering no guarantee that funds will actually be complete until retirement or disability; and (4) IRA contemplates contractual arrange-ment whereby debtor deals directly with depository institution rather than having fund provided by employer or other third party; these characteristics of IRAs, allowing debtor control over funding and lump sum withdrawal, support conclusion that IRA is not a pension plan and thus is not within

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Illinois pension plan exemption. In re Kitson (1984, BC CD Ill) 43 BR 589, CCH Bankr L Rptr P 70120.

Debtor's exempt property worth $ 7,776 and his ability to work and earn living on date of filing demonstrate that his IRA is not reasonably necessary for support of debtor and his dependents, and thus debtor may not exempt IRA under Iowa law. In re Schwartz (1984, BC ND Iowa) 58 BR 606, CCH Bankr L Rptr P 71290.

No monetary limit is placed on Wisconsin exemption statute by Wisconsin Constitution, which requires that "reasonable amount of property" be exempted, nor can monetary limit be inferred as matter of statutory construction and therefore debtor may exempt retirement account in which he has vested amount of $ 84,110.70. In re Martinson (1986, BC WD Mo) 57 BR 560.

Debtor's entire interest in IRA is exempt under Iowa statute exempting pensions, annuities and similar plans to extent they are reasonably necessary for support of debtor or his dependents where 46-year-old debtor's last contributions to plan made 3 years earlier were not made in contemplation of bankruptcy and where debtor's expectable income does not indicate any realistic possibility to provide for retirement needs at any time in foreseeable future. In re Pingel (1986, BC ND Iowa) 63 BR 652.

Chapter 7 debtor's $ 17,017.56 Individual Retirement Annuity is reasonably necessary for sup-port of his dependents, rendering it exempt under 11 USCS § 522, where amount is small and debtor has predeceased his wife since time of bankruptcy filing. In re Cilek (1990, BC WD Wis) 115 BR 974, 11 UCCRS2d 937.

Debtor may exempt under New York law funds that had been distributed to him under ERISA-qualified plans following termination of his employment and that were rolled over into IRA which is considered trust that is conclusively presumed to be spendthrift trust under New York law; since funds that opened IRA account emanated from qualified trust funds that flowed from debtor's em-ployer, res constituted valid spendthrift trust under state law and is excluded from property of es-tate; dilution of IRA with nonqualified retirement moneys does not vitiate exempt status of entire account; however, as to moneys that were later added to account and admittedly cannot be shown by debtor to constitute qualified retirement moneys, these funds are not exempt; since debtor has claimed no exemption as to real property and aggregate value of all exemptions claims is $ 830, debtor is entitled to additional cash exemption in amount of $ 2,500 which may be utilized to offset funds in account which would otherwise be nonexempt. In re Morgan (Smith v Affinity Group) (1992, BC ND NY) 145 BR 760.

Chapter 7 debtors' IRA is reasonably necessary for support of debtors and their dependents pur-suant to 11 USCS § 522(b)(1) and is therefore exempt under 11 USCS § 522(d)(10)(E), where monthly expenses exceed monthly income, there appears no possibility that debtors will be able to fund a new plan before retirement to meet future needs, debtor wife who underwent cancer surgery will need continuing treatments, some of which are not covered by insurance policy, and cancer may recur, and debtors support their 2 dependent children who live with them while attending high school. In re Sisco (1992, BC WD Ark) 147 BR 495, CCH Bankr L Rptr P 75038.

Trustee's objection to Chapter 7 debtor's claimed exemption in his $ 33,239 individual retire-ment account (IRA) pursuant to 11 USCS § 522(d)(10)(E) is sustained, despite debtor's claim that he should be able to exempt entire declared value of IRA because it may be reasonably necessary in future for his and his dependents' support, where (1) debtor does not have present right to receive

Page 317 11 USCS § 522

payments since debtor is not receiving any distribution from IRA and cannot do so without incur-ring substantial tax penalty because he has not reached 59 1/2 years of age, and (2) amount claimed is not reasonably necessary for his and his dependents' support even though debtor's sole source of income, unemployment compensation, is expected to run out in near future given fact that debtor is 52 years of age and is in good health, it is reasonable to expect that he will be able to again find gainful employment and to provide for his and his dependents' basic needs, and debtor's spouse could find employment and contribute to her and debtor's support; debtor is attempting to retain all of his assets, especially IRA, while relieving himself of liability for all unsecured debts by means of general discharge; allowing trustee's objection will provide funds with which to pay debtor's unse-cured creditors in full while still leaving approximately $ 15,000 which debtor could use for his and his dependents' future support. In re Brewer (1993, BC WD Pa) 154 BR 209.

Chapter 7 debtor's IRA account funds are not reasonably necessary for support as required under Ohio exemption law where, despite declining income, debtor has been able to maintain his suste-nance without withdrawing money from his IRA; however, trustee is entitled to turnover under 11 USCS § 542 of only half of account balance where debtor's income barely exceeds his expenses at present, if debtor's employer closes its doors, as contemplated, and debtor is forced to rely on un-employment compensation, debtor's expenses will exceed his income, and debtor is in his mid-forties and has no retirement benefits or passive sources of income. In re Metzner (1993, BC ND Ohio) 157 BR 332.

Debtor's $ 5,545.09 IRA is reasonably necessary for her support and is exempt under 11 USCS § 522(d)(10)(E) where only source of 58-year-old debtor's income at retirement will include proceeds from her pension and IRA, considering her age, training and educational experience, it is unlikely that debtor will obtain other gainful employment, debtor owns no real estate, her only assets include car and various items of jewelry, encumbrance on her car exceeds her monthly pension expectancy, and while not needed for her present support, IRA is critical to future support; second IRA account, valued at $ 2,083.41, is not exempt. In re Bogart (1993, BC ND Ohio) 157 BR 345, 29 CBC2d 780.

Chapter 7 debtors may not exempt IRA account with balance of $ 9,000 under 11 USCS § 522(d)(10)(E) where couple has no dependents, debtor wife is in good health, is 35, has masters de-gree in nursing, and earns $ 750 per week, debtor husband, who holds 401(k) plan with balance of$ 10,000, is 37, in good health, and earns $ 300 per week, couple has $ 11,000 worth of equity in their residence, and had $ 312,888 in unsecured debt which will be discharged, and, thus, IRA is not rea-sonably necessary for debtors' support; although debtors contend that their IRA is small enough such that it would never generate stream of income greater than their retirement needs, age and health of debtors, absence of any dependents, debtors' ability to work and earn living and to save money toward retirement after bankruptcy discharge, and funds from exempt 401(k) plan indicate that debtors still have adequate time and means to prepare for their retirement. In re Lima (1994, BC DC Mass) 169 BR 486, CCH Bankr L Rptr P 75979.

Chapter 7 debtor's $ 15,000 in his Individual Retirement Account (IRA) may not be exempted under 11 USCS § 522(d)(10)(E), despite fact that IRA was funded by rollover of lump-sum payment made to debtor by his employer when employee pension plan terminated which plan would have been exempt under § 522(d)(10)(E) had debtor retained interest in plan until petition was filed, where general rule is that if property exempted by statute is exchanged for property not covered by any applicable statute, exemption is lost; any funds due debtor under pension plan or contract lose

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their exempt character once debtor receives funds. In re Cesare (1994, BC DC Conn) 170 BR 37, 31 CBC2d 680.

Chapter 7 debtor's claim of exemption in 1984 in IRA fund to which trustee did not timely ob-ject is allowed and Chapter 7 trustee is directed to return fund moneys, along with all interest accu-mulated thereon, to debtor, but debtor's request for compound interest or other damages is denied inasmuch as debtor had it in his power to precipitate this issue at time of trustee's seizure of account but delayed until 1992 in taking effective action; applying "middle-ground" approach, which in-volves determining whether debtor had good-faith statutory basis for claimed exemption, debtor's assertion in 1984 that his IRA account was exempt did have colorable or good-faith basis in law ex-isting at time, since opinion that IRAs are not exempt had not been rendered at that time, and due to uncertainty of law regarding exemptibility of IRAs from property of estate prior to that decision, trustee had burden to object to debtor's claim of exemption and obtain ruling thereon, but trustee not only failed to object, he also took almost 2 years to take any adverse action with respect to property claimed as exempt; prior to that time, debtor had no way of knowing that trustee took issue with debtor's claim of exemption regarding IRA funds, and during that time debtor was entitled to make his future plans on assumption that IRA account was exempt; even if trustee's action in seizing ac-count moneys was equivalent to objection, objection was untimely. In re Riso (Chapter 7) (1994, BC DC NH) 170 BR 484.

Chapter 7 debtor has failed to establish that Individual Retirement Accounts (IRAs) are rea-sonably necessary for his support, and, therefore, trustee's objection to debtor's claimed 11 USCS § 522 exemption in IRAs is sustained, where debtor has ability to prepare for his retirement without prejudice to creditors of his bankruptcy estate, since: (1) debtor is 46-year-old attorney, in good health, with ability to earn approximately $ 50-55,000 per year for next 10-15 years; (2) both he and his wife are capable of working and saving for retirement; and (3) debtor's child is leaving private school which will result in savings of $ 1,100 per month, leaving debtor with substantial excess in-come with which to fund his retirement. In re Link (1994, BC DC Mass) 172 BR 707.

Although full amount of IRA account was property of estate, Debtor was granted exemption of $ 75,000 from IRA, where he and his wife did not have substantial unencumbered assets which could be applied to postpetition debts, including nondischargeable income taxes, they were older and there was question as to their future health, and he did not conceal assets or lie about his finan-cial condition. In re Hoppes (1996, BC ND Ohio) 202 BR 595.

IRA was exempt under Florida law and 11 USCS § 522, since monies used to open it could be traced to 401(k) funds issued to debtor upon termination of employment, despite commingling and transfer to third party prior to opening IRA. In re Hickox (1997, BC MD Fla) 215 BR 257, 11 FLW Fed B 133.

Although debtor-wife's 401(k) funds lost their exempt status when she rolled them over into IRAs, husband-and-wife debtors were entitled to exemption for "necessary support" in larger of two IRA's under 11 USCS § 522(d)(10)(E), since they were nearing retirement age, had health problems, and would not have time to fund new retirement plans. In re Savage (2000, BC ED Ark) 248 BR 573.

Debtor who has expressly claimed exclusion under ERISA and 11 USCS § 541(c)(2) of his/her interest in ERISA-qualified 401(k) plan has "claimed an exemption under Federal law" within

Page 319 11 USCS § 522

meaning of Virginia retirement plan exemption and is therefore not entitled to unlimited IRA ex-emption allowed by that Virginia statute. In re Gurry (2000, BC ED Va) 253 BR 406.

Chapter 7 debtor could only exempt small portion of funds in custodial account IRA under 11 USCS § 522(d)(5) because his other exemptions left little unused of maximum amount that could be exempted under § 522(d)(5). Walsh v Galloway (In re Galloway) (2001, BC WD Pa) 308 BR 709.

Debtor's objection to Chapter 7 trustee's proposed final distribution was overruled because debtor could not claim exemption in individual retirement account (IRA) under 11 USCS § 522(d)(10)(E), under law of Third Circuit, when debtor was not collecting payments from IRA at time that petition was filed. In re Reutzel (2005, BC WD Pa) 2005 Bankr LEXIS 2759, affd, re-manded (2006, WD Pa) 2006 US Dist LEXIS 37980 and (criticized in Frank v Wiggins (In re Wig-gins) (2006, MD Pa) 341 BR 506, 97 AFTR 2d 2241).

Court declined to extend restraining order that prohibited debtor from spending funds in her in-dividual retirement account (IRA), thus terminating order; even though money used to fund IRA came from qualified domestic relations order, IRA was still exempt under Ohio Rev. Code Ann. § 2329.66(A)(10)(c), and because funds were exempt, per 11 USCS § 522(c), they would not be avail-able to bank if it prevailed in its adversary proceeding against debtor; therefore, no harm could come to bank from denying it preliminary injunction. Nat'l City Bank v Hartman (In re Hartman) (2005, BC ND Ohio) 345 BR 826.

Debtors could claim exemption in their individual retirement account (IRA) to extent allowed under 11 USCS § 522(d)(5), but could not claim exemption for additional amount pursuant to 11 USCS § 522(d)(10) because debtors were not receiving payments from IRA account at time they filed their petition. Skiba v Andrzejewski (In re Andrzejewski) (2006, BC WD Pa) 337 BR 835.

Individual retirement account (IRA) inherited from someone other than spouse cannot be claimed as exempt from debtor's bankruptcy estate under Tex. Prop. Code Ann. § 42.0021, since IRA is not retirement plan despite temporary tax deferral; under U.S. Internal Revenue Code, debtor cannot roll over or contribute to IRA, debtor can remove funds at any time, for any reason, and without penalty, and debtor is required either to start taking lifespan-measured withdrawals within one year or to take entire amount within five years, regardless of debtor's age. In re Jarboe (2007, BC SD Tex) 365 BR 717.

Debtor could not exempt his interest in individual retirement annuity, to be distinguished from individual retirement account, from property of his bankruptcy estate, under clear language of Iowa's exemption provisions to which debtor was limited as Iowa resident. Huisinga v Kemmerer (In re Kemmerer) (2000, BAP8) 251 BR 50, 25 EBC 1624 (criticized in In re Pepmeyer (2002, ND Iowa) 273 BR 782, 47 CBC2d 1235).

Where debtors had unfettered ability to withdraw funds from individual retirement accounts (IRAs) established by rolling over funds deposited into employer-created retirement plans, IRAs were not "similar plans or contracts" exempted from bankruptcy estate, nor were payments under IRAs on account of illness, disability, death, age or length of service; thus, IRAs were not exempt property under 11 USCS § 522(d)(10)(E). Rousey v Jacoway (In re Rousey) (2002, BAP8) 283 BR 265, 49 CBC2d 308, 28 EBC 2629, CCH Bankr L Rptr P 78726, 90 AFTR 2d 6467, affd (2003, CA8 Ark) 347 F3d 689, 31 EBC 1622, CCH Bankr L Rptr P 78934, reh den, reh, en banc, den (2004, CA8) 2004 US App LEXIS 493 and revd, remanded (2005, US) 161 L Ed 2d 563, 125 S Ct

Page 320 11 USCS § 522

1561, 44 BCD 144, 34 EBC 1929, CCH Bankr L Rptr P 80263, 2005-1 USTC P 50258, 18 FLW Fed S 223.

175. Keogh plans

Qualified Keogh plan of Chapter 7 debtor, self-employed physician, is not exempt from credi-tor's claims under Oregon law since state exemption does not apply to pensions created by individ-ual for his own benefit. Hebert v Fliegel (1987, CA9 Or) 813 F2d 999, 8 EBC 1652, CCH Bankr L Rptr P 71746.

Qualified Keogh Plan is not exempt under § 11 USCS § 522(d)(10)(E) where holder of plan is 37 years old and is actively engaged in practice of medicine and payments are not "necessary for support of debtor" and where debtor has no right to any present benefits from plan. In re Clark (1982, BC ED Tenn) 18 BR 824, 8 BCD 1207, CCH Bankr L Rptr P 68780.

Trust res of ERISA-qualified Keogh retirement plan may not be exempted under provision of 11 USCS § 522(b)(2)(A) for other "federal law." In re O'Brien (1985, BC ED Va) 50 BR 67, 13 BCD 97, 12 CBC2d 1161.

Chapter 13 debtor's Keogh plan retirement trust is not exempt property under 11 USCS § 522(d)(10)(E) because federal exemptions are not available to Virginia debtors and because debtor failed to file list of exempt property in accordance with 11 USCS § 522(1); similarly, property is not exempt under Virginia law because debtor failed to record and file homestead deed as required. In re O'Brien (1985, BC ED Va) 50 BR 67, 13 BCD 97, 12 CBC2d 1161.

Trustee's objection to Chapter 7 debtor's claim of exemption pursuant to 11 USCS § 522 in his Keogh account is overruled when trustee has failed to discharge his burden under Bankruptcy Rule 4003(c) of proving that debtor's Keogh account is not, and will not, be reasonably necessary for support of debtor and his wife; in dispute over exemption of pension rights involving elderly debtor, court must consider debtor's future needs for support and not merely debtor's employment status and income as of date of filing. In re Rosen (1985, BC DC Minn) 52 BR 96.

Keogh plan can be exempted as matter of law as "pension, annuity, or similar plan or contract" pursuant to Iowa exemption statute in Chapter 7 proceeding; in instant case, because funds are rea-sonably necessary for support of debtor and his dependents-in that debtor is 58 years old and he and his wife, who is disabled, earn only $ 10,000 per year-they are exemptable. In re Lawrence (1986, BC ND Iowa) 57 BR 727.

Chapter 7 debtor's Keogh plan may be exemptable under Minnesota statute exempting stock bo-nus, pension, profit sharing, annuity, or similar plan, and, in determining whether such plan is, in fact, exemptable, court will consider present and/or future needs of debtor. In re Schlee (1986, BC DC Minn) 60 BR 524, 14 BCD 526.

Chapter 7 trustee who, as objector to debtor's claim of exemption under Minnesota law, has bur-den of proving that debtor's Keogh plan is not reasonably necessary for support of debtor, has failed to meet that burden where debtor's income will soon be reduced to $ 1,000 per month and this in-come does not supply debtor's family needs at present, nor does it allow debtor to amass any retire-ment funds to provide for future family needs. In re Schlee (1986, BC DC Minn) 60 BR 524, 14 BCD 526.

Chapter 7 debtor's interest in KEOGH plan is not exempt under Illinois statute exempting debtor's right to receive payment under pension plan to extent necessary for support of debtor,

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where debtor has introduced no evidence to establish that funds in pension plan are needed for her future support. In re Sundeen (1986, BC CD Ill) 62 BR 619.

To determine if debtor's interest in Keogh plan, pension and profit-sharing plan, and IRA are reasonably necessary for his support and that of his dependents as required by Kentucky exemption statute, court must examine all facts and circumstances including debtor's age, earning capacity, present and future financial needs, ability to insure against future disruptions in earning capacity and his ability to reestablish retirement fund; 61-year-old debtor's ability to reestablish retirement fund is not great, and therefore debtor may exempt entire $ 69,072.86 net value of funds. In re Fisher (1986, BC WD Ky) 63 BR 649.


Debtor's interest in Keogh retirement plans is not exempt from property of estate under 11 USCS § 522(b)(2)(A) as property exempt under "other federal law." In re Kerr (1986, BC DC Utah) 65 BR 739, 15 BCD 160, CCH Bankr L Rptr P 71544.

Interest in Keogh retirement plan will be exempt from property of estate under Utah exemption provisions enacted pursuant to 11 USCS § 522(d)(10)(E) if property is reasonably necessary to sup-port of debtor or his dependents; factors court may consider in determining what is reasonably nec-essary for support of debtor and dependents will include, without limitation, debtor's age, health, future earnings capacity, and necessary expenditures. In re Kerr (1986, BC DC Utah) 65 BR 739, 15 BCD 160, CCH Bankr L Rptr P 71544.

Chapter 11 debtor's interest in Keogh plan is exempt under 11 USCS § 522(d)(10)(E) only to ex-tent that "present right" to receive payments exists and then only to extent needed to sustain debtor's basic needs. In re Velis (1989, BC DC NJ) 109 BR 64, affd (1991, DC NJ) 123 BR 497, 21 BCD 591, affd in part and revd in part on other grounds (1991, CA3 NJ) 949 F2d 78, 22 BCD 414, 25 CBC2d 1362, 14 EBC 1922, CCH Bankr L Rptr P 74329, reh den (1991, CA3) 1991 US App LEXIS 30075 and (criticized in Reitmeyer v Gralka (In re Gralka) (1997, BC WD Pa) 204 BR 184, 37 CBC2d 490, CCH Bankr L Rptr P 77301).

Debtors' interest in pension and Keogh plans are exempt under New York law notwithstanding trustee's argument that debtor husband is 100 percent owner of professional corporation sponsoring plans, and conclusive presumption under New York law that ERISA-qualified plans are spendthrift trusts forecloses trustee's argument to contrary. In re Shailam (1992, BC ND NY) 144 BR 626.

Keogh pension plan that does not provide nonkey employees with minimum benefits required under 26 USCS § 416(c)(1) is not qualified top-heavy plan under 26 USCS § 401 and is not exempt; although debtor argues that plan need not contain provisions providing minimum benefits to nonkey employees where there are no nonkey employee participants, there is no provision in plan that alters minimum benefits to nonkey employees in event nonkey employees participate; holding that trust funds deposited under plan are not exempt shall be stayed pending IRS approval of plan as IRS rul-ing would be enlightening and, similarly, debtor might be given opportunity to amend plan to in-clude required provisions, or to delete disqualifying provisions, rendering plan qualified. In re Feldman (1994, BC ED NY) 171 BR 731.

176. Pension or profit-sharing plans

Page 322 11 USCS § 522

Debtors' interest in profit-sharing plan is exempt under Iowa law. In re Pettit (1985, SD Iowa) 57 BR 362.

Debtors are entitled to exempt their interest in profit-sharing plan, even though they had volun-tarily sought to transfer their interest as preference to bank, because no assignment occurred: at-tempted assignment was rejected by bank and plan prohibited assignment. In re Pettit (1985, SD Iowa) 57 BR 362.

Iowa exemption applies to all assets in profit sharing fund, not just present payments due, be-cause interest in future payments necessarily includes interest in present assets from which those payments will be made. In re Pettit (1985, SD Iowa) 57 BR 362.

Pension or profit sharing plan can be exempt, if otherwise qualified, under "spillover" or "wild card" provisions of 11 USCS § 522(d)(5). In re Grant (1984, BC ND Tex) 40 BR 612.

Pension or profit sharing plan is exempt under 11 USCS § 522(d)(10((E) where beneficiary is not insider, to extent necessary to support debtor and dependents. In re Grant (1984, BC ND Tex) 40 BR 612.

Debtor's right to payment in profit-sharing plan conforms to Iowa exemption statute requirement that right be on account of illness, disability, death, age, or length of service, where terms of plan provide that debtor may receive payments only upon his death, disability, or termination. In re Flygstad (1986, BC ND Iowa) 56 BR 884, CCH Bankr L Rptr P 70938.

Under Iowa pension plan exemption statute, debtor need not be actually receiving payments from plan in order to claim exemption. In re Flygstad (1986, BC ND Iowa) 56 BR 884, CCH Bankr L Rptr P 70938.

Any monies which Chapter 7 debtor might receive from pension plan upon termination of his employment would not be within Ohio pension fund exemption statute because payment would not be made as result of debtor's disability, death or age, but payable upon termination of employment, which is not event which effectuates right to exempt payments from pension fund. In re Wiggins (1986, BC ND Ohio) 60 BR 89, 14 CBC2d 1136.

Chapter 7 debtor's interest in pension plan is not exempt under Tennessee opt-out provisions where debtor can accelerate payments under plan or receive funds therein in one lump sum. In re Faulkner (1987, BC ED Tenn) 79 BR 362.

Chapter 7 debtors' interests in employer's profit sharing retirement plan are not exempt assets of bankruptcy estates under federal nonbankruptcy law under 11 USCS § 522(b)(2)(A). In re Bowen (1987, BC DC SD) 80 BR 1012, 16 BCD 1315.

In state that has opted out of federal exemptions under 11 USCS § 522(d), Bankruptcy Court hearing Chapter 7 case regarding exemptions for pensions and profit sharing plans is girded by de-cisions under federal statute in light of dearth of state case law, where language of state law and Code are virtually identical. In re Fill (1988, BC SD NY) 84 BR 332, 17 BCD 427 (superseded by statute as stated in In re Iacono (1990, BC ED NY) 120 BR 691, 20 BCD 1950) and (superseded by statute as stated in In re Orlebeke (1992, BC SD NY) 141 BR 569).

Chapter 7 debtor's interest in deferred contribution plan may not be exempted under 11 USCS § 522(d)(10)(E), which exempts payments from certain plans to extent reasonably necessary for sup-port, because that subsection only applies where debtor has present right to receive payments from

Page 323 11 USCS § 522

pension plan; furthermore, even if court were to consider matter of debtor's future need for funds, record does not support finding that "reasonably necessary" standard has been met. In re Tisdale (1990, BC DC Conn) 112 BR 61.

Even if Bankruptcy Code has effect of discriminating in favor of public employees with respect to pension rights under 11 USCS § 522(b)(2), such discrimination is rationally related to legitimate governmental interest of maintaining quality public sector work force. In re Enfield (1991, BC WD Mo) 133 BR 515.

Profit sharing plan does not qualify as exempt property under Florida exemption provision se-lectively opting-back to federal exemptions since plan does not qualify for exemption under USCS § 522(d)(10)(E) where it was established by and under auspices of insider that employed debtor so as not to meet requirements of § 522(d)(10)(E)(i) and did not qualify under applicable provisions of Internal Revenue Code pursuant to § 522(d)(10)(E)(iii). In re Harris (1995, BC MD Fla) 188 BR 444, CCH Bankr L Rptr P 76851, 9 FLW Fed B 176, affd (1997, CA11 Fla) 116 F3d 1492, cert den (1997) 522 US 950, 139 L Ed 2d 288, 118 S Ct 370.

11 USCS § 522(d)(10)(E) does not require debtor to begin receiving payments under pension plan before petition was filed in order to qualify for exemption under statute. In re Marsella (1995, BC DC RI) 188 BR 731.

Debtor's interest in employee profit sharing retirement plan is exempt from estate under 11 USCS § 522 where plan constitutes pension under state law. In re West (1987, BAP9) 81 BR 22, 16 BCD 1325, CCH Bankr L Rptr P 72198.

177.--Particular plans and payments

Real estate properties allegedly held by Chapter 11 debtor exclusively for investment purposes could not be exempted as "private retirement plan" under California law since more than debtor's illusory intentions and dictionary definitions were necessary to satisfy court that property was ac-quired as part of private retirement plan. Smith v Kennedy (In re Smith) (2000, CA9 Cal) 221 F3d 1101, 2000 CDOS 6581, 2000 Daily Journal DAR 8721, 36 BCD 150, CCH Bankr L Rptr P 78240, reh gr, op withdrawn (2000, CA9 Cal) 234 F3d 483.

Bankruptcy court properly determined that portion of debtor's I.R.C. § 403(b) retirement plan account, which he had pledged to secure his payment of alimony pursuant to divorce decree, was not exempt under 11 USCS § 522(b), which incorporated exemption authorized under Tex. Prop. Code Ann. § 42.0021: (1) § 42.0021 incorporated federal tax treatment of distributions from retire-ment accounts; (2) pursuant to I.R.C. § 72(p)(1)(A), (p)(1)(B), pledge was considered to be loan to debtor and was also deemed to be distribution to him; and (3) pledged portion of account was not exempt under Tex. Prop. Code Ann. § 42.0021 because deemed distribution of pledged amount de-stroyed tax qualification of that portion and rendered it non-tax qualified under I.R.C. § 403(b). Coppola v Beeson (In re Coppola) (2005, CA5 Tex) 419 F.3d 323, 35 EBC 1641, CCH Bankr L Rptr 80324, 2005-2 USTC 50503, 96 AFTR 2d 5375.

Chapter 7 debtor husband may not exempt interest in pension and profit sharing plan under Ore-gon law because debtor's employer corporation of which debtor is sole shareholder and office has sole discretion as to estimation of net profits and amount of contribution to plan and plan allows employer to terminate plan at any time; debtor wife is person different from person granting pension

Page 324 11 USCS § 522

because there is no evidence that she controlled pension and profit sharing plan. In re Ott (1986, DC Or) 69 BR 1.

Under 11 USCS § 522, Chapter 7 debtor's ERISA-qualified pension plan is not exempt under Florida law as annuity contract exempt from attachment since debtor is not entitled to receive fixed sum at stated intervals as defines annuity, but rather debtor's payments are based on fair market value of assets in plan which are revalued annually, and company had absolute discretion over amount of contributions to plan. In re Gribben (1988, SD Ohio) 84 BR 494.

Debtor's beneficial interest in profit sharing plan is not valid spendthrift trust under state law and thus is not excluded from estate under 11 USCS § 541 and is not exemptible property under 11 USCS § 522 where debtor's ability to require trustee of plan to convey entire interest in plan to debtor, together with debtor's prior course of conduct in connection with administration of plan, show that debtor had absolute dominion and control over assets held for his benefit in plan; 29 USCS § 1144(a) does not preempt this rule. In re Mumm (1985, BC SD Fla) 52 BR 140.

Debtors' interest in profit sharing plan maintained by professional corporation of which husband debtor is sole shareholder is not exempt under Oregon law because there is no truly separate, dis-tinct employer-employee relationship and debtors may withdraw plan funds and/or other assets at any time. In re Ott (1985, BC DC Or) 53 BR 388, affd in part and revd in part on other grounds (1986, DC Or) 69 BR 1.

Debtor's profit-sharing plan is plan or contract similar to pension plans and annuities within meaning of Iowa exemption statute where (1) plan was established by debtor's employer and in-tended for her retirement, (2) fund management and distribution is out of debtor's control, except upon certain events which are consistent with purpose of providing future support for debtor or her dependents, and (3) distribution events are related to age, disability, death, or length of service; amendment to Iowa exemption statute to include exemption for profit-sharing plan does not impair contractual relationship between debtor and debtor's former employer, who created pension plan and who was creditor of debtor, because federal law precludes enforcement against assets of plan qualifying under ERISA, 29 USCS § 1001, and because general creditor of debtor could not have reached benefits under plan outside of bankruptcy in any event. In re Pettit (1985, BC SD Iowa) 55 BR 394, affd (1985, SD Iowa) 57 BR 362.

In terms of control exercisable by debtor, profit-sharing plan in which debtor's interest of $ 40,000 can be withdrawn in lump sum, is pension or other plan as contemplated by Iowa exemption statute because debtor can gain access to his vested interest in plan by quitting his job, and, for 54-year-old man with limited skills and modest income, this is extreme act that cannot be equated with withdrawal from savings account. In re Flygstad (1986, BC ND Iowa) 56 BR 884, CCH Bankr L Rptr P 70938.

Chapter 7 debtor's vested interest in pension fund is not reasonably necessary for his support or that of his dependents, now or in future, and therefore is not exempt under Missouri law where: (1) debtor is 41, his wife is 38, and their children are 17, 14, and 13; (2) debtor is in good health and currently employed full-time; (3) in 2 years previous to filing debtor's income was $ 80,000 and $ 52,000; (4) debtor's health and earning capacity for future appear to be good; and (5) debtor has ap-proximately 25 years before retirement within which to accumulate additional retirement funds. In re Bartlett (1986, BC WD Mo) 67 BR 455.

Page 325 11 USCS § 522

Chapter 7 debtor's interest in pension and profit sharing plans is not spendthrift trust under Ne-vada law and is property of estate under 11 USCS § 541, not exemptable under 11 USCS § 522, where debtor could take distribution under plans or terminate them at any time and where plans were not established by "separate entity" for benefit of debtor because debtor is sole shareholder and director of employer corporation. In re Shuman (1986, BC DC Nev) 68 BR 290, affd (1987, BAP9 Nev) 78 BR 254, 16 BCD 755.

Florida statute exempting from execution pension established for police officers funded by con-tributions of foreign casualty insurance companies does not apply to retirement fund to which Chap-ter 13 debtor retired police officer and city employer have made joint contributions. In re Harring-ton (1987, BC SD Fla) 70 BR 301, 15 BCD 809.

Chapter 7 debtor/attorney's 100 percent vested interest in qualified retirement plan is exempt under New York law, but only to extent benefits are necessary to meet debtor's and his family's pre-sent basic needs; where debtor's present net income is just under $ 3000 per month, and his ex-penses would decrease as result of bankruptcy, and he has substantial equity in his residency, de-termination that only 30 percent of $ 116,137 in retirement plan is necessary for his and his family's support is reasonable and only that portion of benefits is exempt, notwithstanding fact that debtor is 58 years old, since attorney can be expected to work well beyond average retirement age without significant diminishment of earning capacity or income. In re Woodford (1987, BC ND NY) 73 BR 675.

Ohio exemption statute expressly prohibits Chapter 7 debtor from exempting his interest in profit-sharing plan, and debtor's interest in pension plan is exempt only to extent reasonably neces-sary for his or his dependent's support; debtor who listed his income as physician as $ 155,000 and $ 160,808 in 2 years preceding filing of his petition could not therefore claim his pension interest as exempt in absence of evidence indicating likelihood of reduction of debtor's future earnings and could not exempt his interest in profit-sharing plan. In re Hotchkiss (1987, BC ND Ohio) 75 BR 115.

Chapter 7 debtors' interests in profit sharing plan are not exempt under South Dakota opt-out provision which exempts proceeds of life or health insurance, or proceeds of endowment policy, because plan is not policy of insurance; neither are interests in plan exempt under provision which exempts any benefits, rights, privileges and options under annuity contract because interests in plan cannot be construed as annuity contracts on date of filing petitions because debtors have not elected to receive plan proceeds as annuity. Further, plan interests are not exempt under provision which exempts contributions and benefits accruing to debtor under South Dakota Retirement System be-cause debtor's employer is not participant in system and neither are its employees. In re Bowen (1987, BC DC SD) 80 BR 1012, 16 BCD 1315.

Chapter 7 debtor may exempt portion of his pension plan under Illinois wild card exemption but because remainder of amount is not necessary to debtor's support and because debtor is 39 years old, in good health, earns in excess of $ 40,000 per year, and has many years of future employment to look forward to, it is not exempt under pension plan exemption statute. In re Boggess (1989, BC SD Ill) 105 BR 470, 21 CBC2d 1015.

Trustee is entitled to turnover of proceeds from Chapter 7 debtor's profit-sharing plan under 11 USCS § 542 where plan is not exempted from estate under 11 USCS § 541(c)(2) because it is not spendthrift trust, debtor may not exempt property under 11 USCS § 522(d), which does not exempt

Page 326 11 USCS § 522

ERISA-qualified plan, and although profit sharing plan falls within Florida exemption statute, that statute is preempted by ERISA. In re Hadnot (1992, BC MD Fla) 138 BR 637, 6 FLW Fed B 58.

Chapter 7 debtor may exempt her interest in former husband's profit-sharing plan account under New York exemption law, despite creditor's objection that debtor's interest in plan awarded to her under qualified domestic relations order constitutes nothing more than future interest of debtor in cash payment which cannot be considered exempt property and contention that because funds be-came immediately payable to debtor, they are no longer protected, where interest to which debtor became entitled under order is in nature of ownership interest in distinguishable pool of retirement funds, and where under New York exemption law, which provides for 100 percent exemption of both principal and interest from qualifying retirement plans from application by creditors to satis-faction of money judgments, any payment debtor receives pursuant to order will fall within such exemption; contention that order constitutes transfer of trust funds to third-party nonbeneficiary in whose hands such funds are no longer exempt is without merit as debtor is recognized beneficiary under plan. In re Abbata (1993, BC ND NY) 157 BR 201, 29 CBC2d 773.

Although corpus of debtor's pension plan is not part of debtor's bankruptcy estate because of re-striction upon its transferability, $ 7000 transferred from plan by debtor to debtor's checking ac-count became part of debtor's bankruptcy estate upon filing of his bankruptcy petition. In re Bresnahan (1995, BC SD Ohio) 183 BR 506, 33 CBC2d 1592.

178. Savings and investment plans

Employee savings and profit-sharing plan which is part of ERISA qualified plan is entitled to exemption under 11 USCS § 522(d)(10)(E) only for retirement fund portion of plan. In re Berndt (1983, BC ND Ind) 34 BR 515, 9 CBC2d 848, CCH Bankr L Rptr P 69467.

Debtor's savings and investment plan is qualified exemptible profit-sharing plan under Wiscon-sin law where assets of plan are derived from employee and matching employer contributions, all assets are held in trust for exclusive benefit of employee participants and their beneficiaries, no in-terest in plan or payments made under plan may be assigned, and certain restrictions on employee withdrawals exist; proceeds of plan are also exempt under Wisconsin law and proceeds did not lose exempt status when debtor rolled them over into individual retirement account. In re Woods (1986, BC WD Wis) 59 BR 221.

Chapter 7 debtor's savings plan may not be exempted under 11 USCS § 522(d)(10)(E) where it allows beneficiary to withdraw funds at any time subject to penalty of loss of nonvested employer contributions and 3-month suspension from plan, thus making it a present savings plan; trustee is thus entitled to turnover under 11 USCS § 542. In re Pettit (1986, BC WD Wash) 61 BR 341, 14 CBC2d 1111.

Chapter 7 debtor's individual retirement account (IRA) was exempt under Neb. Rev. Stat. § 25-1563.01 where account agreement and IRS determination letter showed that IRA complied with all of requirements of 26 USCS § 408 and debtor's testimony, account records, investment history, and other testimony showed that funds that had accumulated in IRA were result of deposits within le-gally authorized limits and market growth. In re Rosen (2004, BC DC Neb) 318 BR 166.

Based on Chapter 7 debtor's income, necessary living expenses, litigation costs, and other cir-cumstances, bankruptcy court found that portion of individual retirement account was necessary to

Page 327 11 USCS § 522

meet debtor's monthly expenses and cover litigation costs that had not been paid. In re Rosen (2004, BC DC Neb) 318 BR 166.

Regardless of fact that debtor had not separated from service and was not presently entitled to receive distribution under 401(k) plan, interest could be exempted, pursuant to 11 USCS § 522(d)(10)(E), provided, and to extent, that such interest was shown at evidentiary hearing to be reasonably necessary for support of debtor or his dependents. Cardiello v Seaton (In re Seaton) (2006, BC WD Pa) 346 BR 389.

179. Simplified Employee Pension plans

Like Individual Retirement Accounts (IRAs), Simplified Employee Pension (SEP) plans are "similar plans or contracts" under 11 USCS § 522(d)(10)(E). In re Kellogg (1995, BC DC Mass) 179 BR 379, 33 CBC2d 245, CCH Bankr L Rptr P 76448.

Bankruptcy trustee objecting to debtor's claimed exemption in Simplified Employee Pension (SEP) plan under 11 USCS § 522(d)(10)(E) on ground that it does not conform to requirements of 26 USCS § 401(a), has not met its burden of production under Bankruptcy Rule 4003, since subsec-tion (E) of 11 USCS § 522(d)(10) is satisfied if SEP plan complies with 26 USCS § 408, and trustee has not demonstrated why § 408 is inapplicable. In re Kellogg (1995, BC DC Mass) 179 BR 379, 33 CBC2d 245, CCH Bankr L Rptr P 76448.

180. Miscellaneous

Fact that debtor loaned more than half of the funds in her retirement plan to herself without se-curity does not constitute such an abuse of the plan as to cause it to lose its retirement purpose and exemption under California law. In re Bloom (1988, CA9) 839 F2d 1376, 9 EBC 1845.

Ten-year stream of income payable to Chapter 7 debtors pursuant to noncompetition agreement obtained when husband/debtor sold his business and which he intended to use for retirement was not exempt as "private retirement plan" under California statute. Lieberman v Hawkins (In re Lie-berman) (2001, CA9 Cal) 245 F3d 1090, 2001 CDOS 2951, 2001 Daily Journal DAR 3657, 25 EBC 2464, CCH Bankr L Rptr P 78389.

Debtor's interest in spendthrift trust may not be claimed as exempt under 11 USCS § 522. In re Kelleher (1981, BC MD Fla) 12 BR 896.

Chapter 7 debtor's interest in employee stock ownership plan is not exempt under Georgia stat-ute exempting pension, annuity, or similar plans because Georgia legislature, by enacting statute which adopts verbatim language of federal statute except for omission of words "stock bonus" and "profit sharing", intended that such stock bonus or profit sharing plans were not to be included as exempt and that words "or similar plan" were not to be extended to such plans; clear purpose of debtor's plan is not to provide employee with pension or annuity, but rather is to give employee ownership interest in company. In re Gillespie (1985, BC ND Ga) 63 BR 124.

Debtor may not exempt patronage refunds due from creamery association as employee benefit because (1) these dividends do not fit any category of exemptible employee benefits, i.e., plan holds monies of members in order to prevent budget shortfalls but no contributions are made based upon wages and debtor is not employee of association, having received no wages, and (2) refunds are not reasonably necessary for debtor's support since debtor's truck driving and crop farming should pro-duce sufficient income. In re Schuette (1986, BC DC Minn) 58 BR 417.

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Chapter 7 debtor cannot exempt under New York opt-out provisions vested interest in money deposited in tax-deferred savings account maintained by deceased spouse where such is not "cash" as required by statute and no distribution was made to debtor until after filing of petition. In re Sykes (1987, BC ND NY) 76 BR 924.

Debtor may exempt severance pay under Ohio opt-out provisions to extent reasonably necessary for support of debtor or dependents where severance pay fund is: (1) funded by employer; (2) dis-tributed under definite formula; and (3) not available to debtor employee prior to distribution. In re Bell (1987, BC ND Ohio) 80 BR 97.

Stock certificates actually distributed to debtor under employee stock ownership program may not be exempted from bankruptcy estate under Missouri opt-out provision exempting debtor's right to receive such payment where right to receive terminates upon actual possession. In re McGoy (1988, BC ED Mo) 86 BR 174, 4 BAMSL 4177.

Trustee's own rights and powers as levying creditor arise as of date when bankruptcy petition is filed; as representative of unsecured creditors who extended credit to debtor before enactment of Oklahoma statute exempting tax-qualified retirement plans, trustee has standing to litigate issue of statute's constitutionality; to extent that statute declares that all tax-qualified retirement plans and accounts are exempt from execution in enforcement of state court judgment and from beneficiaries' bankruptcy estates, regardless of whether amount so reserved is more than reasonably necessary for beneficiaries' support, regardless of whether beneficiaries have de facto control over and ready ac-cess to funds for any purpose of their own, and even if plan or accounts are otherwise-forbidden self-settled revocable spendthrift trusts, statute constitutes impairment of obligation of contracts as to debts incurred before its enactment, in violation of United States and Oklahoma constitutions. In re Garrison (1989, BC ND Okla) 108 BR 760, 22 CBC2d 387.

Wages voluntarily contributed by Chapter 7 debtor to state employees deferred-compensation program prepetition, and to which debtor has access, are property of debtor's estate under 11 USCS § 541, and not exemptible where debtor has not claimed any exemption under Ohio law. In re Leadbetter (1990, BC ND Ohio) 111 BR 640, 12 EBC 1217, affd without op (1991, CA6 Ohio) 946 F2d 895, reported in full and affd, on reconsideration (1993, CA6) 1993 US App LEXIS 10544.

State employee's deferred compensation plan may be exempted under 11 USCS § 523(d)(10)(E) even though plan allows payments for reasons not specifically enumerated in statute where plan administrator construed term "unforeseeable emergency" in plan as restricting payments to those needed to provide future earnings in time of need, which is comparable to disability, illness or age for which statute permits payments to be made. In re Destremps (1996, BC DC Mass) 193 BR 85.

Where Chapter 7 debtor's qualified 401(k) plan required disbursement of account within 60 days after end of his employment, fact that traceable 401(k) proceeds were placed in checking account after his employment terminated had no bearing on exempt status of those funds under Florida law so that they would be held exempt where trustee did not challenge qualification of plan or allege lack of traceability regarding proceeds. In re Ladd (2001, BC ND Fla) 258 BR 824, 37 BCD 115, 45 CBC2d 1183, 14 FLW Fed B 200.

Retired debtor/police officer's tax-qualified deferred compensation plan payments were exempt under New York law as plan or contract similar to "stock bonus, pension, profit sharing, or similar plan or contract." In re Ruffo (2001, BC ED NY) 261 BR 580, 26 EBC 1884, 87 AFTR 2d 2150.

Page 329 11 USCS § 522

Where bankruptcy debtor claimed exemptions in lawsuits with insurers to recover under policies insuring life of debtor's parent, exemptions were improperly claimed under 11 USCS § 522(d)(10)(E) since policies did not provide substitute for wages and thus were not similar to profit-sharing, stock bonus, pension, or annuity plans. Opel v Daly (In re Daly) (2005, BC MD Pa) 344 BR 304.

Debtor's thrift savings fund account was exempt under D.C. Code § 15-501(a)(9), but even if account could not be exempted under District of Columbia law, debtor could still claim account as exempt under 11 USCS § 522(b)(3) even if debtor elected not to utilize exemptions available under 11 USCS § 522(d). In re Gill (2007, BC DC Dist Col) 100 AFTR 2d 6356.

In New Hampshire exemption accorded "any interest in a retirement plan or arrangement quali-fied for tax exemption purposes," phrase "qualified for tax exemption purposes" modifies "plan or arrangement" rather than "interest"; exception in statute for pre-existing extensions of credit and debts is preempted by Bankruptcy Code. Premier Capital, Inc. v DeCarolis (In re DeCarolis) (2001, BAP1) 259 BR 467 (criticized in In re Friedlander (2002, BC DC Mass) 284 BR 525, 40 BCD 96).

I.Other Property 181. Generally

Debtor may not exempt property under 11 USCS § 522(b) where debtor did not comply with mechanisms provided by state law for claiming personal property exemptions. In re Norton (1983, BC ED Tenn) 30 BR 712.

Right of exemption under 11 USCS § 522 is personal privilege and court will therefore carefully see that exemption laws are not construed so as to make them instruments of fraud; for example, where property sought to be exempted is determined to be fruit or instrumentality of crime or where property to be exempted was fraudulently concealed by debtor both before and after filing, exemp-tion will not be allowed. In re Hanson (1984, BC DC ND) 41 BR 775.

Wyoming exemption for entireties property, authorized by 11 USCS § 522(b)(2)(B), extends to personalty under state common law, but only if survivorship right is expressly created, and person-alty is capable of joint possession; thus Chapter 7 debtor husband of nonfiling wife (1) can exempt interest in contracts for deed given to "husband and wife," (2) cannot exempt stock certificates which are held by debtor and wife designated only by their proper names, (3) cannot exempt trust interest in condominium created only in proper names, and (4) cannot exempt household goods and artwork where no documents describing form of ownership exist. In re Anselmi (1985, BC DC Wyo) 52 BR 479, 13 BCD 573.

For purposes of 11 USCS § 522(d)(11)(B), relevant time when one must be dependent of de-ceased individual is not time of individual's death; rather, relevant time when one must be depend-ent to qualify under statute is after individual's death. Walsh v Hendrickson (In re Hendrickson) (2002, BC WD Pa) 274 BR 138.

Phrase "a payment" in 11 USCS § 522(d)(11)(B) indicates that one must look to debtor's right to receive particular payment and determine whether debtor would have been dependent of deceased at that time had deceased not died; thus, exemption is properly taken under statute only if debtor would have been dependent of deceased individual when right to receive particular payment arises. Walsh v Hendrickson (In re Hendrickson) (2002, BC WD Pa) 274 BR 138.

Page 330 11 USCS § 522

Bankruptcy court found that where debtor filed his bankruptcy petition and elected state exemp-tions as single person rather than federal exemptions under 11 USCS § 522, and testified that he was not married when he filed his bankruptcy petition, then debtor was not entitled to personal property exemption found in Ark. Const. art. 9, § 2; Ark. Code Ann. § 16-66-218(b)(2). In re Hunter (2003, BC WD Ark) 295 BR 882.

182. Animals and livestock

Race horse could not be claimed as exempt by bankrupt under state law exempting team work horses. In re Libby (1900, DC Vt) 103 F 776.

For bankrupt to claim exemption for horses used in team work, as provided by state law, he must make selection before sale is made by trustee. In re Grady (1905, DC Vt) 138 F 935.

Where debtors voluntarily transferred their interest in cattle to extent of lien, upon granting of security interest in livestock to bank, debtors are not entitled to exemption as claimed under 11 USCS § 522(g)(1) and even if security interest did not control, transfer of cattle for sale by debtor was voluntary transfer, and that transfer was accomplished by aid provided by debtors and by their lack of resistance; mere fact that debtors disliked having to transfer livestock for sale does not obvi-ate voluntariness of transaction. In re McQueen (1982, BC DC Vt) 25 BR 592.

Under Missouri law, debtor dairy farmers may not exempt cows used for commercial or produc-tion purposes under statute allowing exemption for animals used for personal, family, or household use, nor may they exempt them under tools of trade exemption because term "tool" does not en-compass livestock, but instead refers to inanimate devices such as instrument or apparatus that augments or extends limits of human physical ability or power; since cows are not exempt, liens on them may not be avoided under 11 USCS § 522(f). In re Eakes (1987, BC WD Mo) 69 BR 497.

Thirteen Holstein and six beef cattle are not animals owned for personal use and therefore pro-ceeds from sale of animals cannot be claimed as exempt by Chapter 11 debtors under Missouri per-sonal property exemption, particularly where debtors had already exempted 8 cattle by self-help, presumably to fill their personal milk and meat requirements; however, wild card and head of household exemptions may be applied to exempt portion of sales proceeds. In re Searcy (1987, BC WD Mo) 75 BR 149, 4 UCCRS2d 1247.

183. Art

Where there is no evidence that oil paintings belonging to bankrupt and hanging in Los Angeles athletic club are either family portraits or drawn or painted by any member of family, they are not exempt as hanging pictures under California law or under former 11 USCS § 24 which allowed bankrupts exemptions prescribed by law of state of their domicile. Hamaker v Heffron (1945, CA9 Cal) 148 F2d 981, cert den (1945) 326 US 737, 90 L Ed 440, 66 S Ct 46.

Although artist is not entitled to exemption as family pictures art works which are not represen-tations of bankrupt's family or friends, he is entitled to exemption for art works used in his occupa-tion up to value of $ 1000 less any other business exemption. In re Teachout (1975, BC WD Mich) 1 BCD 1271, 5 CBC 511.

Chapter 7 debtors' may exempt as household furnishings, under California law, stereo and video cassette recorder, telephone answering machine, oil painting and figurines, and German beer steins; they may not claim; however, camera, golf clubs or exercise bike. In re Lucas (1986, BC SD Cal)

Page 331 11 USCS § 522

62 BR 949, 14 BCD 729, affd in part and revd in part on other grounds (1987, BAP9 Cal) 77 BR 242.

184. Causes of action

Debtors may claim causes of action under federal and state truth-in-lending acts as exempt un-der 11 USCS § 522. In re Smith (1981, CA7 Ill) 640 F2d 888, 7 BCD 419, 3 CBC2d 827, CCH Bankr L Rptr P 67833.

Dismissal of class action suit for lack of standing was erroneous even if debtor's portion of claim would put her above state's personal property exemption ceiling, since she was entitled to ex-empt $ 900 of claim's fair market value as of date she filed bankruptcy petition. Polis v Getaways, Inc. (In re Polis) (2000, CA7 Ill) 217 F3d 899, reh den (2000, CA7 Ill) 2000 US App LEXIS 18226, complaint dismd, judgment entered (2001, ND Ill) 2001 US Dist LEXIS 2021.

All of debtor's motions and correspondence at time in question stressed fact that jurors in his lawsuit against city had told him no award was made for future lost wages; having taken that posi-tion before district court several months earlier, he could not take opposite stance and, therefore, bankruptcy court correctly found judgment to be non-exempt. Pequeno v Schmidt (2004, SD Tex) 307 BR 568 (criticized in Copper v Copper (In re Copper) (2004, BAP6) 314 BR 628, CCH Bankr L Rptr P 80171, 2004 FED App 7P) and affd (2005, CA5 Tex) 126 Fed Appx 158.

Debtor may claim as exempt monies received in remuneration for loss of future earnings, 11 USCS § 522(d)(11)(E), and once property is claimed to be exempt, there is presumption that exemp-tion has been correctly claimed; therefore, any party contesting exemption has burden to show that it was improperly claimed and, once objecting party has satisfied burden, debtor must come forward with unequivocal evidence that exemption is proper. Pequeno v Schmidt (2004, SD Tex) 307 BR 568 (criticized in Copper v Copper (In re Copper) (2004, BAP6) 314 BR 628, CCH Bankr L Rptr P 80171, 2004 FED App 7P) and affd (2005, CA5 Tex) 126 Fed Appx 158.

Real and personal property, or either, to be selected by bankrupt including money, debts due him, and choses in action may be set apart as exempt under Virginia law. In re Wilkes (1976, BC WD Va) 2 BCD 957, 9 CBC 801.

Debtor's interest in unliquidated tort claim is distinct from interest in insurance proceeds so that where debtors had not filed suit by date of their bankruptcy filing or by date of conversion of their case from Chapter 13 to Chapter 7, they had no right to payment under insurance policy and thus could not exempt insurance proceeds. In re Kollar (1998, BC ED Pa) 218 BR 349, 39 CBC2d 956, affd (1998, ED Pa) 223 BR 288, CCH Bankr L Rptr P 77774, affd (1999, CA3 Pa) 176 F3d 175.

Florida's $ 1,000 personal property exemption for general intangibles or choses in action could be used to exempt $ 600 portion of value of Chapter 7 debtor's class action lawsuit. In re Kelsey (1998, BC MD Fla) 224 BR 495, 12 FLW Fed B 25.

Property of estate under 11 USCS § 541(a)(1) includes choses in action, even if contingent and unliquidated and thus not subject to attachment under state law; Bankruptcy Code was intended to go beyond limits of creditor process law in defining property of estate so that debtor's exemption rights in property cannot be based solely on that property's insulation from attachment, levy, and sale. Howe v Richardson (In re Howe) (1999, BAP1 RI) 232 BR 534, affd (1999, CA1) 193 F3d 60, cert den (2000) 529 US 1021, 146 L Ed 2d 315, 120 S Ct 1424.

Page 332 11 USCS § 522


Unpublished: Debtor's claim that Chapter 7 trustee had improperly failed to exercise her 11 USCS § 544 power to avoid transfers for benefit of estate was properly rejected by bankruptcy court because claims to which debtor was referring were contingent claims of estate based on possible position outcome in litigation involving quit claim deed, not secured claims of creditors, with result that Chapter 7 trustee's general authority under § 544 was simply inapposite, nor was debtor entitled to relief on alternate theory that he was entitled to avoid transfer under 11 USCS § 522(h); § 522 does not afford debtor unfettered power to step into trustee's shows and exercise avoidance power but conditions exercise of such powers on showing that property at issue would be subject of debtor's statutory claim of exemption, which was not case at bar. Lewis v McCallum (In re Lewis) (2007, BAP10) 2007 Bankr LEXIS 2500.

185.--Personal injury actions and awards

Debtor's claim for personal injury, whether unliquidated when petition was filed, or settled dur-ing proceeding, are property of bankrupt estate when case begins; pursuant to Virginia law, debtor is entitled to claim exemption for such claim under homestead exemption statute, but not as com-mon law exemption nor as an unassignable cause of action unreachable by creditors. Tignor v Parkinson (1984, CA4 Va) 729 F2d 977, 11 BCD 965, 10 CBC2d 729, CCH Bankr L Rptr P 69772 (superseded by statute as stated in Cassell v Krippendorf (In re Cassell) (1994, CA4 Va) 6 Fourth Cir & Dist Col Bankr Ct Rep 665, 6 Fourth Cir & Dist Col Bankr Ct Rep 814) and (superseded by statute as stated in In re Sherman (1995, BC ED Va) 191 BR 654).

Chapter 7 debtor's personal injury cause of action cannot be considered exempt from his bank-ruptcy estate, despite immunity of tort cause of action from sequestration where Wisconsin legisla-ture did not include right within its general list of exemptions and failed to identify it with reason-able certainty as exemption, prior to amendment to exemption statute to exempt specifically pay-ments for personal injury claims. In re Geise (1993, CA7 Wis) 992 F2d 651, CCH Bankr L Rptr P 75226.

Chapter 7 debtor who listed lawsuit at value of one dollar is entitled to entire value of personal injury lawsuit, whatever it turned out to be, despite trustee's argument that debtor is entitled to only one dollar, where debtor exempted full reported value of lawsuit, and neither trustee nor any other interested party objected, where trustee has conceded that he knew debtor used nominal one dollar value to signify asset with contingent value, and trustee specifically denied having been misled into believing debtor's lawsuit had actual value of one dollar. Allen v Green (In re Green) (1994, CA11 Ala) 31 F3d 1098, 31 CBC2d 1449, CCH Bankr L Rptr P 76098, 8 FLW Fed C 606.

Employer, sponsor and administrator of health benefits plan with reimbursement provision, had equitable lien on personal injury settlement proceeds received by employee after she filed for bank-ruptcy; employer had security interest in proceeds and nothing prevented employer from foreclosing on that interest. Wal-Mart Stores, Inc. v Carpenter (In re Carpenter) (2002, CA4 Va) 36 Fed Appx 80, 28 EBC 2043.

Sponsor and administrator of employee health benefits plan with reimbursement provision had enforceable equitable lien on personal injury settlement proceeds received by its employee from third-party tortfeasor after employee filed for bankruptcy; because plan administrator was seeking equitable relief via lien on particular property in hands of plan beneficiaries, rather than legal relief, its actions were authorized by 29 USCS § 502 (a)(3) and exemption under 11 USCS § 522(b)(2) did

Page 333 11 USCS § 522

not apply to bar plan administrator's actions. Wal-Mart Stores, Inc. v Carpenter (In re Carpenter) (2002, CA4 Va) 36 Fed Appx 80, 28 EBC 2043.

Under both state and federal rules, debtor was required to disclose settlement from her personal injury suit as asset of her estate, contingent or otherwise, and then seek exemption under Utah Code Ann. § 78-23-5 (2005); bankruptcy court's determination that debtor met neither of safe havens to establish inadvertence, that debtor intentionally concealed her potential litigation interest, and that concealment prejudiced trustee's administration of estate were not clearly erroneous because debtor's shifting explanations of why she failed to disclose asset and her failure to give trustee timely notice of accident settlement suggested bad faith. Gillman v Ford (In re Ford) (2007, CA10) 492 F3d 1148, CCH Bankr L Rptr P 80941.

There is sufficient proof to sustain Chapter 7 debtor's personal injury exemption under 11 USCS § 522(d)(11)(D) where although judgment does not differentiate among damages for wages, bodily injury, or pain and suffering, award for personal injury was far below that requested by debtor in state court action, rendering it unlikely that entire award was for pain and suffering, and since there is no proof that judgment was only for pain and suffering, the form of personal injury that may not be exempted, debtor is entitled to $ 7,500 exemption; debtor is not entitled to exemption under § 522(d)(11)(E), which exempts compensation for loss of future earnings to extent reasonably neces-sary for support, because award was not in compensation for loss of future earnings since debtor is capable of working and schedules indicate that debtor receives social security and veteran's benefits in excess of listed expenses. In re Russell (1992, ED Ark) 148 BR 564.

Statutory language of D. C. Code § 15-501(a)(11)(D) did not create exemption for proceeds of personal injury settlement, despite some similarity to 11 USCS § 522(d)(11)(D), which created par-tial exemption; as drafted, D.C. statute was so ambiguous court could discern no clear meaning. Howell-Robinson v Albert (2008, DC Dist Col) 384 BR 19.

Personal injury claims are exempt personal property under Wisconsin law, and even in absence of specific statutory exemption, 11 USCS § 522(b)(2)(A) allows Wisconsin debtors to claim per-sonal injury action and thereby remove such actions from their bankruptcy estates created under 11 USCS § 541. In re Brandstaetter (1984, BC ED Wis) 36 BR 369, 11 BCD 527.

Personal injury claim was exempt under 11 USCS § 522(b)(2) pursuant to applicable (Minne-sota) state law, and fact that claim was settled constituted only an executory accord, not substitute contract where no payment was made on release signed. In re Carlson (1984, BC DC Minn) 40 BR 746, 12 BCD 210.

While under state law unliquidated tort claim for personal injuries is not subject to writ of exe-cution but is, nevertheless, not exempt from claims of creditors, such claim may not be exempted pursuant to 11 USCS § 522(b)(2) and therefore is part of estate under 11 USCS § 541. In re Mills (1985, BC SD Fla) 46 BR 525.

Chapter 7 debtor may not exempt personal injury judgment proceeds because Nevada legislature has determined that neither personal injury actions nor recoveries are exempt from execution and levy by judgment creditors. In re Richards (1986, BC DC Nev) 57 BR 662.

Under Georgia's opt-out statute, identical to 11 USCS § 522(d)(11)(D), debtor may claim as ex-empt up to $ 7,500, after deducting amounts for medical expenses and property damage (which may not be exempted), and any recovery from unliquidated claim resulting from Chapter 7 debtor's

Page 334 11 USCS § 522

automobile accident 8 months prior to filing; that personal injury claims are nonassignable in Geor-gia does not affect amount of exemption nor does any "increase" in claim due to alleged pain and suffering, since value of claim at time of filing would estimate future damage and therefore claim's value remains constant from time of filing. In re Geis (1986, BC ND Ga) 66 BR 563.

Exemption in 11 USCS § 522(d)(11) for personal injury awards is supplemental to other exemp-tions, not limit on them; thus fact that debtor claims more than § 522(d)(11) allows has no effect on availability of homestead exemption to debtor. In re Wheeling (1986, BC WD Pa) 68 BR 388.

Where under applicable state law, in state which has opted out under 11 USCS § 522(d), debtors' unliquidated claim for personal injuries is not subject to levy or assignment, such claim is retained by the debtors as exempt property in Chapter 7 proceeding. In re Mitchell (1987, BC ED Mo) 73 BR 93, 4 BAMSL 3673.

Chapter 7 debtor may exempt under 11 USCS § 522(d)(11)(D) interest in proceeds he hopes to receive from medical malpractice action in which debtor is plaintiff to extent recovery is for actual bodily injury, but may not exempt proceeds for pain and suffering, unless only recovery is for pain and suffering, or recovery is disproportionate to bodily injury suffered. In re Sidebotham (1987, BC ED Pa) 77 BR 504, 17 CBC2d 923.

Provision in Minnesota opt-out provisions limiting exemptions to "reasonable amount of prop-erty" will not limit exemption of general damages portion of personal injury right of action, where such damages represent monetary restoration of physically and mentally damaged person; such pro-vision does restrict exemption for special damages. In re Bailey (1988, BC DC Minn) 84 BR 608.

Minnesota statute exempting rights of action for injuries to person of debtor or of relative whether or not resulting in death, and which imposes no monetary limit on amount of recovery, is unconstitutional because it is contrary to Minnesota constitution which provides that reasonable amount of property shall be exempt and that amount of such exemption shall be "determined by law," which requires that amount of exemption must be made on face of statute. In re Medill (1990, BC DC Minn) 119 BR 685.

When Chapter 7 case is filed before judgment is entered on right of action for injuries to person of debtor or relative: (1) claim for special damages that accrued before case is filed is not exempt because Minnesota statutory exemption for prepetition special damages is unconstitutional as ap-plied under Minnesota Constitution; (2) claim for special damages that accrue after case is filed is exempt because statutory exemption for postpetition special damages is constitutional; (3) claim for general damages is exempt because statutory exemption is constitutional; and (4) claim for punitive damages is not exempt either because statutory exemption is unconstitutional as applied or because such claim does not come within scope of exemption statute. In re Cook (1992, BC DC Minn) 138 BR 943.

Although Chapter 7 debtor's unliquidated medical malpractice claim is not subject to garnish-ment under Kansas law, claim is property of estate and cannot be claimed as exempt. In re Garrity (1992, BC DC Kan) 144 BR 895.

Proceeds from personal injury settlement that are paid and received in full prior to filing of bankruptcy petition are property of estate and are not exempt under Minnesota statute (Minnesota Statutes § 550.37(22)) exempting rights of actions for injuries to person of debtor or of relative,

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whether or not resulting in death, from any attachment, garnishment, or sale on any final process issued from any court. In re Procter (1995, BC DC Minn) 186 BR 466.

Nothing in Bankruptcy Code requires debtor to choose one exemption under which to claim all aspects of single personal injury award; accordingly, Chapter 13 debtor could exempt portion of personal injury settlement under 11 USCS § 522(d)(11)(D) and remainder under § 522(d)(11)(E). In re Bova (1997, BC ED Pa) 205 BR 467.

Debtor was allowed to amend his Schedule C exemptions, revising his 11 USCS § 522(d)(5) ex-emption to apply to proceeds of his medical malpractice claim, since Rule 1009 permits debtor to amend his schedules at any time before case is closed, and exemptions are one-time benefits con-ferred upon debtor by statute which should be used to fullest extent possible. In re Scotti (2000, BC DC NJ) 245 BR 17, 43 CBC2d 1405.

Debtor who owns multiple rights to receive payment on account of personal bodily injury aris-ing from separate and distinct incidents, is entitled to claim 11 USCS § 522(d)(11)(D) exemption for each such payment right. In re Comeaux (2003, BC ED Tex) 305 BR 802.

Because debtors who owned multiple rights to receive payment on account of personal bodily injury arising from separate and distinct incidents were entitled to claim 11 USCS § 522(d)(11)(D) exemption for each such payment right, bankruptcy trustee's objection to debtors' multiple claims of exemption under § 522(d)(11)(D) was overruled. In re Comeaux (2003, BC ED Tex) 305 BR 802.

Where husband's wife suffered personal injury in accident, husband could take exemption in their joint chapter 13 bankruptcy, to extent, because wife's personal injury claim arose in commu-nity property state in which they lived. In re Bippert (2004, BC WD Tex) 311 BR 456.

Debtor's claim to exempt share of settlement fund under 11 USCS § 522(d)(11)(D) that arose from compromised personal injury claim was subject to proration for tracing method where bank-ruptcy trustee and debtor were both blameless under facts. In re Rauser (2004, BC DC Conn) 312 BR 461, 52 CBC2d 998.

Exempt portion of debtor's undiscounted personal injury claim was reduced to statutory maxi-mum of $ 17,425.00 because amount "traced" and, thus, exempted under 11 USCS § 522(d)(11)(D) was not capped by statutory maximum but, rather, it was statutory maximum, or some lesser amount, that had to be "traced" under statute. In re Rauser (2004, BC DC Conn) 312 BR 461, 52 CBC2d 998.

In Chapter 7 bankruptcy case, trustee's objection to debtor's claim of exemption in anticipated proceeds of pending personal injury lawsuit, on ground that debtor had not shown that she had per-manent bodily injuries, lacked merit because 11 USCS § 522(d)(11)(D) is not limited to permanent injuries. In re Lawton (2005, BC DC Conn) 324 BR 20.

Personal bodily injury, within meaning of 11 USCS § 522(d)(11)(D), does not have to be per-manent to be within scope of exemption. In re Lawton (2005, BC DC Conn) 324 BR 20.

Debtor wife was not entitled to receive any portion of settlement proceeds under 11 USCS § 522(d)(11)(D) where settlement had compensated her for her actual pecuniary losses suffered as result of automobile accident. Walsh v Kelin (In re Kelin) (2006, BC WD Pa) 341 BR 521.

Debtor husband was not entitled to receive any portion of settlement proceeds from pre-petition, personal injury lawsuit where lawsuit had been brought by and settled on behalf of his wife and as

Page 336 11 USCS § 522

result, he had no property interest in his own right in lawsuit. Walsh v Kelin (In re Kelin) (2006, BC WD Pa) 341 BR 521.

Debtor wife was not entitled to receive any portion of settlement proceeds under 11 USCS § 522(d)(11)(E) where there was nothing in record to indicate that wife's earning capacity had been diminished in any way as result of automobile accident and as result, no portion of settlement pro-ceeds was compensation for future earnings wife lost as consequence of her injuries. Walsh v Kelin (In re Kelin) (2006, BC WD Pa) 341 BR 521.

Debtor could utilize "personal bodily injury" exemption found at 11 USCS § 522(d)(11)(D), so he could exempt annuities at issue from property of estate; documents and other evidence produced by debtors adequately set forth basis for exemption under § 522(d)(11)(D) and injuries sustained by debtor, on their own, were extensive enough to account for settlement award he received; undis-puted record was that debtor's bodily injury has been so severe that he was physically precluded from performing work that was his livelihood prior to accident. Walsh v Reschick (In re Reschick) (2006, BC WD Pa) 343 BR 151.

Where portion of debtor's original malpractice claim and resulting settlement was for personal injury in form of emotional distress, defendant was entitled to exempt proceeds of claim pursuant to state law personal injury exemption to extent they were necessary for support. Sylvester v Hafif (In re Sylvester) (1998, BAP9) 220 BR 89, 98 CDOS 2728, 98 Daily Journal DAR 3750.

Under Cal. Civ. Proc. Code § 704.140, Chapter 7 debtors were required to show that settlement proceeds from their medical malpractice action were necessary for their support to claim proceeds exempt in their bankruptcy case. Gose v McGranahan (In re Gose) (2004, BAP9) 308 BR 41.

California Legislature did not intend Cal. Civ. Proc. Code § 704.140(a) to exempt personal in-jury claims in their entirety, without reference to necessity for support; rather, § 704.140(a) merely allowed debtor to exempt personal injury claims without having to make formal claim. Gose v McGranahan (In re Gose) (2004, BAP9) 308 BR 41.

186.----Multiple causes of action

Chapter 7 debtor may not claim more than $ 15,000 in exemption for payment received on ac-count of personal bodily injury under 11 USCS § 522(d)(11)(D), even though she had three personal injury claims from three separate pre-petition accidents. Christo v Yellin (In re Christo) (1999, CA1) 192 F3d 36, CCH Bankr L Rptr P 78002 (criticized in In re Comeaux (2003, BC ED Tex) 305 BR 802).

11 USCS § 522(d)(11)(D) entitles Chapter 7 debtor who has sustained personal bodily injuries in 2 separate prepetition accidents to 2 exemptions of $ 7,500. In re Marcus (1994, BC DC Conn) 172 BR 502.

Nothing forecloses bankruptcy debtor from properly asserting multiple exemptions under 11 USCS § 522(d)(11)(D) for multiple property interests in personal injury lawsuits which are separate and distinct. Opel v Daly (In re Daly) (2005, BC MD Pa) 344 BR 304.

Debtor should be allowed only one exemption in amount of $ 15,000 on account of personal bodily injury under 11 USCS § 522(d)(11)(D); bankruptcy court decision limiting Chapter 7 debtor's exemption to $ 15,000 even though debtor has three separate tort actions pending as result of three separate pre-petition automobile accidents is affirmed. Christo v Yellin (In re Christo)

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(1999, BAP1 Mass) 228 BR 48, 41 CBC2d 310, CCH Bankr L Rptr P 77885, affd (1999, CA1) 192 F3d 36, CCH Bankr L Rptr P 78002 (criticized in In re Comeaux (2003, BC ED Tex) 305 BR 802).

187.----Particular causes of action

Pennsylvania statute permitting exemption of net amount payable under any accident or disabil-ity insurance does not apply to debtor's prospective tort judgment despite fact that such judgment might be paid by tort defendant's insurance carrier; thus, Chapter 7 debtors' potential recovery for slip and fall in retail store, valued by debtors at $ 500,000 to $ 750,000, could not be exempted since (1) exemption at issue is insurance exemption, not personal injury or tort exemption, and pol-icy proceeds will be paid to retailer rather than debtors, (2) debtors have no "property or other rights" as required for proceeds to be exempt under Pennsylvania statute, and (3) it is illogical as well as potentially disruptive of bankruptcy process for right to exemption under state law to turn on possibility that tort judgment will be paid by defendant's insurer which approach would enable tort defendant to defeat exemption by deciding to pay any judgment out of its own pocket. Kollar v Miller (In re Kollar) (1999, CA3 Pa) 176 F3d 175.

Alleged conduct that gave rise to his complaint involved actions prior to his filing for bank-ruptcy, and under 11 USCS § 541(a)(1), all of debtor's legal claims became property of bankruptcy estate at time he filed his Chapter 7 petition; consequently, debtor had no standing to bring subject legal claims since trustee had not abandoned any of property of estate under 11 USCS § 554(a),(d) and debtor's legal claims were not exempted from bankruptcy estate under 11 USCS § 522(d)(1) where no part of that or any other statutory provision recognized exemption of kind of legal claims for alleged violations of federal statutes for concealing nature of loan terms and for race, national origin, and gender discrimination. Augustin v Danvers Bank (2007, DC Mass) 486 F Supp 2d 99.

Personal injury cause of action representing contingent and unliquidated claim for damages against railroad, which is neither assignable nor subject to reach of creditors under state law, is ex-empt property pursuant to 11 USCS § 522. In re Musgrove (1981, BC WD Va) 7 BR 892, 3 CBC2d 556, CCH Bankr L Rptr P 67852.

Award for loss of consortium because of personal injury to spouse is payment "on account of personal bodily injury . . . of debtor or individual of whom debtor is dependent" and may be ex-empted pursuant to provisions of 11 USCS § 522(d)(11)(D). In re Lynn (1981, BC WD Wis) 13 BR 361, 7 BCD 1379, CCH Bankr L Rptr P 68287 (criticized in Owen v Vieira (2002, SD Ill) 2002 US Dist LEXIS 5910).

Secured creditor has not established as matter of fact or law that monies received from settle-ment of state court lawsuit for personal injury and property damage to car only represent recovery for pain and suffering so as to make money not exempt property pursuant to 11 USCS § 522(d)(11)(D); further factfinding must be conducted as it cannot yet be determined whether debtor can claim entire amount as exempt or whether secured creditor is entitled to receive some portion pursuant to its security interest in proceeds of car. In re Territo (1983, BC ED NY) 32 BR 377, 11 BCD 20, 36 UCCRS 1762.

Compensation debtor may have already received in form of direct payments from his own in-surer under provisions of state no fault insurance law does not count towards $ 75,000 exemption pursuant to 11 USCS § 522(d)(11)(D) where such compensation is actually not debtor's to have, but was rather trust from which his medical expenses and other compensable losses were paid; despite any pain and suffering that presumably accompanied debtor's injury, where injury alone was exten-

Page 338 11 USCS § 522

sive enough to account for all of money received in settlement of debtor's state court action less that amount attributable to damage to vehicle, debtor may claim such sum as exempt property; likewise, portion of money debtor received from state court settlement arising out of automobile accident could reasonably be attributed to lost earnings and retained as exempt property on that basis where prior to accident debtor served as assistant manager at salary of $ 12,000 per year and where his in-come since time of accident has never exceeded 80 percent of level it was at time he was injured and where further because of continuing disability it is unlikely that debtor will attain former in-come level once again without some form of job retraining. In re Territo (1984, BC ED NY) 36 BR 667, CCH Bankr L Rptr P 69759.

Debtor is entitled to full exemption of $ 7,500 under 11 USCS § 522(d)(11)(D), for personal in-jury settlement, without offset of $ 3,083.50 paid to debtor's doctors by insurance company. In re Estate of Shahan (1984, BC ND Tex) 40 BR 608.

Where state court judgment for debtor in personal injury action was by general verdict, which exceeded amount allowed under Tennessee exemption for personal injury recoveries after deducting non-exempt amount for actual pecuniary loss, debtor is entitled to entire $ 7,500 exemption because it is impossible to distinguish between amounts awarded for exemptible elements of recovery and non-exempt elements such as pain and suffering; and court awards remainder of judgment to dis-abled debtor under subsection allowing exemption of award for lost future earnings. In re Haga (1985, BC ED Tenn) 48 BR 492.

Under Bankruptcy Rule 4003, without proof by creditor hospital that debtor accepted part of tort recovery in trust for payment of medical services, as opposed to payment for bodily injury, creditor cannot bring amount owed for medical services outside of debtor's right to exempt tort recovery un-der 11 USCS § 522(d)(1)(D), despite contrary conclusion in 3 Colliers § 522.20. In re Wheeling (1986, BC WD Pa) 68 BR 388.

Chapter 7 trustee's objection to exemption claimed by debtor relating to $ 14,000 recovered in personal injury settlement must be overruled, where state exemption statute places limit of $ 7,500 on account of personal injuries, but permits unlimited exemption for award for pain and suffering, for actual pecuniary loss, and for loss of future earnings, because elements of total net settlement are not specified, particularly where evidence establishes that debtor sustained 40 percent perma-nent partial disability and incurred $ 50,000 in medical bills. In re Blizard (1988, BC WD Ky) 81 BR 431.

Chapter 7 debtor may not exempt legal malpractice claim for untimely filing of bankruptcy peti-tion resulting in foreclosure of debtor's home and loss of homestead exemption as personal injury cause of action under California exemptions. In re Haaland (1988, BC SD Cal) 89 BR 845, 19 CBC2d 811, affd in part and remanded in part on other grounds (1989, SD Cal) 172 BR 74.

Although automobile accident claim proceeds were not entitled to exemption under state law, property was deemed exempt where no objections to claim were filed, and proceeds could not be considered disposable income. In re Ferretti (1996, BC SD Fla) 203 BR 796, 37 CBC2d 473, 10 FLW Fed B 139 (criticized in In re Springer (2005, BC ND Ga) 2005 Bankr LEXIS 760) and (criti-cized in In re Launza (2005, BC ND Tex) 2005 Bankr LEXIS 1017).

Debtor was entitled to exemption under 11 USCS § 522(d)(11)(D) for personal injury settlement proceeds, where he suffered appreciable or cognizable injury when his treating physician inadver-tently injected needle into his spinal cord, causing temporary paralysis and headaches; debtor may

Page 339 11 USCS § 522

also exempt proceeds under 11 USCS § 522(d)(11)(E), where trustee failed to disprove his claim for lost wages. In re Scotti (2000, BC DC NJ) 245 BR 17, 43 CBC2d 1405.

Settlement paid Chapter 7 debtor in sexual harassment suit against former employer was exempt under Maryland personal injury exemption statute as claim for "injury of the person." In re Dobbins (2000, BC DC Md) 249 BR 849.

Debtor's settlement of sexual harassment claim against former employer is exemptible where claim can be construed as "injury to the person" under state law. In re Dobbins (2000, BC DC Md) 249 BR 849.

Self-funded ERISA medical benefits plan administered by employer of Chapter 7 debtor who was injured in automobile accident did not have superior right in her personal injury lawsuit on grounds of subrogation, equitable lien, or constructive trust, so as to furnish basis for objection to debtor's claimed exemption of her cause of action, where (1) accident information form did not even purport to grant plan subrogation rights but only right of reimbursement to any recovery and plan document would not establish subrogation rights since such rights would still be defeated by "make-whole rule," (2) principles underlying "make-whole rule" applied with equal force in determination of equitable lien, and (3) record did not establish that debtor had taken any action prejudicial to plan's alleged interest and, even if she were found have duty to convey lawsuit and/or its proceeds to plan, constructive trust claim was not ripe since debtor had never had possession of any property which might, in theory, be rightful property of plan. In re DeLucia (2001, BC DC Conn) 261 BR 561.

Worker's compensation lien was statutory lien under Illinois law and therefore was not avoid-able pursuant to 11 USCS § 522(f), nor could it be subordinated to debtors' personal injury exemp-tion under any other provision of Bankruptcy Code; thus debtors' attempt to assert personal injury exemption against workers' compensation lien failed. Rieman v Allied Ins. (In re Rieman) (2002, BC SD Ill) 289 BR 120.

Trustee had not met burden of proof to show that proceeds of settlement in personal injury ac-tion were not properly exemptible as loss of future earnings under 11 USCS § 522(d)(11)(E) where: (1) evidence that was offered at hearing consisted mostly of allegations regarding damages and there was no evidence of any kind involving damages for pain and suffering or husband's loss of consortium, (2) most telling about trustee's argument was that trustee did not identify in brief any specific, non-exemptible portion of settlement based on evidence of damage other than amount that it would have taken to pay estate in full or to pay trustee's fees, and (3) based on record, court could have only speculated as to proper portion of award that was attributable to loss of future earnings. In re Whitson (2005, BC ED Ark) 319 BR 614, CCH Bankr L Rptr P 80230.

Balance of settlement funds from personal injury action were reasonably necessary for support of debtors (husband and wife) under 11 USCS § 522(d)(11)(E) where: (1) debtors' amended sched-ules showed that even with additional medical benefit and Social Security payment, debtors' basic expenses exceeded their income by $ 800 or $ 900 month, (2) even with Medicare coverage, wife had incurred higher medical costs because she could have no longer taken less-expensive, over-the-counter drugs for her fibromyalgia due to damage to her liver that was caused by her initial drug therapy, (3) wife's transportation costs had increased because she had to travel to consult with heart specialist in addition to two other physicians who treated her on regular basis, (4) since petition fil-ing, husband was diagnosed with diabetes and had incurred increased medical expenses, and (5)

Page 340 11 USCS § 522

husband's income as truck driver was reduced because of layoffs and he currently worked 40 hours or less week at job that grossed only $ 1845 month. In re Whitson (2005, BC ED Ark) 319 BR 614, CCH Bankr L Rptr P 80230.

Debtor could claim exemption for net proceeds he received for personal injury settlement, pur-suant to 11 USCS § 522(d)(11)(D), because amount received was intended to compensate debtor for injuries he sustained to his neck and back as result of automobile accident. Skiba v Andrzejewski (In re Andrzejewski) (2006, BC WD Pa) 337 BR 835. Unpublished Opinions

Unpublished: Where debtor exempted pending tort action, which alleged violation of § 1983, malicious prosecution, and negligence, in connection with false arrest, trustee's objections to ex-emption under 11 USCS § 522(d)(11)(D) and § 522(d)(11)(E) were sustained on grounds that, be-cause suit was still pending, it was unclear whether debtor's recovery would be capable of exemp-tion under § 522(d)(11)(D) and § 522(d)(11)(E); debtor was permitted to later demonstrate that any award he actually received was exemptible. In re David (2004, BC DC Dist Col) 2004 Bankr LEXIS 2245.

188.--Other particular actions and awards

Chapter 7 debtors properly claimed their contract and tort cause of action against bank as ex-empt under West Virginia wildcard exemption, notwithstanding their failure to assign particular value to it at time of their bankruptcy filing; however, by claiming value less than statutory maxi-mum, or by claiming no value at all, entire cause of action does not become exempt--West Virginia statute does not provide for revesting of entire cause of action in debtor, but only for exemption of debtor's interest up to $ 7,900 each, less other exemptions claimed; amount of debtors' exemption represents present, substantial interest and provides necessary standing for debtors to pursue action, even though debtors placed question marks on schedules to indicate value of cause of action; how-ever, trustee would have to abandon cause of action under 11 USCS § 554 in order for debtors to have interest in any recovery above their exemptible interest. Wissman v Pittsburgh Nat'l Bank (1991, CA4 W Va) 942 F2d 867, 3 Fourth Cir & Dist Col Bankr Ct Rep 712, 21 BCD 1697, 25 CBC2d 605, CCH Bankr L Rptr P 74225 (criticized in In re Forti (1998, BC DC Md) 224 BR 323, 10 Fourth Cir & Dist Col Bankr Ct Rep 593, 40 CBC2d 1025).

Although debtor's causes of action against insurer for alleged negligence and breach of fiduciary duty resulting in loss of bankruptcy exemption in IRA did become property of bankruptcy estate, they were exempt under Texas law, despite fact that IRA itself was not, since it would have been had insurer's wrongdoing not caused its defectiveness, and causes of action were to replace lost IRA. State Farm Life Ins. Co. v Swift (In re Swift) (1997, CA5 Tex) 129 F3d 792, CCH Bankr L Rptr P 77572.

Debtor could only exempt cause of action against creditor for violation of certain consumer fraud laws up to remaining value of her state "wildcard" exemption of $ 900, since cause of action remained asset of estate controlled by estate, where its value was speculative but not zero, and set-tlement offer, though problematic as workable valuation tool, was $ 1500. Polis v Getaways, Inc. (1998, ND Ill) 242 BR 653, revd, remanded (2000, CA7 Ill) 217 F3d 899, reh den (2000, CA7 Ill) 2000 US App LEXIS 18226, complaint dismd, judgment entered (2001, ND Ill) 2001 US Dist LEXIS 2021.

Page 341 11 USCS § 522

Debtor will be permitted exemption in $ 3,000 in unpaid child support where evidence indicates that she is taking steps to attempt to collect some portion of unpaid moneys. In re Crippen (1983, BC ED Mo) 36 BR 7, 2 BAMSL 577.

State court action for conversion is not exempted under Minnesota statute enacted pursuant to 11 USCS § 522(b)(2), identical in scope to federal exemption contained in 11 USCS § 522(d)(11), because statute contemplates exemption for actual bodily injury, such as cut, bruise, or broken limb, as distinguished from injury to property; action in conversion for damages to property is not "bodily injury" which may result in death. In re Babcock (1984, BC DC Minn) 44 BR 521.

Under New York opt-out provisions, damages sought to be recovered in cause of action for conversion of Chapter 7 debtor's automobile are not independently exempt under cause of action exemption and may be claimed as exempt only to extent such automobile qualifies as "necessary working tool." In re Lauterbach (1987, BC ND NY) 74 BR 627.

Debtors' interest in lender-liability cause of action is not exempt under Missouri law. In re Jones (1989, BC WD Mo) 112 BR 975.

Civil Liberties Act of 1988, which provides for restitution payments to those individuals of Japanese ancestry who were interned in relocation camps during World War II, contains no provi-sion exempting restitution payments from attachment or execution by creditors or from administra-tion by bankruptcy estate, even though restitution payments are protected from taxation as income; nor is restitution payment exempt under Minnesota statute exempting rights of action for injuries to person because debtor's claim is barred by Federal Tort Claims Act since his claim would be time-barred and he has not exhausted his administrative remedies, and Act itself creates no new right of action, and because restitution payment is not one for "injury to the person" as required under Min-nesota statute. In re Ezaki (1992, BC DC Minn) 140 BR 747, 22 BCD 1626, 26 CBC2d 1506, affd (1992, DC Minn) 181 BR 385.

Any recovery that Chapter 7 debtor realizes against bank and insurance company, in action aris-ing from bank's payment of check on which debtor's signature had been forged, for humiliation and embarrassment he suffered, damages to credit reputation, and emotional and mental anguish, is ex-empt under Missouri law from inclusion in bankruptcy estate as unliquidated personal injury claims, although claim for actual and punitive damages arising from forgery is not personal and belongs to bankruptcy estate; allegation of some personal injuries as result of defendant's conduct will not con-vert nonpersonal cause of action into cause of action for personal injuries, but fact that underlying cause of action is nonpersonal should not subject claims for personal injuries sustained by debtor to creditors' claims. In re Shahzad (1992, BC ED Mo) 147 BR 34.

Discharged Chapter 7 debtor had interest in her pending workers' compensation cause of action, not in final agency approved contested case settlement, as of petition date so that interest in that cause of action could be claimed as exempt regardless of whether applicable Iowa exemption for workers' compensation would have encompassed settlement. In re Robinson (1999, BC SD Iowa) 246 BR 373.

Where bankruptcy debtor claimed exemptions in lawsuits with insurers, fact that lawsuits al-leged breach of contract did not preclude exemptions under 11 USCS § 522(d)(10)(E), (d)(10)(C), (d)(11)(E), mere fact that there was dispute as to ownership of assets did not change nature of ex-emption; only issue was whether exemptions were properly claimed in any resultant recovery that might arise from matter being litigated. Opel v Daly (In re Daly) (2005, BC MD Pa) 344 BR 304.

Page 342 11 USCS § 522

Where bankruptcy debtor claimed exemption under 11 USCS § 522(d)(10)(C), 522(d)(11)(E) in lawsuit with insurer to recover terminated disability benefits, pre-petition termination of insurance policy by insurer was immaterial since only issue was whether debtor possessed present right to re-ceive benefits provided for under policy. Opel v Daly (In re Daly) (2005, BC MD Pa) 344 BR 304.

Cause of action arising under Consumer Credit Protection Act, 15 USCS §§ 1601 et seq., comes within term "any property" which may be claimed as exempt by debtor under 11 USCS § 522(d)(5), and to extent that debtor has unused exemption under § 522(d)(5), it may be claimed against value of cause of action under Act. In re La Flamme (1981, BAP1) 14 BR 21, 7 BCD 1416, 4 CBC2d 1406, CCH Bankr L Rptr P 68300.

Phrase "any property" in 11 USCS § 522 does not refer only to property actually mentioned; to extent that debtor has any unused exemption under § 522(d)(5), it may be claimed against value of cause of action under Consumer Credit Protection Act. In re La Flamme (1981, BAP1) 14 BR 21, 7 BCD 1416, 4 CBC2d 1406, CCH Bankr L Rptr P 68300.

Under 11 USCS § 553, landlord of Chapter 7 debtors may set off claim for damage to rental property against debtor's claim for breach of rental contract, even though debtors have exempted their claim under California opt-out provisions or 11 USCS § 522. In re Pieri (1988, BAP9 Cal) 86 BR 208, 17 BCD 1016, 18 CBC2d 924, CCH Bankr L Rptr P 72554.

189. Damages and restitution

While purpose of Bankruptcy Code and state exemption statutes is to provide debtor with fresh start, quid pro quo for debtor's discharge is distribution of assets of debtor not needed for fresh start; since primary purpose of exemplary damages is to punish wrongdoing, such damages are not neces-sary for debtor's fresh start but instead result in windfall to debtor, exemplary damages are not ex-empt under either Colorado legislation or 11 USCS § 522. In re Keyworth (1985, DC Colo) 47 BR 966, 12 BCD 1137, CCH Bankr L Rptr P 70314.

Debtor, who was eligible for restitution under Civil Liberties Act of 1988 (50 USCS Appx §§ 1989 et seq.) because he had been born in relocation camp established in 1940's for purposes of in-terning individuals of Japanese ancestry during pendency of World War II, could not exempt his right to restitution payment from claims of bankruptcy trustee pursuant to 11 USCS § 522(b)(2), be-cause restitution was not exempt under provisions of Act itself, and restitution was not for injuries to person of debtor within meaning of state exemption statute. Ezaki v Bergquist (1992, DC Minn) 181 BR 385.

Term "any property" under 11 USCS § 522 is broad enough to include interest which debtor has in common law arbitration award on date he filed Chapter 7 petition so that debtor may claim as exempt under § 522 interest in arbitration award, which is represented by fund held by state court and may, therefore, avoid garnishment lien of judgment creditor in that fund. In re Laird (1980, BC ED Pa) 6 BR 273, 6 BCD 998, 2 CBC2d 1299.

Debtor's claim of exemption under 11 USCS § 522(d)(11)(E) of vacant lot is allowed where property is traceable to tort claim settlement, where trustee has adduced no evidence contradicting debtor's characterization of settlement as compensation for loss of future earnings, and where lot, and capital it represents, is necessary for debtor's future support as debtor's current income is limited to social security disability benefits and debtor has limited prospects for any immediate improve-ment in his situation. In re Miller (1984, BC DC NM) 36 BR 420, 11 BCD 673.

Page 343 11 USCS § 522

Although trustee did not object to Chapter 7 debtor's claimed $ 1,000 objection in proceeds of lawsuit, entire proceeds of lawsuit are not exempt, but rather, only $ 1,000 of proceeds are exempt, while all proceeds of lawsuit above $ 1,000 claim of exemption belong to trustee and may be used for benefit of debtor's creditors. In re Shoemaker (1992, BC ND Ala) 155 BR 552.

Should Chapter 7 debtor recover award for her unliquidated sexual harassment claim, any re-covery that she realizes for embarrassment, medical expenses, emotional distress, or similar harms to person is exempt from bankruptcy estate under 11 USCS § 522; however, any recovery she real-izes for loss of wages and punitive damages constitutes property interest and will be included in bankruptcy estate under 11 USCS § 541 for distribution to creditors. In re Kininson (1995, BC ED Mo) 177 BR 632, 67 BNA FEP Cas 381.

Should Chapter 7 debtors recover award for debtor husband's claims pending before state Hu-man Rights Commission for alleged discriminatory treatment and alleged retaliatory discharge, any recovery that he realizes for emotional distress or similar harms to person is exempt from bank-ruptcy estate under 11 USCS § 522; however, any recovery he realizes for loss of wages and puni-tive damages constitutes property interest and will be included in bankruptcy estate under 11 USCS § 541 for distribution to creditors. In re Barnes (1995, BC ED Mo) 177 BR 635.

Exemptions set forth in Georgia statute, O.C.G.A. § 44-13-100(a)(11)(A), were identical to those set forth in 11 USCS § 522(d)(11)(A); debtors were not permitted to exempt from bankruptcy estate money that was restitution for wrongful conversion of their property because they had not shown that restitution was being made to compensate them for future loss of earnings or for per-sonal injury. In re Seymour (2002, BC ND Ga) 285 BR 57.

190. Equipment

Farm equipment does not come under Texas personal property exemption statute; thus Chapter 7 debtor farmers cannot exempt equipment and avoid valid consensual lien on it. In re Rodgers (1986, ND Tex) 68 BR 17.

Amendment increasing Iowa opt-out exemption for farm equipment from $ 5,000 to $ 10,000 applies to all bankruptcy cases filed after effective date of amendment, regardless of when lien on farm equipment may have arisen; such application does not violate contracts or takings clause of Iowa or federal constitution because impairment of reasonable contractual expectations of lenders who made loans prior to amendment is justified by state's interest in coordinating value of farm equipment with rising market prices. In re Van Hove (1987, ND Iowa) 78 BR 917.

Heavy farming equipment exempted under spillover provision of 11 USCS § 522(d)(5) is eligi-ble for lien avoidance provisions of § 522(f). In re Falconer (1987, WD Mich) 79 BR 283.

Chapter 7 debtors may exempt mower-conditioner and hay baler pursuant to Wisconsin statute exempting mowers and hayloaders since these items serve same basic function as those items named in statute. In re Brzezinski (1985, BC WD Wis) 65 BR 336.

Chapter 7 debtors may claim exemption in farm equipment and animal feed and may avoid liens on same where: (1) at time of filing, debtors were in possession of animal feed and machinery, even though 17 days later at voluntary auction, machinery and feed were sold; and (2) debtor husband, who had been forced to take on another type of employment due to financial difficulties, testified that he had been farming his whole life and desired to farm again as soon as possible; exemption

Page 344 11 USCS § 522

rights are determined by circumstances present at time of filing and changes occurring after filing are not relevant. In re Brzezinski (1985, BC WD Wis) 65 BR 336.

Chapter 7 debtors' avoidance of liens on farm equipment exempt under Wisconsin law is not limited to $ 750 amount contained in 11 USCS § 522(d)(6). In re Brzezinski (1985, BC WD Wis) 65 BR 336.

Secured creditor's lien on debtor's combine extends to equipment added by debtor to keep com-bine running and improve its performance, in hope of using it in reorganization effort, before case was converted to Chapter 7, because debtor's additions did not improve value of combine beyond creditor's lien interest, which might have excepted those additions under 11 USCS § 522; rather, ad-ditions merely maintained value of collateral, as debtor is required to do under 11 USCS § 361, and did not improve creditor's position. In re Knaus (1986, BC WD Mo) 68 BR 8.

Wisconsin opt-out provision exempting livestock, implements, and automobiles is not limited to items specifically listed in exemption but applies to modern versions of equipment, such as culti-packer, bug killer, welder, drill press, small tools and equipment, blower, and manure spreader. In re Werner (1986, BC WD Wis) 79 BR 819.

Modern farm implements may be exempt, notwithstanding fact that they are not specifically de-scribed in state statute providing exemption for many obsolete farm implements, if they are succes-sors of antiquated exempt implements, and therefore debtor may avoid nonpossessory, nonpur-chase-money security interests in such property under 11 USCS § 522(f). In re Sutheimer (1986, BC WD Wis) 87 BR 64.

Semitractor is equipment included with Iowa opt-out exemption for implements and equipment reasonably related to normal farming operation; exemption for semitractor is not improper by rea-son of debtor's claiming as exempt multiple motive power sources including 2 trucks and 2 tractors in addition to semitractor. In re Erickson (1987, BC SD Iowa) 76 BR 136.

Debtor's Third Amended Schedule C listed 1993 Guthrie Trailer under heading, "Machinery, Fixtures, Equipment and Supplies Used in Business"; as such, 1993 Guthrie Trailer did not qualify as "real or personal property that debtor or dependent of debtor uses as residence" and was, there-fore, not properly claimed exempt under 11 USCS § 522(d)(1). In re Victor (2006, BC DC NM) 341 BR 775.

Court could properly conclude that irrigation equipment repossessed by creditors was not fixture attached to farmland found to be exempt as homestead under 43 USCS § 175, where equipment could be removed by loosening bolts and removing couplings; hence, if there was conversion when equipment was repossessed, right of action for conversion passed to trustee, such equipment having retained their character as personalty; also, bankrupt was properly denied claim for consequential damages allegedly resulting from liability to raise and harvest crops after repossession of irrigation equipment. Duff v Draper (1977) 98 Idaho 379, 565 P2d 572.

191. Income tax refunds

Income tax refunds are property of bankrupt for purposes of former 11 USCS § 110(a)(5) and no part of refunds would be exempt for purposes of former 11 USCS § 24 by reason of Consumer Credit Protection Act. In re Brissette (1977, CA9 Cal) 561 F2d 779, reh den (1977, CA9) 568 F2d 473.

Page 345 11 USCS § 522

Federal appeals court ruled that under state's opt-out statute, Mo. Rev. Stat. § 513.427, state resi-dents were restricted to bankruptcy exemptions available under state law and under federal statutes other than 11 USCS § 522(d), rejecting debtors' arguments that their anticipated federal income tax returns fell outside their Chapter 7 estates. Benn v Cole (In re Benn) (2007, CA8) 491 F3d 811, CCH Bankr L Rptr P 80979.

Debtor's tax refund is property of estate and debtor is under duty to turn it over to trustee and seek to have it exempted if he needs it for necessities of life; however, fact that debtor spent refund before turnover order is not dispositive of issue of whether discharge should be revoked. In re Guerrero (1983, ND Ind) 30 BR 463.

Exemption statute will not be extended to include class of persons not provided for by state leg-islature; hence, bankrupt divorced woman with two dependent minor children is not entitled, in lieu of homestead, to $ 500 exemption from federal income tax refund on income taxes withheld from her wages which would be exempt under state law to husband and wife living together, widow liv-ing with unmarried child, and every widow and every unmarried female having custody of minor child of deceased relative. In re Jaynes (1977, BC SD Ohio) 3 BCD 355.

Exemption for federal income tax refund and savings account is allowable under federal exemp-tions, but not under Idaho exemption law. In re Mertsching (1980, BC DC Idaho) 4 BR 519, 6 BCD 445, 2 CBC2d 301.

Under general exemption in any property provided for by 11 USCS § 522, debtor may exempt income tax refund and wage withholdings, to extent of $ 400 plus unused portion of homestead ex-emption, notwithstanding that such property would not be exempt under state law, where debtor chooses federal, rather than state exemption, since such exemption is not limited to property which would normally be exempt under state law. In re Nichols (1980, BC ED Mich) 4 BR 711, 6 BCD 597, 2 CBC2d 521, CCH Bankr L Rptr P 67595.

Bankruptcy Court will construe state statute, which allows debtor to exempt only $ 400 in tax refunds, but permits additional exemption of $ 400 in any property, as permitting exemption of total of $ 800 from tax refund, where such statute is ambiguous as to whether or not such exemption would be permissible. In re Smith (1980, BC SD Ohio) 5 BR 227, 6 BCD 644, CCH Bankr L Rptr P 67656.

Provisions of Ohio Statute, enacted under state's power under 11 USCS § 522 to opt out of fed-eral exemption scheme, which provide that exemption of up to $ 400 due debtor as tax refund is ap-plicable only in bankruptcy proceedings, and is not available to nonbankrupt debtor, is constitu-tional and in conformance with Bankruptcy Code. In re Bloom (1980, BC ND Ohio) 5 BR 451, 6 BCD 831, 2 CBC2d 838.

Exemption provision of 11 USCS § 522(d)(5) must be liberally construed and words selected by Congress "any property" mean just that and this largesse variously described as "spillover, grub-stake, wildcard, and unfilled bin" includes $ 3,500.00 in income tax refunds and $ 7,500.00 remain-der owing on contract for deed in case of joint debtors who are each entitled to federal exemption of $ 7,900.00; although it may be argued that stacking of 2 exemptions is unjust and windfall to debt-ors and for some debtors such benefits may be unwarranted to others same relief may be essential element of fresh start envisioned by Congress. In re Schuler (1981, BC DC Mont) 13 BR 478, 7 BCD 503.

Page 346 11 USCS § 522

Income tax refund of wife who has joined in joint petition of bankruptcy with husband, which is construed as community property under state law, becomes part of consolidated estate in bank-ruptcy, and husband may therefore claim entire amount of refund as exempt property under 11 USCS § 522(d)(5); therefore, trustee may not require that each debtor exempt one-half of refund in order that trustee may challenge validity of wife's state law exemption which wife had claimed for same refund on joint schedule. In re Barnes (1981, BC ND Tex) 14 BR 788, 8 BCD 290, CCH Bankr L Rptr P 68419.

Debtor may exempt income tax refund held in custody of trustee under 11 USCS § 522 where debtor failed to disclose income tax refund on original petition and where there has not been any significant reliance by trustee or creditor in failure to claim income tax refund and evidence dis-closes no change of position by any party in interest on failure to claim exemption prior to date it was claimed. In re Schmidthuber (1982, BC DC Neb) 18 BR 129.

Where under state law spouse has no interest in tax withholdings and refunds derived solely from other spouse's wages, spouse, codebtor in Chapter 7 proceeding, is not entitled to claim tax refund as exempt under 11 USCS § 522 notwithstanding fact debtors filed joint tax return. In re Honomichl (1987, BC SD Iowa) 82 BR 92, 16 BCD 1288.

Any part of Chapter 7 debtors' state and federal income tax refunds under control of "friend of the court" due to debtor husband's failure to comply with order requiring him to pay confinement costs of birth of child are not subject to debtor's right to exemption under 11 USCS § 522, even though income tax refund is part of debtor's estate and is generally exempt asset since exemptions do not protect property from liability for child support as described under 11 USCS § 523(a)(5). In re Rouse (1992, BC WD Mich) 145 BR 546.

Chapter 7 debtor may not exempt 75 percent of his tax refunds due from IRS and state tax commission which arose from moneys withheld from his wages/earnings in 90 days prior to bank-ruptcy filing pursuant to Oklahoma statute exempting 75 percent of all current wages or earning earned during last 90 days because tax refunds are not "wages" earned. In re Miles (1993, BC ND Okla) 153 BR 72, 28 CBC2d 1431.

Chapter 7 debtor's federal tax refund is not exempt under Florida law, and therefore trustee is entitled to turnover of refund, where pursuant to Florida statute, once debtor's wages are paid over to Internal Revenue Service, moneys are no longer properly identified as wages, and where exemp-tion only applies to bank accounts, not to moneys traceable to wages. In re Lancaster (1993, BC SD Fla) 161 BR 308, 30 CBC2d 390.

Where husband and wife were both debtors in bankruptcy proceeding and had history of paying household expenses through joint account and filing joint tax returns, tax refund that was due to debtors was held by them jointly for purposes of how it should be treated in bankruptcy estate, and debtors could aggregate exempt portion of refund. In re Hejmowski (2003, BC WD NY) 296 BR 645, 92 AFTR 2d 6027.

Trustee's objection, 11 USCS § 522(1), to debtor's claim that tax refund was exempt property under Colo. Rev. Stat. § 13-54-102(1)(o) was sustained, and trustee's motion for turnover of prop-erty was granted; tax refund based in part on credit for adoption expenses, 26 USCS § 23(b)(4), was not equivalent of earned income tax credit refund, 26 USCS § 32. In re Walsh (2003, BC DC Colo) 298 BR 894, 92 AFTR 2d 6132.

Page 347 11 USCS § 522

In matter of first impression in state, bankruptcy court found that pursuant to 735 Ill. Comp. Stat. 5/12-1001(g)(1) of state personal property exemption statute, additional federal child tax credit under 26 USCS § 24, refunded to taxpayers of limited financial means, could be claimed exempt in bankruptcy as public assistance benefit; debtor's claim of exemption in child tax credit was there-fore allowed as to additional child tax credit claim and denied as to general child tax credit, and trustee's motion for turnover of refunds was granted. In re Koch (2003, BC CD Ill) 299 BR 523, CCH Bankr L Rptr P 78944, 92 AFTR 2d 6410.

Bankruptcy court held that non-refundable federal income general child tax credit under 26 USCS § 24 could not be claimed exempt as public assistance under 735 Ill. Comp. Stat. 5/12-1001(g)(1) where key factor was refundability of credit; if credit was not refundable, further inquiry was not necessary and general child tax credit, which only reduced debtor's tax liability, could not be claimed as exempt. In re Koch (2003, BC CD Ill) 299 BR 523, CCH Bankr L Rptr P 78944, 92 AFTR 2d 6410.

Where debtor claimed tax refunds as exempt under Cal. Code Civ. Proc. § 703.140(b) and IRS failed to object to claimed exemption within applicable time period in Fed. R. Bankr. 4003(b), IRS was barred from challenging validity of exemption; accordingly, IRS was not granted relief from automatic stay of 11 USCS § 362 to permit it to offset, pursuant to 11 USCS § 553 and 26 USCS § 6402(a), pre-petition income tax liabilities owed by debtor against pre-petition income tax refunds. In re Gould (2008, BC ND Cal) 389 BR 105.

192.--Based upon earned income tax credit

Plain meaning of language of Ala. Code § 38-4-8, standing alone, indicates that federal earned income tax credit payments, which constitute public assistance payments to needy persons, shall not pass to trustee in case of bankruptcy as part of state's opt-out exemptions under 11 USCS § 522(d); moreover, conclusion that federal earned income tax credit payments constitute "public assistance" for purposes of Ala. Code § 38-4-8 exemption is unaffected by state-only limitation in Ala. Code § 38-4-1. Hamm v James (In re James) (2005, CA11 Ala) 406 F3d 1340, CCH Bankr L Rptr P 80268, 2005-1 USTC P 50367, 95 AFTR 2d 2122, 18 FLW Fed C 445.

Federal earned-income tax credit constituted "public assistance" which could be exempted under Alabama statute. Brasher v McGregor (In re Brasher) (2000, MD Ala) 253 BR 484, CCH Bankr L Rptr P 78304.

Debtor was not entitled to exemption of portion of her income tax refund attributable to federal earned income tax credit since Ohio exemption provision, which once included "poor relief pay-ments," has been drastically narrowed and earned income tax credit did not fall within it. In re Ku-rilich (1996, BC ND Ohio) 199 BR 161.

Pursuant to 11 USCS § 522(b) Illinois has opted out of federal schedule of exemptions, and earned income credits are exempt as "public assistance benefit" under Illinois law, and Chapter 7 Trustee's objection to exemption of debtor's earned income tax credit is denied. In re Brockhouse (1998, BC CD Ill) 220 BR 623.

Payments due on Chapter 7 debtor's anticipated income tax refunds based on earned income credits, withholding, and dependent and child care credits were property of estate and were not ex-empt under New York's exemptions for $ 2,500 cash or for social security benefits, unemployment compensation, or local public assistance benefits; whether payments were truly tax refunds or pay-

Page 348 11 USCS § 522

ment of earned income or other credits was inconsequential. In re Garrett (1998, BC WD NY) 225 BR 301.

Chapter 7 trustee's objection to claimed exemption was sustained because debtor's state and fed-eral tax refunds under IRS Earned Income Credit and Minnesota Department of Revenue Working Family Credit public assistance programs did not constitute local public assistance benefits for pur-poses of 11 USCS § 522(d)(10)(a). In re Espey (2006, BC DC Minn) 347 BR 357.

193. Inheritances

Chapter 7 debtor may exempt property which he inherited postpetition from his mother; under 11 USCS § 522(b), debtor may select exempt property from "property of the estate" and under 11 USCS § 541, "property of the estate" includes property inherited within 180 days after petition is filed. In re Magness (1993, BC ND Tex) 160 BR 294.

Property to which debtor became entitled as heir on death of his mother became property of es-tate pursuant to 11 USCS 541(a)(5)(A), and debtor can claim exemption for such "after-acquired" property if criteria for exemption is met. In re Meachen (1998, BC DC Colo) 217 BR 877, 15 Colo Bankr Ct Rep 231, 39 CBC2d 757.

194. Insurance proceeds from loss of exempt property

Pennsylvania statute permitting exemption of net amount payable under any accident or disabil-ity insurance does not apply to debtor's prospective tort judgment despite fact that such judgment might be paid by tort defendant's insurance carrier; thus, Chapter 7 debtors' potential recovery for slip and fall in retail store, valued by debtors at $ 500,000 to $ 750,000, could not be exempted since (1) exemption at issue is insurance exemption, not personal injury or tort exemption, and pol-icy proceeds will be paid to retailer rather than debtors, (2) debtors have no "property or other rights" as required for proceeds to be exempt under Pennsylvania statute, and (3) it is illogical as well as potentially disruptive of bankruptcy process for right to exemption under state law to turn on possibility that tort judgment will be paid by defendant's insurer which approach would enable tort defendant to defeat exemption by deciding to pay any judgment out of its own pocket. Kollar v Miller (In re Kollar) (1999, CA3 Pa) 176 F3d 175.

Every item of clothing, furniture, appliances, and other personal property to which debtors were entitled to have exemption is protected by debtors' insurable interest in insurance proceeds received in payment for fire, smoke, and water damage to those items; debtors' insurable interest is limited only by maximum dollar amount found in state exemption statute. In re Taylor (1982, BC SD Ohio) 23 BR 539.

Debtors are entitled to proceeds from their fire insurance policy in compensation for loss of their exempt property; since debtors had property available for exemptions at time they filed bankruptcy petition, fire insurance proceeds of that destroyed property are also exempt. Lewis v Thompson (1983, BC MD Pa) 28 BR 351.

Although Chapter 7 debtor exempted promissory note and second deed trust which gave debtor insurable interest in real estate damaged by fire, $ 6,400 payable to Chapter 7 debtor as loss payee under fire insurance policy is not also exempted under state opt-out legislation pursuant to 11 USCS § 522 since it was not specifically listed and allowance as "proceeds" of promissory note and second deed of trust would produce inequitable windfall for debtor; neither could payment be exempted

Page 349 11 USCS § 522

under state "wild-card" exemption where such exemption had already been exhausted. In re Crownover (1984, BC ED Mo) 43 BR 22, 3 BAMSL 1266.

Proceeds of casualty insurance paid for loss of Chapter 7 debtor's household furnishing de-stroyed in postpetition fire are exempt to extent of opt-out state law exemption, and debtors are not bound by statement of value of such property made in their petition at time of filing, but may re-cover all proceeds subsequently recovered within limits of state exemption. In re Rutherford (1986, BC WD Mo) 73 BR 665.

Proceeds of fire insurance due for destruction of property occupied and used as homestead qual-ify for exemption from levy and sale under Florida opt-out exemption law as long as property quali-fies for homestead status at time of filing of bankruptcy case; Chapter 11 debtor may not claim homestead exemption in fire insurance proceeds for mobile home that was located in Tennessee un-der Florida exemption statute that requires that homestead property be located in Florida. In re Sanders (1987, BC MD Fla) 72 BR 124.

Chapter 7 debtor may not exempt fire insurance proceeds under 11 USCS § 522, even though assets covered by insurance were exempted by debtor without objection from trustee or other par-ties, because (1) debtor did not claim contingent property right in fire insurance as exempt on schedules and (2) debtor's concealment of policy and other assets prevented trustee from making any inquiry into value of debtor's assets. In re Fox (1987, BC WD Pa) 80 BR 753.

Court will not make Chapter 13 debtor's insurance proceeds obtained as result of destruction of debtor's car payable to secured creditor pursuant to 11 USCS § 522(b), but rather, based on equities of case, proceeds will be made payable to debtor where debtor desires to purchase new car with such proceeds to replace destroyed one, because vehicle is essential for debtor's plan to succeed, and creditor's lien can readily attach to new vehicle. In re Woods (1989, BC WD Va) 97 BR 850.

Debtor's interest in unliquidated tort claim is distinct from interest in insurance proceeds so that where debtors had not filed suit by date of their bankruptcy filing or by date of conversion of their case from Chapter 13 to Chapter 7, they had no right to payment under insurance policy and thus could not exempt insurance proceeds. In re Kollar (1998, BC ED Pa) 218 BR 349, 39 CBC2d 956, affd (1998, ED Pa) 223 BR 288, CCH Bankr L Rptr P 77774, affd (1999, CA3 Pa) 176 F3d 175.

Bankruptcy court gave full faith and credit to state court's grant of summary judgment in favor of secured lender awarding it insurance proceeds from debtor's wrecked car; court denied debtor's attorney's claim for lien against part of proceeds. In re Watkins (2003, BC ND Ill) 298 BR 342.

195. Licenses

License of debtor as contract motor carrier was not exempt where state act in specifying types of exempt property failed to mention licenses. Barutha v Prentice (1951, CA7) 189 F2d 29, cert den (1951) 342 US 841, 96 L Ed 635, 72 S Ct 69.

In Pennsylvania bankrupt is not entitled to exemption out of proceeds of liquor license. In re Myers (1900, DC Pa) 102 F 869.

Corporation commission permits, indispensable to operation of bankrupt's trucking business, are exempt under Kansas law as tangible means necessary in carrying on bankrupt's business; and bank-rupt's transferring permits from proprietorship to corporation does not affect exempt status where bankrupt intends to remain in same business. In re Gardner (1977, BC DC Kan) 3 BCD 706.

Page 350 11 USCS § 522

Liquor license is not subject to exemption under 11 USCS § 522(d)(6) on ground that license confers right or privilege to transact type of business and is not professional book or tool or imple-ment by means of which acts involved in conduct of trade or business are performed; but such right or privilege is property under 11 USCS § 522(d)(5) subject, however, to power of state to regulate, to approve or disapprove transfer of, and to revoke. In re Stubenhofer (1983, BC WD Pa) 31 BR 820.

Rights of debtors in liquor license are subject to their claim for exemption under 11 USCS § 522(d)(5) free and clear of any security interest. In re Stubenhofer (1983, BC WD Pa) 31 BR 820.

Liquor license is not subject to exemption under 11 USCS § 522(d)(6); but rights of debtors in liquor license are subject to their claim for exemption under 11 USCS § 522(d)(5) free and clear of any security interest. In re Caylor (1983, BC WD Pa) 31 BR 821.

Debtor's motion for avoidance of judicial lien under 11 USCS § 522(f)(1) was granted because creditor did not dispute that its lien was obtained by levy under Minn. Stat. § 551.06, subd.9 and its existence impaired exemption that debtor otherwise could have taken as to funds. In re McGovern (2003, BC DC Minn) 295 BR 897.

196. Money or accounts

Cash exemption to which bankrupt is entitled under law of state of domicile may not be applied to payment of claims for taxes filed by state and city even though exemption can be reached by bankrupt's tax creditors through other proceedings. Stein v Bostian (1943, CA8 Mo) 133 F2d 586.

Debtor's holdings of cash (i.e., actual U.S. currency) was "intangible" asset for purposes of state exemption statute, Ind. Code § 34-55-10-2. In re Oakley (2003, CA7 Ind) 344 F3d 709, 41 BCD 272, CCH Bankr L Rptr P 78922.

Exemption for federal income tax refund and savings account is allowable under federal exemp-tions, but not under Idaho exemption law. In re Mertsching (1980, BC DC Idaho) 4 BR 519, 6 BCD 445, 2 CBC2d 301.

Cash may be exempted under 11 USCS § 522(d)(5) which provides that debtor may take his ex-emption in "any property"; had Congress intended to exclude cash from property which debtor may claim as exempt it would have done so by express verbiage and absent that express language com-mon sense dictates that phrase "any property" includes cash. In re Taylor (1981, BC ED Pa) 8 BR 578.


Where debtors transferred funds into escrow account prior to filing petition which were to be held by counsel to satisfy counsel's prepetition legal fees, debtors, by virtue of transfer, no longer had interest in that part of fund allocated to payment of prepetition debts and therefore had no al-lowable claim of exemption under 11 USCS § 522(d)(5). In re Darke (1982, BC ED Mich) 18 BR 510, 8 BCD 1059.

If state court in forfeiture actions finds money found in course of arrest of debtor to have been fruit or instrumentality of crime, debtor will not be allowed to exempt money used or intended to be

Page 351 11 USCS § 522

used in illegal drug trade. In re Ryan (1983, BC DC Md) 32 BR 794, 10 BCD 1377, CCH Bankr L Rptr P 69391.

Joint debtors who had filed Chapter 13 petition and had subsequently converted their case to Chapter 7 will be permitted to exempt $ 1,000 they had paid to Chapter 13 trustee prior to conver-sion under 11 USCS § 522(d)(5). In re Wanderlich (1984, BC WD NY) 36 BR 710, 11 BCD 467.

Under Colorado exemption legislation made applicable pursuant to 11 USCS § 522, proceeds from sale of exempt household goods are not likewise exempt; only exception is that proceeds from sale of homestead are exempt for one year. In re Gillespie (1984, BC DC Colo) 41 BR 810 (criti-cized in In re Capps (2000, BC DC Neb) 251 BR 73, 36 BCD 128).

Bond fund is not "cash" as defined by New York law and therefore cannot be claimed as exempt property. In re Doyle (1984, BC WD NY) 42 BR 615.

Debtors may not claim exemptions pursuant to 11 USCS § 522 in funds they paid to trustee un-der provisions of Chapter 13 plan before conversion to Chapter 7; therefore sums paid to trustee prior to conversion pursuant to Chapter 13 plan in satisfaction of bank's lien must be paid to bank. In re Williams (1985, BC WD Pa) 52 BR 15.

Bonus money, designated by Chapter 7 debtor's employer to be distributed at future date certain to debtor, does not come within definition of cash in New York's exemption statute; therefore debtor may not amend his schedules to include exemption when designation by employer took place prior to filing of debtor's petition, but distribution and actual receipt of money by debtor was subse-quent to filing. In re Joiner (1985, BC WD NY) 52 BR 41.

Future installments due debtor on mortgage do not constitute cash for purposes of New York debtor and creditor law and may not be claimed as exempt property under 11 USCS § 522. In re Abdo (1986, BC ND NY) 65 BR 56.

California's exemption of credit union share accounts is not independent exemption that shields unlimited amount of money from bankruptcy trustee, but rather credit union share accounts are ex-empt only to extent that they can be traced to otherwise available exemption under Exemption Chapter of California Code of Civil Procedure. In re Petruzzelli (1992, BC ED Cal) 139 BR 241, 92 Daily Journal DAR 10252.

Chapter 7 debtors, having claimed checking and dairy accounts as exempt in their petition, should have opportunity to create interest in accounts and avoid judgment creditor's lien thereon pursuant to either 11 USCS § 522(f) or § 522(h) and, therefore, creditor's objection to debtors' claim of exemption in accounts pursuant to Bankruptcy Rule 4003(b), based on assertion that debtors have no interest in accounts, is denied; in event that debtors fail to create interest in accounts by avoiding creditor's judgment lien, creditor is granted relief from automatic stay pursuant to 11 USCS § 362(d) and also to have trustee abandon accounts pursuant to 11 USCS § 554(b). In re Shurtleff (1994, BC ND NY) 170 BR 54, 25 BCD 1477.

Debtor's scheduled property was not held as tenants by entireties and thus exempt from process under applicable Florida law since third party's authorization to execute checks of brokerage firm account was inconsistent with essential unity of possession or control, and bank account was titled not just in names of debtor and his spouse but four different names. In re Planas (1996, BC SD Fla) 199 BR 211, CCH Bankr L Rptr P 77057, 10 FLW Fed B 39 (criticized in In re Campbell (1997, BC

Page 352 11 USCS § 522

MD Fla) 214 BR 411, 11 FLW Fed B 120) and (criticized in In re Monzon (1997, BC SD Fla) 214 BR 38, 38 CBC2d 1469, 11 FLW Fed B 113).

Prejudgment garnishment order obtained by creditor against debtor in state court civil action is debt secured by lien under 11 USCS § 522(c)(2) since creditor obtained lien under Ohio law at time order was served upon bank, and creditor's interest in debtor's bank account is superior to debtor's claim of exemption. In re Flynn (1999, BC ND Ohio) 238 BR 742.

Credit union's lien upon deposit accounts could not be avoided under 11 USCS § 522(f), regard-less of whether credit union was federal credit union or state credit union; if credit union was fed-eral credit union, then its lien upon deposit accounts could not be avoided under § 522(f) because possessory security interests could not be avoided under § 522(f)(1)(B) and nonpossessory security interest in money or deposit account with financial institution could not be avoided under § 522(f)(1)(B) and, if credit union were state credit union, then Pennsylvania law clearly granted to credit union statutory lien on deposit accounts and statutory liens, in contrast to certain judicial liens and particular security interests, are not avoidable under § 522(f)(1). Muhammad v Pittsburgh Teachers Credit Union (In re Muhammad) (2004, BC WD Pa) 314 BR 546.

Nonpossessory, nonpurchase-money security interest in money or deposit account with financial institution may not be avoided under 11 USCS § 522(f)(1)(B) because neither money nor deposit accounts are among types of property listed in § 522(f)(1)(B)(i)-(iii). Muhammad v Pittsburgh Teachers Credit Union (In re Muhammad) (2004, BC WD Pa) 314 BR 546.

197. Motor vehicles

Under opt-out provision of 11 USCS § 522(b)(1), effect of Illinois personal property exemption allowing Chapter 7 debtor to exempt $ 1,200 in his automobile, and $ 2,000 in "any other property," is to allow debtor to stack exemptions so that debtor can exempt any of his equity in automobile ex-ceeding $ 1,200. In re Barker (1985, CA7 Ill) 768 F2d 191, CCH Bankr L Rptr P 70653.

In Massachusetts statute which provides for exemption for "an automobile necessary for per-sonal transportation or to secure or maintain employment, not exceeding $ 700 in value," statutory phrase "not exceeding $ 700 in value" is ambiguous with respect to whether automobile exceeding $ 700 in fair market value, but in which bankrupt has equity of less than $ 700, is exempt; District Court will construe state statute as requiring that debtor be required to turn automobile over to trus-tee for liquidation, but as permitting debtor benefit of $ 700 exemption with which to purchase an-other vehicle. Levin v Mauro (1977, DC Mass) 425 F Supp 205.

Chapter 7 joint debtors who have each claimed $ 1,200 exemption for motor vehicle in his or her name are not also entitled to apply separate $ 2,000 exemption provided under Illinois law for "any other property" to same vehicles since reference to any other property in Illinois statute means any property not specifically exempted in any other section. In re Pastorek (1983, CD Ill) 33 BR 406.

Under California law providing that debtor is entitled to automobile exemption of $ 500 if automobile is worth $ 1,000 or less, only when automobile is worth $ 1,000 or less is debtor entitled to keep up to first $ 500 over and above liens. In re Stivers (1975, BC SD Cal) 1 BCD 524.

Where law of state of bankrupt's domicile permits bankrupt to exempt from seizure $ 1,000 of his personal property plus clothing but where bankrupt claims car subject to security interest, in which he has no equity, car belongs to secured party. In re Walker (1976, BC DC NJ) 2 BCD 1177.

Page 353 11 USCS § 522

State statute providing exemption for one automobile not exceeding $ 1,000 in value is intended to provide means of transportation for debtor and debtor may select motorcycle as his means of transportation. In re McGray (1977, BC ED Wis) 3 BCD 988, CCH Bankr L Rptr P 66645.

Under Iowa statute granting debtor who is farmer right to exempt team and harness, and wagon or other vehicle, Bankruptcy Court will permit debtor to exempt one vehicle which is source of mo-tive power, rather than team and harness, together with one wagon or other vehicle suitable for car-rying goods, and will permit debtor to choose between tractor and wagon, or truck and trailer, but will not permit exemption of both. In re Hahn (1980, BC SD Iowa) 5 BR 242, 2 CBC2d 761.

Provisions of 11 USCS § 522 permitting debtor to claim as exempt up to $ 400 interest in any property, plus any portion of unused homestead exemption, may be applied by debtor to totally ex-empt automobile with value in excess of otherwise allowable exemptions, where such spillover ex-emption exceeds remaining value of automobile. In re Dubrock (1980, BC WD Ky) 5 BR 353, 6 BCD 771, 2 CBC2d 776.

Debtor cannot place mobile home within state homestead exemption statute and automobile within state motor vehicle exemption statute for purposes of claiming large exemptions and addi-tionally, for purposes of avoiding nonpossessory, nonpurchase money lien, try to fit these items within purview of 11 USCS § 522 by claiming they are held primarily for personal or family use; neither debtor's mobile home nor automobile are types of exempt property subject to avoidance un-der § 522 and creditor's liens on debtor's mobile home and automobile are good and valid liens to extent that they do not impair debtor's interest in property as provided by § 522. In re Moore (1980, BC SD Ohio) 5 BR 669.

Minnesota statute allowing debtor to exempt motor vehicle to extent of value not exceeding $ 2,000 applies to equity debtor has in automobile and not to automobile's fair market value. In re Setley (1981, BC DC Minn) 11 BR 106.

Automobile repossessed prior to filing of bankruptcy petition is not property of the estate as de-fined by 11 USCS § 541(a)(1) from which the debtor may claim an exemption pursuant to 11 USCS § 522(b)(1) and, as such is not subject to turnover pursuant to 11 USCS § 542(a). In re Campbell (1982, BC DC SC) 20 BR 42.

Fact that trustee's lien on and title to vehicle is superior to any claimed lien of creditor does not make vehicle available to debtors as exempt from claims of creditors where debtors prevented per-fection of creditor's prebankruptcy lien by obtaining title without notation of lien and by failing to return title to creditor after having vehicle released from lien in one state in order to have it titled in another state. Lincoln Nat'l Bank v Conti (1982, BC SD Ohio) 27 BR 175.

Under Illinois law, husband and wife debtors may exempt up to value of $ 2,400 in any one ve-hicle they both own or each debtor may exempt up to value of $ 1,200 in vehicle owned by debtor claiming exemption, but debtors may not claim $ 2,400 exemption in truck which they own and $ 1,500 exemption in automobile which they own. In re Johns (1984, BC CD Ill) 39 BR 488.

Subdivision of Illinois exemption law permitting debtors to claim exemption in "any other prop-erty" refers to property not specifically exempted in any other subsection of exemption statute, and since motor vehicles are specifically exempted under one subsection of statute, debtors may not claim exemption for automobile under "any other property" subdivision of statute. In re Johns (1984, BC CD Ill) 39 BR 488.

Page 354 11 USCS § 522

Debtor is required to use Ohio exemption statute, extension of which is not violative of Ohio constitution's one issue rule, and automobile exemption is therefore $ 1400 rather than fair market value under 11 USCS § 522(d). In re Brown (1984, BC SD Ohio) 48 BR 19.

Only transfer by debtor which, under 11 USCS § 522(g)(1)(A), bars exemption rights is volun-tary transfer of debtor's property itself; thus creditor bank cannot defeat debtors' exemption rights under 11 USCS § 522(d)(2) of $ 1200 in motor vehicle by fact that debtors gave bank security inter-est in vehicle. In re Hawley (1985, BC WD Pa) 54 BR 49.

Where Chapter 7 debtor executes document waiving vehicle exemption and releasing motor home to sheriff's office for levy to satisfy judgment on writ of execution, and sheriff levies on prop-erty on same date, debtor's withdrawal of waiver on following day is ineffective to render waiver inoperative; even if withdrawal were effective, debtor waives vehicle exemption in motor home by applying motor vehicle exemption to another vehicle when filing bankruptcy. In re Hoffner (1986, BC DC NM) 69 BR 70, CCH Bankr L Rptr P 71600.

Debtors may not exempt nonmotorized trailer as passenger car or light truck or under alternative provision of Texas exemption. In re Gibson (1987, BC ND Tex) 69 BR 534.

Montana statute limiting exemption for vehicle to $ 1,000 in value cannot be exceeded nor split between more than one vehicle, despite fact debtor's exempt vehicle is worth only $ 356. In re Stanhope (1987, BC DC Mont) 76 BR 165.

Where undisputed value of Chapter 7 debtor's vehicle is less than $ 2,400 and there are no valid or existing liens or encumbrances on vehicle asserted by other creditors, vehicle is exempt property under 11 USCS § 522 and New York law. In re Bagnato (1987, BC SD NY) 80 BR 655, CCH Bankr L Rptr P 72137.

Chapter 7 debtors are not entitled to $ 1,000 exemption in automobile as provided for by Ohio law whether trustee is successful or unsuccessful in preference action against one debtor's father; in event trustee is successful in anticipated adversary proceeding against one debtor's father to avoid father's security interest in automobile as preferential transfer under 11 USCS § 547, it is clear that debtors will not be eligible to claim exemption in automobile, since pursuant to 11 USCS § 522(g) debtors may not claim exemption in property "if the transfer avoided was a voluntary transfer of the debtor;" if trustee's efforts to avoid lien as preferential transfer are unsuccessful, debtors still are not entitled to exemption, where amount of father's lien exceeds value of motor vehicle, and debtors' exemptions under Ohio law are limited to property interests not subject to pre-existing liens. In re Baumgarten (1993, BC SD Ohio) 154 BR 66, 28 CBC2d 1650, CCH Bankr L Rptr P 75300.

Chapter 7 debtor husband is not entitled to claim $ 2,400 exemption in motor vehicle, where ve-hicle is titled solely in name of wife, since exclusive title in debtor wife precludes debtor husband from claiming motor vehicle exemption; to allow non-owner to claim exemption in property would create anomalous situation whereby husband could place property in name of wife to keep it beyond reach of his creditors and then reclaim it for bankruptcy purposes, again putting it beyond reach of his creditors. In re Miller (1994, BC SD NY) 167 BR 782, 31 CBC2d 339.

Chapter 7 debtor is entitled to exempt $ 1,000 equity in automobile, where debtor is not barred from claiming benefit of Florida statute merely because he incurred portion of his unsecured debts before effective date of statute, since phrase "occurring on or after October 1, 1993" modifies terms

Page 355 11 USCS § 522

"attachment, garnishment, or other legal process." In re Adkins (1995, BC MD Fla) 176 BR 58, 8 FLW Fed B 301 (criticized in In re Puff 'n Stuff (1995, BC MD Fla) 183 BR 959, 9 FLW Fed B 9).

Debtor's automobile cannot be exempted under state law as professionally prescribed health aid unless it is uniquely suited and principally used for diagnosis, cure, mitigation, treatment or preven-tion of disease, or for purpose of affecting any structure or function of body. In re Driscoll (1995, BC DC Or) 179 BR 664.

Where Chapter 7 debtors claimed $ 3,000 exemption in motor vehicle, which was statutory maximum for joint exemption under Arizona statute, but trustee concluded vehicle was worth minimum of $ 6,700, trustee will be ordered to sell vehicle and give debtors $ 3,000 from proceeds, notwithstanding that trustee's objection to exemption was untimely; since debtors did not use term "100 percent exempt," or other language, to provide warning or red flag to trustee, their recovery will be limited to precise statutory amount they claimed as exempt and remaining proceeds will re-main part of bankruptcy estate for distribution to creditors. In re Jackson (1995, BC DC Ariz) 194 BR 867.

All-terrain vehicle owned by Chapter 7 debtors qualified as "motor vehicle" for purposes of Missouri exemption even though it was not lawful for vehicle to be operated on public highway ex-cepted certain specified instances and even though this type of vehicle is, as general rule, used for recreational purposes. In re Moore (2000, BC WD Mo) 251 BR 380.

Where debtors in Chapter 7 bankruptcy claimed boat as exempt asset under Rhode Island law, R.I. Gen. Laws § 9-26-4(13), which provided exemption for "motor vehicle," bankruptcy court held that "motor vehicle" as used in R.I. Gen. Laws § 9-26-4(13) referred to vehicles that traveled on land; if Rhode Island General Assembly intended to include things marine in exemption statute, it would have said so, rather than being silent on subject. In re Barbera (2002, BC DC RI) 285 BR 355.

Granting of lien to bank by debtors was transfer which was avoided by Chapter 7 trustee; trustee "recovered" equity that had been encumbered by bank's lien for benefit of estate, so debtors could not claim exemptions in that equity, but according to schedules, car was worth $ 20,575, and bank's debt was $ 18,840; accordingly, since there was no contrary evidence as to debt due bank, trustee recovered only $ 18,840 for benefit of estate and remainder represented equity that existed regard-less of trustee's powers and was exemptible. In re Hicks (2006, BC WD Mo) 342 BR 596.

Trustee's objection to debtor's claim of state automobile exemptions was sustained because ex-emptions were not available when debtor was not domiciled in state on date she filed bankruptcy petition; however, debtor was entitled to federal automobile exemption of $ 2,950 under 11 USCS § 522(d)(2). In re Crandall (2006, BC MD Fla) 346 BR 220, 19 FLW Fed B 352.

Where debtors' attempted sale of their vehicle was voluntary, once Chapter 7 Trustee recovered vehicle, debtors were not entitled to exemption in vehicle. In re Woods (2008, BC DC Idaho) 386 BR 758.

Defendant's claim that his automobile is exempt and is therefore not subject to seizure on behalf of plaintiff's replevin action is without merit where defendant's exemption claim shows that he has no interest in automobile; 11 USCS § 522(b)(2) indicates that it does not grant exemption to auto-mobile, but rather to debtor's interest in automobile, provided that it does not exceed $ 1200. Ma-rine Midland Bank, N. A. v Venton (1980) 104 Misc 2d 599, 428 NYS2d 615.

Page 356 11 USCS § 522

198. Spousal support

Chapter 7 debtor wife may, under Virginia opt-out provisions, exempt 50 percent of tax refund as homestead exemption despite fact that wife did not earn 50 percent of income reported on return. Bass v Hall (1987, WD Va) 79 BR 653.

Congress intended for 11 USCS § 522(d)(10)(D) to exempt only those monies, and potentially other equivalent awards, that concern general spousal sustenance. Harbaugh v Sweet (In re Har-baugh) (2001, ED Mich) 257 BR 485, 45 CBC2d 1447, judgment entered (2001, ED Mich) 2001 US Dist LEXIS 4169.

11 USCS § 522(d)(10)(D) exempts any payments from bankruptcy estate that are intended by parties or state court to support spouse, and that are, in judgment of bankruptcy court, reasonably necessary for such purpose. Harbaugh v Sweet (In re Harbaugh) (2001, ED Mich) 257 BR 485, 45 CBC2d 1447, judgment entered (2001, ED Mich) 2001 US Dist LEXIS 4169.

Under Pennsylvania conflict of laws rules, New Jersey law applies to determine whether Chap-ter 7 debtor and his wife may exempt mortgage and note on real estate located in New Jersey that is held as tenants by entirety, where documents were negotiated and executed in New Jersey, mort-gage is recorded there, payments are made from New Jersey, and creditor is New Jersey corpora-tion; debtor may not exempt mortgage because New Jersey condones process upon entireties prop-erty by individual spouse's creditors and because property is presently paid for in monthly mortgage payments and is easily susceptible to partition, and thus creditor cannot cause injury to nondebtor spouse by proceeding against debtor's interest thereon. In re Goldstein (1986, BC WD Pa) 66 BR 909.

Obligation of Chapter 7 debtor's former spouse to pay debtor $ 150,000 lump-sum is alimony, rather than property settlement, for purposes of determining whether debtor may be exempt sum under 11 USCS § 522(d)(10)(D) where state-court judge clearly allowed debtor's spouse to retain property that, for most part, was in his name prior to marriage, and lump-sum alimony provision was to supplement periodic alimony in assisting debtor with her continuing mental illness and need to maintain separate home for herself; furthermore, lump-sum amount is reasonably necessary for debtor's support, taking into account debtor's mental illness, her history of hospitalization and like-lihood of rehospitalization, her need for daily medication, her present deficit income position, and her lack of assets. In re Joseph (1993, BC DC Conn) 157 BR 514, 29 CBC2d 691, CCH Bankr L Rptr P 75401.

Chapter 7 debtors may not exempt real property transferred to debtor wife by her former hus-band in satisfaction of past due child support under Idaho statute exempting money or personal property received for alimony, maintenance, or support where transfer of real property was in satis-faction of past due child support, not present or future child support, and is nothing more than reim-bursement of funds already expended. In re Russell (1994, BC DC Idaho) 163 BR 584.

Equitable distribution of $ 10,550, payable at $ 350 per month, is clearly in nature of property settlement and does not constitute "alimony," and thus may not be exempted pursuant to Florida statute specifically adopting federal exemptions provided by 11 USCS § 522(d)(10)(D) where (1) debtor's right to receive each monthly payment is contingent only upon payment of equitable distri-bution in full, not upon death or remarriage, (2) award is not subject to modification upon changing circumstances of either party, (3) express purpose for award is to equitably divide marital property, providing monetary payments in exchange for full ownership and possession of several parcels of

Page 357 11 USCS § 522

real property, (4) child support is addressed separately under marital settlement agreement which indicates that equitable distribution payments did not exist to provide support for dependent child, and (5) agreement failed to mention physical health, levels of education, or need for support of ei-ther party, but specifically included waivers by both parties to any claim of alimony of any kind. In re Ellertson (2000, BC SD Fla) 252 BR 831, CCH Bankr L Rptr P 78267, 13 FLW Fed B 332.

Chapter 7 debtor was not entitled to Ohio exemption for right to receive arrearages in spousal support where she failed to establish that arrearage owed was necessary for her support, given suffi-ciency of her $ 38,600 salary to pay her current expenses, fact that her two children were now emancipated and had been assisting her, and fact that she still retained right to receive current spousal support. In re Thurston (2000, BC SD Ohio) 255 BR 725.

Ohio exemption for right to receive arrearages in spousal support is limited to amount reasona-bly necessary for support of debtor and dependants, and instant debtor is directed to submit affidavit detailing extent to which arrearages are necessary for support. In re Edwards (2000, BC SD Ohio) 255 BR 726.

Even though Chapter 7 debtor claimed divorce agreement's characterization of monthly $ 200 payments to her as "direct financial support" rather than as "division of assets" led to conclusion that award was alimony, labels used in contract are not dispositive of nature of obligation and pay-ments to her from ex-husband would be held to constitute nonexempt property settlement where, even though fact that payments were tied to her life indicated they were intended as alimony, bal-ance of factors considered strongly suggested that money was intended for debt repayment so the payments were property settlement in view of (1) disparate income of parties, (2) statement in agreement that payments were "in lieu of one lump sum settlement at present time," (3) absence of any minor children, (4) absence of evidence that debtor needed additional funds for medical or edu-cational expenses, and (5) fact that divorce agreement and debtor's testimony, when read together, indicated payments were intended to repay loans belonging to debtor rather than to provide her re-habilitative support. In re Brackett (2001, BC MD Fla) 259 BR 768, 45 CBC2d 1415, 14 FLW Fed B 217.

Proceeds from sale of marital residence was property settlement that could not be exempted un-der 11 USCS § 522(d)(10)(D) as "alimony, support, or separate maintenance."; the debtor's marital settlement agreement had meaningful separate alimony provision, fund at issue was described as being part of property division, label was matched by its actual characteristics and there was no evi-dence to suggest that true nature of obligation was disguised. Mason & Mason v Korwin (In re Korwin) (2007, BC WD Pa) 379 BR 80.

199. Tax credits

In case of first impression, court holds that Hope Scholarship Credit, federal education tax credit, is not exempt under Idaho law. In re Crampton (2000, BC DC Idaho) 249 BR 215, CCH Bankr L Rptr P 78208.

Debtor's portion of exempt tax refund attributable to state supplemental income and credits leg-islation was required to be included in calculation of debtor's disposable income for purposes of formulating debtor's Chapter 13 plan; fact that tax credits were designed to provide relief to low-income families and were enacted as incentive to work rather than receiving public assistance was irrelevant. In re Sohn (2003, BC DC Minn) 300 BR 332, 51 CBC2d 785.

Page 358 11 USCS § 522

200. Wages

Consumer Credit Protection Act, 15 USCS §§ 1671-77, does not itself create exemption within meaning of Bankruptcy Act of 1898 [former 11 USCS §§ 1 et seq.], but by reason of its incorpora-tion by state exemption statute, which, in turn, is adopted by Bankruptcy Act of 1898, it becomes exemption measure, with result that 75 percent of bankrupt's wages are exempt from creditors. In re Brissette (1977, CA9 Cal) 561 F2d 779, reh den (1977, CA9) 568 F2d 473.

District Court order directing judgment debtor to pay to creditor 25 percent of his future income is not limited by Illinois Wage Garnishment Act, which permits creditor to obtain order requiring debtor's employer to pay directly to creditor up to 15 percent of debtor's income, where District Court's order is directed at judgment debtor himself and to no one else. Wienco, Inc. v Scene Three (1994, CA7 Ill) 29 F3d 329, magistrate's recommendation, (1994, ND Ill) 1994 US Dist LEXIS 13333.

Sum due bankrupt as result of monies withheld from his wages constituted exemptible portion of bankrupt's estate. In re Johnson (1964, SD Ohio) 232 F Supp 681, 27 Ohio Ops 2d 448.

Lien of execution and garnishment does not constitute preference voidable under 11 USCS § 547 because lien, created when execution is delivered to sheriff, was delivered prior to 90 days be-fore filing of petition; thus, fact that funds were not actually paid over did not affect lien; where sums sufficient to pay judgment and garnishment were removed from debtor's control more than 90 days before filing, debtors have not right to claim any part of funds as exempt under opt-out legisla-tion. In re Lamm (1984, ED Va) 47 BR 364.

Where former Chapter 7 debtor was estopped from bringing employment discrimination claim against her former employer because she was cognizant of her claim prior to filing for bankruptcy, yet she did not disclose claim in bankruptcy before she received discharge, employee's claim for front pay, sought by operation of 11 USCS § 522(d)(11)(E), did not survive either because debtor never asserted in bankruptcy exemption for future earnings, and claim for front pay was contingent upon debtor establishing her claim for constructive discharge, which she failed to do. Bexley v Dil-lon Cos. (2006, DC Colo) 17 AD Cas 1745.

Even if money garnished from debtor's wages by debtor's former wife is property of estate, re-coverable by trustee, debtor may still claim it as exempt under 11 USCS § 522(b); it would be futile to permit recovery by trustee only to have him remit fund recovered to debtor as part of his exemp-tions. In re Stenborg (1981, BC ED Mo) 1 BAMSL 579.

Stipulation and agreement entered into by debtor and former wife establish that money was not owed by debtor to former wife at time that she garnished money from debtor's wages; former wife has no claim to fund under 11 USCS § 522(c)(1); debtor may claim fund as exempt pursuant to 11 USCS § 522(g)(1). In re Stenborg (1981, BC ED Mo) 1 BAMSL 579.

Pursuant to 11 USCS §§ 522(h) and 547(b), debtor may avoid withholding of wages and entry of garnishment judgment against employer which occurred within 90 days before Chapter 7 petition was filed and may exempt wages under 11 USCS § 522(b) where, under Illinois law, garnishment summons did not terminate debtor's interest in non-exempt wages which were then due or became subsequently due, even though service of garnishment summons outside 90-day preference period did create continuing lien; pursuant to 11 USCS § 542 creditors obtaining garnishment judgment

Page 359 11 USCS § 522

must turn over wages held by debtor's employer. In re Nealis (1985, BC ND Ill) 52 BR 329, 13 CBC2d 663.

Under Illinois wild card exemption, debtor can claim garnished wages as exempt property under 11 USCS § 522(f)(1). In re Johnson (1985, BC ND Ill) 53 BR 919.

Where Chapter 7 debtor's wages have been attached pursuant to state statute later declared to be unconstitutional, debtor retains interest in attached funds, judgment creditor's lien is invalid, and money being held pursuant to said lien is property of estate which debtor is entitled to claim as ex-empt under 11 USCS §§ 522(d)(1) and (5); consent order which merely establishes procedure whereby debtor is given opportunity to object in state court to release of garnished funds being held in escrow does not infringe upon debtor's right to claim exemption. In re Rianna (1986, BC DC RI) 61 BR 924.

Federal garnishment statute does not apply in Missouri to allow Chapter 7 debtor to exempt pre-bankruptcy earnings; Missouri garnishment statute does allow debtor, however, to exempt prebank-ruptcy earnings from attachment and execution. In re Sanders (1987, BC ED Mo) 69 BR 569, 4 BAMSL 3458.

Monies withheld from Chapter 13 debtors' salary checks pursuant to statutory compulsory wage deduction program for governmental employees and interest accrued thereon are property of debt-ors' estates, but are subject to statutory lien; postpetition deductions constitute assignment of wages as security for prepetition debt and therefore are not subject to statutory lien; thus, such monies could be recovered by estate pursuant to 11 USCS § 522(h) if any avoiding powers listed therein are invoked and established. In re Ortiz Vega (1987, BC DC Puerto Rico) 75 BR 858.

Debtor head of household may exempt paycheck due him under Florida opt-out provisions pro-viding that such debtor may exempt money due him for personal services. In re Montoya (1987, BC MD Fla) 77 BR 926, 110 CCH LC P 56000.

Neurological surgeon is entitled to exempt $ 3,600 paid to him by professional association shortly before filing petition where Florida statute exempts wages earned by employee head of household from execution, where evidence establishes that sum paid was actual wages rather than payment of passive income and that debtor was "employee" within meaning of statute and not inde-pendent contractor. In re Montoya (1987, BC MD Fla) 77 BR 926, 110 CCH LC P 56000.

Feed and Grain Program payments which are part of debtor's estate are not exempt as wages un-der Iowa law because payments are not equivalent to wages since there is no relationship between program payments and farmer's labor. In re Mattice (1987, BC SD Iowa) 81 BR 504, 6 UCCRS2d 214.

Neither Ohio future earnings exemption nor 11 USCS § 522(d)(11)(E) restrict scope of exemp-tion to lost future earnings resulting from bodily injury, and therefore Ohio statute exempts that por-tion of settlement of Chapter 7 debtor's employment discrimination action which is attributable to compensation for debtor's lost future wages; debtor will be allowed to amend his schedule to claim exemption and trustee will then be afforded opportunity to object. In re Carson (1987, BC SD Ohio) 82 BR 847, 50 BNA FEP Cas 347.

Even if head of household's wages are commingled with nonhead of household's wages, portion of wages traceable to head of household are exempt under Florida law. In re Welch (1990, BC MD Fla) 115 BR 374.

Page 360 11 USCS § 522

Chapter 7 debtor may exempt 90 percent of his earnings under New York law and such exemp-tion is not limited to $ 2,500; under New York law, 90 percent of debtor's salary earned 60 days prior to bankruptcy, or at any time thereafter, is not subject to seizure by creditors, except such part as court should determine to be unnecessary for reasonable requirements of debtor and his depend-ents, because 90 percent earning exemption statute applies to bankruptcy debtors as well as judg-ment debtors. In re Maidman (1992, BC SD NY) 141 BR 571.

Florida statute exempting money or other thing due for personal labor or services of head of family applies only to actual wages earned by one in employer/employee relationship, and it cannot be construed to cover those instances in which independent contractor seeks exemption of moneys due to him even if due for rendering personal labor or services; in instant case, debtor may not ex-empt commissions he received as real estate broker on sales procured prepetition because debtor's occupation as real estate agent is that of independent contractor and moneys due him are not wages within meaning of statute. In re Hanick (1994, BC MD Fla) 164 BR 165, CCH Bankr L Rptr P 75787, 7 FLW Fed B 397.

Iowa Code § 627.6(9)(c) was intended to protect bankruptcy debtor's wages from reach of credi-tors to same extent they would be protected in state court garnishment proceedings. In re Irish (2003, BC ND Iowa) 303 BR 380, affd (2004, BAP8) 311 BR 63.

State's wage exemptions set forth in Iowa Code §§ 537.5105 and 642.21 apply in bankruptcy proceeding even if debtor's wages were not actually garnished in pre-petition state court proceed-ings. In re Irish (2003, BC ND Iowa) 303 BR 380, affd (2004, BAP8) 311 BR 63.

Under Iowa Code § 642.21, maximum amount of Chapter 7 debtor's disposable earnings that could be garnished per year was within exemption amount for wages contained in Iowa Code § 627.6(9)(c); therefore, debtor's net wages were fully exempt. In re Irish (2003, BC ND Iowa) 303 BR 380, affd (2004, BAP8) 311 BR 63.

Chapter 7 debtor was not entitled to exempt 85 percent of prepetition bonus under 735 Ill. Comp. Stat. 5/12-803 or 740 Ill. Comp. Stat. 170/4 because statutes did not give rise to general ex-emption for wages earned but not yet paid to employee and had no relevance to exemptions that debtor could claim in bankruptcy case. In re Thum (2005, BC CD Ill) 329 BR 848.

Debtor was only entitled to exempt $ 16,550 of net settlement proceeds for future earnings of $ 83,203 pursuant to 11 USCS § 522(d)(11)(E), as pro-rated amount reasonably necessary for support of debtor's family postpetition; remainder was subject to Chapter 7 trustee's objection to exemption. In re Jackson (2007, BC DC Conn) 376 BR 75.

Bankruptcy court erred by ordering turnover to debtor, tax protestor, of $ 697 in wages received by IRS after petition pursuant to prepetition levy, where impact of 11 USCS § 522(c) on debtor's claim of exemption had not been presented to or resolved by bankruptcy court, nor had nondis-chargeability of claim under 11 USCS § 523(a)(1), Chapter 7 trustee had not recovered any property for purposes of 11 USCS § 522(g), and debtor had not alleged or commenced avoidance action de-scribed in 11 USCS § 522(h). United States, IRS v Mathews (In re Mathews) (1997, BAP6 Ohio) 209 BR 218, CCH Bankr L Rptr P 77425, 97-2 USTC P 80851, 79 AFTR 2d 3084. Unpublished Opinions

Page 361 11 USCS § 522

Unpublished: Record supported bankruptcy trustee's objections to debtor's exemption because juror statements debtor presented in his motion to amend employment case judgment showed that jury did not intent to award damages for future wages; therefore, trustee carried his burden of proof under Fed. R. Bank. P. 4003 and debtor was not entitled to exemption under 11 USCS § 522(d)(11)(E). Pequeno v Schmidt (In re Pequeno) (2005, CA5 Tex) 126 Fed Appx 158 (criticized in In re Epley (2005, BC ED Va) 2005 Bankr LEXIS 2817).

201.--What constitutes exemptable wages

Debtors were not entitled to exemption under 11 USCS § 522(d)(11)(E) for entire net proceeds of their wrongful termination action because clear and unambiguous language of statute allowed them to claim only post-petition loss of earnings as exemption. In re Jackson (2008, DC Conn) 394 BR 8.

Clear and unambiguous language of 11 USCS § 522(d)(11)(E) creates estate on petition date and allows exemption for loss of any future earnings after creation of that estate; to allow exemption for earnings prior to petition date would make statute retroactive instead of future looking and would render term "future" obsolete, defeating statute's purpose. In re Jackson (2008, DC Conn) 394 BR 8.

Bankruptcy court properly calculated amount reasonably necessary for support under 11 USCS § § 522(d)(11)(E) based on income and expenditure numbers provided by debtors; debtors' calcula-tion failed to account for their certified statements in their uncontested petition that certain inde-pendent contractor fees were earned over six month rather than twelve month period and that set-tlement of wrongful termination action was meant to return debtor's income to his pretermination income level. In re Jackson (2008, DC Conn) 394 BR 8.

In bankruptcy, wages are distinguishable from payments under disability insurance contract where payments are fixed, matured, due, and payable as executed contract since wage earner con-tinues to work and create new earnings by his labor and wages constitute property not in existence at date of garnishment or execution. In re Dent (1976, BC ND Ala) 2 BCD 462.

Account receivable due proprietor is not "personal earnings" or "earnings for personal service" within contemplation of state statute which allows exemption only to extent necessary to compen-sate debtor for his personal labor if personal labor element can be distinguished from other elements of gain such as employment of capital to produce income; bankrupt, who occupies position of inde-pendent contractor for work performed and not that of wage earner, is not protected under 15 USCS §§ 1671-1677, Consumer Protection Act, which provides exemption of 75 percent of personal earn-ings. In re Erickson (1976, BC SD Cal) 2 BCD 876.

Chapter 13 debtor's retirement fund payments are not "wages" or "pay" exemptible under Flor-ida statute. In re Harrington (1987, BC SD Fla) 70 BR 301, 15 BCD 809.

Debtors may not exempt prepetition tax refund as wages. Tavormina v United States (In re Seslowsky) (1991, BC SD Fla) 135 BR 692.

Chapter 7 debtor may not exempt his interest in deferred compensation investment pool estab-lished by his employer for limited number of employees as wages under Florida exemption statute since income derived from investment pool is in nature of passive income and agreement does not predicate distribution on performance of personal services by employee; nor may debtors exempt funds in bank account into which only deposits were debtor husband's payroll checks and expense reimbursements from his employer, and from which various withdrawals were made, where debtor

Page 362 11 USCS § 522

husband commingled his exempt wages in account with nonexempt expense reimbursement funds, and having commingled funds, he cannot trace his earnings In re Parker (1992, BC MD Fla) 147 BR 810, 6 FLW Fed B 303.

Oregon statutory scheme provided exemption for funds on deposit traceable to earnings up to total of $ 7,500, subject to statutory limitations. In re Platt (2001, BC DC Or) 270 BR 773, 38 BCD 210.

Pre-bankruptcy petition earnings deposited in debtors' bank account prior to bankruptcy filing were not exempt wages under state law. In re Resler (2002, BC DC Kan) 282 BR 246.

Where Chapter 7 debtors sought amount in unpaid bonuses in state court action against debtor wife's former employer, debtors were entitled to exempt from estate 75 percent of any award repre-senting actual, unpaid wages pursuant to Ariz. Rev. Stat. § 33-1131(B) and 15 USCS § 1673; debt-ors, however, were not entitled to exempt any amounts that were awarded in punitive damages, treble damages, interest, attorneys' fees, costs or like. In re Mulvihill (2005, BC DC Ariz) 326 BR 459. Unpublished Opinions

Unpublished: Funds that debtor received for unused sick and vacation benefits after he was ter-minated from his employment were exempt under Mo. Rev. Stat. § 525.030.2, up to 75 percent, be-cause these benefits were proportional to hours he had worked; he had right to be paid for unused vacation and sick pay when he was terminated; benefits were subject to federal and state tax with-holdings when they were paid to him; and they were part of remuneration agreed upon by debtor and employer. In re Hidy (2007, BC WD Mo) 2007 Bankr LEXIS 973.

202.--Independent contractor earnings

Tennessee statute exempting disposable earnings from garnishment applies to independent con-tractors as well as to employees to extent that compensation sought to be garnished is for personal services; in instant case, debtor's renewal commissions from policies he sold while insurance agent are compensation for personal services, even though he is no longer agent of insurance company, because renewal commissions are intended to compensate debtor for making initial sales. In re Duncan (1992, BC ED Tenn) 140 BR 210 (criticized in In re Galvez (1999) 115 Nev 417, 990 P2d 187).

Chapter 7 debtor independent contractor may exempt moneys owed him under prepetition ship-ping contract under Iowa wage exemption statute where Iowa law does not distinguish for earnings, income, or wage exemption purposes between independent contractors and employees, but rather focus is on distinguishing types of income, i.e., whether funds represent compensation from per-sonal services, which are exempt, or nonexempt account receivables independent contractor derives from labor of his or her employees or investment income, and funds owed debtor under shipping contract represent compensation for personal services of debtor himself and not his employees. In re Sexton (1992, BC SD Iowa) 140 BR 742.

Chapter 7 debtor was more like independent contractor than employee of contracting corpora-tion owned solely by his wife, and, therefore, is not permitted to exempt $ 4,200 balance of bank account under wage exemption, despite fact that debtor was paid weekly salary, and not on job-by-job basis, and that corporation provided him with office space and support personnel, where amount

Page 363 11 USCS § 522

and timing of compensation was determined by debtor and essentially constituted discretionary dis-tribution from family-owned business; debtor (1) determined his own salary, and whether he would receive commissions or bonuses, (2) had no employment contract, (3) used his own tools, and (4) other than gasoline, paid his own expenses. In re Manning (1994, BC SD Fla) 163 BR 380, 7 FLW Fed B 349.

203. Wearing apparel and jewelry

Watch is wearing apparel within state exemption law. Sellers v Bell (1899, CA5 Ala) 94 F 801.

Diamond ring purchased with insurance proceeds paid out after theft of debtor's original en-gagement ring which had belonged to her husband's grandmother is thing of sentimental value rather than expensive ornament and is exempt under California law and under 11 USCS § 522(b). In re Westhem (1981, CA9 Cal) 642 F2d 1139, 7 BCD 1246.

Under state law exempting wearing apparel of debtor, personal jewelry of bankrupt is exempt. In re H. L. Evans & Co. (1907, DC Del) 158 F 153.

Eleven pieces of jewelry of approximate value of $ 4,000 are exempt as wearing apparel which is "reasonably necessary for the family" considering station in life of person claiming exemption and circumstances under which claimed exemption was acquired. In re Tyler (1976, BC ND Tex) 2 BCD 1537, 11 CBC 768.

Under state law allowing personal property exemption without regard to nature or character of items involved and placing only value limitation on personal properties claimed, diamond ring val-ued at $ 662 is exempt. In re Wilson (1977, BC MD Fla) 3 BCD 816, CCH Bankr L Rptr P 66588.

Where debtor received insurance payment for ring which she discovered under piece of furni-ture in her home after filing for bankruptcy, debtor holds ring in constructive trust subject to equita-ble rights of insurance company which has beneficial interest in trust; creditor insurance company is therefore entitled to ring and debtor who has no homestead cannot use equivalent amount under 11 USCS § 522(d)(5) to claim ring exempt; although insurance company would have had right to file contingent claim to cover possibility of debtor's finding ring it would place extremely unreasonable burden on debtors, insurance companies and bankruptcy court if debtors upon filing had to list all insurance companies that had paid any claim to them and insurers had to keep such records of closed files to be able to identify insured upon receipt of bankruptcy notice and file contingent claim without any real hope of recovery. In re Angus (1981, BC DC Or) 9 BR 769, 7 BCD 468, 4 CBC2d 235, CCH Bankr L Rptr P 67933.

Debtor will be allowed to amend his schedule so that he may exempt jewelry pursuant to 11 USCS § 522(d)(4) where debtor did not conceal it. In re Alesia (1982, BC ND Ill) 28 BR 46.

Diamond engagement ring, which Chapter 7 debtor wore on daily basis and did not hold as in-vestment, is "wearing apparel" within meaning of North Carolina exemption statutes and thus debtor could exempt $ 1,000 in value under "wearing apparel" exemption and $ 2,500 under "wild card" exemption to exempt entire $ 3,500 value of ring pursuant to 11 USCS § 522(b)(1). In re Mims (1985, BC ED NC) 49 BR 283.

Debtor's watch constitutes wearing apparel for purposes of Oklahoma exemption statute; gold chain and gold 10-dollar coin pendant, however, represent more than just ornamentation and wear-ing apparel and they represent investment and are not exemptable. In re Goldberg (1986, BC ND

Page 364 11 USCS § 522

Okla) 59 BR 201, CCH Bankr L Rptr P 71068 (superseded by statute as stated in In re Walker (1990, ND Okla) 139 BR 31).

Diamond wedding band and jewelry did not constitute necessary and proper wearing apparel under "wearing apparel" exemption, Tenn. Code Ann. § 26-2-104, because they were not appropri-ate to debtor's work of taking care of her children at home and were luxury items, considering their $ 15,000 value; 11 USCS § 523(a)(2)(C)(i), (ii), which excepted from discharge debts aggregating more than $ 500 for luxury goods; $ 1,225 limitation in federal bankruptcy exemption for jewelry; and fact that state does not provide specific exemption for jewelry. In re Lebovitz (2006, BC WD Tenn) 344 BR 556.

204. Miscellaneous

Stock exchange seat is property where property is defined as liability to be levied upon and sold since bankruptcy statute supplies process for reaching stock exchange seat for benefit of creditors after board creditors have been paid notwithstanding that purchaser is subject to election by ex-change and other conditions as these are contingencies which will be reflected in its price; under state statute entitling insolvent to retain articles exempt from levy and sale, stock exchange seat may not be retained; hence, stock exchange seat was not within former 11 USCS § 24 which made al-lowable to bankrupts exemptions prescribed by law of state of their domicile. Page v Edmunds (1903) 187 US 596, 47 L Ed 318, 23 S Ct 200.

Attorney's fees refunded to debtor by Bankruptcy Court order become general property of estate and are not governed by specific restrictions, hence are available to debtor to fund exemptions to which he is otherwise entitled. In re Wilson (1982, CA11 Fla) 694 F2d 236, 9 BCD 1352, 7 CBC2d 895, CCH Bankr L Rptr P 68910.

Alabama Code § 6-10-126(b), which provides that no waiver of exemption in any written in-strument shall be held to include or authorize levy of execution or attachment on any of five listed types of property, does not provide debtors with additional exemption rights above and beyond those provided in § 6-10-6, which provides $ 3,000 exemption in personalty. First Alabama Bank v Mims (1986, MD Ala) 66 BR 20.

Repossessed goods in hands of creditor are not in present possession of debtor and therefore these goods are not property that debtor may exempt under Kansas law pursuant to 11 USCS § 522. In re Ferguson (1986, DC Kan) 67 BR 246.

Under North Carolina exemption for personal injury recoveries, Chapter 7 trustee is not entitled to recover medical and legal fees paid by debtor to professionals directly involved in care for injury and subsequent suit, because language creating exception for these expenses does not except them from entire exemption, but means only that such professionals have right to reach injury compensa-tion fund otherwise exempt from all other claims in bankruptcy. In re Brank (1986, WD NC) 67 BR 1005, 16 CBC2d 842, affd without op (1987, CA4 NC) 826 F2d 1059 and affd without op (1987, CA4 NC) 826 F2d 1060.

Bankruptcy court properly affirmed contract substituting Chapter 7 trustee as payee of royalty payments under license agreement; where debtor had already claimed exemptions in amount of $ 2,000 or more, royalties debtor received pursuant to license agreement were not exempt under 735 Ill. Comp. Stat. 5/12 -1001(b), and 11 USCS 522(b)(2). Keen, Inc. v Gecker (2003, ND Ill) 264 F Supp 2d 659.

Page 365 11 USCS § 522

Direct payments to debtor farmers under federal agricultural subsidy for corn and soybeans qualified as "any public assistance benefit" for purposes of state bankruptcy exemption statute, Iowa Code § 627.6(8)(a), as opposed to "a local public assistance benefit" under 11 USCS § 522(d)(10)(A). Wilson v Sergeant (In re Wilson) (2004, ND Iowa) 305 BR 4.

Phrase "any property" in 11 USCS § 522(d)(5) means just that; property need not be of kind oth-erwise exempt under various provisions of 11 USCS § 522(d), and debtor properly includes under exemption business inventory in amount necessary to make up such exemption. In re Upright (1979, BC ND NY) 1 BR 694, 5 BCD 1124, 1 CBC2d 229.

Debtors may not claim exemption in partnership property. In re Schumacher (1982, BC ED Mo) 1 BAMSL 699.

Debtor's right to obtain title to real estate upon performance of recorded contract for deed--equivalent of mortgage relationship--is property of estate which debtor is entitled to claim as ex-empt pursuant to 11 USCS § 522. In re Princiotta (1985, BC DC Mass) 49 BR 447, CCH Bankr L Rptr P 70563 (criticized in FDIC v Finn (In re Finn) (1997, BAP1) 211 BR 780, 38 CBC2d 1176, CCH Bankr L Rptr P 77534).

Evidence establishes that debtor's interest in testamentary trust exceeds both his valuation of his interest and permissible exemption under state law; consequently, debtor may not exempt entirety of trust from estate but is limited to amount specified in statutory exemption. In re Hersch (1986, BC ED Va) 57 BR 667, 13 BCD 1358, CCH Bankr L Rptr P 70999.

"Letters of advice" indicating Chapter 7 debtors' future entitlement to funds in excess of $ 18,000 are not exempt under New York law as unpaid milk proceeds since they are evidence only of interest and debtors' rights as evidenced thereby are based not on proceeds of milk they marketed, but on issuance of letters sometime after fiscal year to which they have reference; further, neither New York nor federal law intended to afford farmer debtors windfall not enjoyed by nonfarmers generally by allowing them to exempt 90 percent of fund paid over to cooperative over period of years and not available to farmer for his ongoing expenses at time paid over. In re Stinson (1986, BC WD NY) 59 BR 914.

Texas exemption for "athletic and sporting equipment" reasonably necessary for family or single adult does not extend to 1975 Glass Par Boat, as if boat were logical extension of fishing rod and reel, which exemption does cover. In re Cypert (1987, BC ND Tex) 68 BR 449.

Debtors may not claim boat used by family for recreational purposes as exempt under Texas ex-emption for athletic and sporting equipment because that exemption is limited to small items for individual use. In re Gibson (1987, BC ND Tex) 69 BR 534.

Chapter 11 debtor cannot exempt $ 5,000 in cash under South Dakota opt-out exemption for provisions or fuel, where language of exemption suggests that debtor must have such provisions or fuel in hand. In re Hogg (1987, BC DC SD) 76 BR 735, 4 UCCRS2d 1254.

Under Minnesota law, Chapter 7 debtor's right to postpetition payments from prepetition con-servation reserve program contract are not earnings for purposes of exemption statutes. In re Holte (1988, BC DC Minn) 83 BR 647.

Under Virginia law, shares of stock and brokerage account, neither of which constituted pro-ceeds of, or rents or profits from, tenancy by entireties real estate, can be held as tenants by entirety

Page 366 11 USCS § 522

and thereby claimed exempt under 11 USCS § 522(b)(2)(B). In re Massey (1998, BC ED Va) 225 BR 887, 10 Fourth Cir & Dist Col Bankr Ct Rep 823.

Discretionary trust for which debtor sought exemption under statute would have exceeded any amount that debtor might have been able to claim; in addition, property of discretionary trust was not exempt under non-bankruptcy or state law. In re Young (2003, BC ED Tex) 297 BR 492.

Because debtors stipulated that per capita distributions received from tribal casino's revenue were never held in joint tenancy or tenancy by entirety, neither 11 USCS § 522(b) nor (b)(2)(B) ap-plied to exempt distributions. In re McDonald (2006, BC DC Kan) 353 BR 287.

For purposes of 11 USCS § 522(d)(10), payments received on promissory note from sale of stock in business generally would not qualify under these special Internal Revenue Code provisions, 26 USCS §§ 401(a), 403(a), (b), 408, for qualified pension, profit-sharing, stock bonus and quali-fied employee annuity plans, and individual retirement accounts. In re Archer (2006) 2006 MT 82, 332 Mont 1, 136 P3d 563.

VII.WAIVER OF EXEMPTIONS 205. Generally

State-law exemption of certain property from bankruptcy estate, which exemption purports to be available unless waived, will be given effect, even if exemption has been waived, for purposes of 11 USCS § 522(f). Owen v Owen (1991) 500 US 305, 114 L Ed 2d 350, 111 S Ct 1833, 91 CDOS 3710, 91 Daily Journal DAR 6043, 21 BCD 1164, 24 CBC2d 850, CCH Bankr L Rptr P 73963 (su-perseded by statute as stated in In re Parrish (1995, BC WD Wis) 186 BR 246, CCH Bankr L Rptr P 76786).

Creditor's claimed waiver of exemptions is enforceable only to extent of statutory lien since any waiver of exemptions properly allowed under 11 USCS § 522(b) executed by debtor in favor of un-secured creditor is unenforceable pursuant to 11 USCS § 522(e). In re Musser (1982, WD Va) 24 BR 913.

11 USCS § 522(e) is designed to avoid selective waivers of exemptions to favored or powerful unsecured creditors and does not apply to waivers by operation of law, thus debtors cannot claim exemptions when they have previously waived them by default in prior state action. United States v Scott (1984, MD NC) 45 BR 318, 12 BCD 885.

Objection to debtors' claim of homestead exemption is not necessary under Bankruptcy Rule 4003(b) where debtors have effectively waived exemption for benefit of lien creditor whose rights survive bankruptcy under 11 USCS § 522(c). In re Harrigan (1987, ND Ill) 74 BR 224.

State statute enforcing security interests in property which would have been exempt from levy by third party is not invalid for conflict with 11 USCS § 522(e) because federal statute prohibits only contractual, consensual waivers of exemptions, not statutory waivers, and debtor's interest never vests in property and therefore cannot be waived by debtor. In re McGuire (1985, BC SD Ohio) 47 BR 182, CCH Bankr L Rptr P 70289.

Chapter 7 debtor cannot waive exemption on property as motor vehicle and later be heard to claim homestead exemption on same property, particularly where creditor has acted in reliance on waiver. In re Hoffner (1986, BC DC NM) 69 BR 70, CCH Bankr L Rptr P 71600.

Protections of 11 USCS § 522(e) prohibiting waiver in favor of unsecured creditor apply not just to federal, but also to state-created exemption rights. In re Blair (1987, BC DC Ariz) 79 BR 1.

Page 367 11 USCS § 522

Any waiver of exemption is unenforceable against Chapter 7 debtor and has no impact on debt-ors' right to invoke voiding provisions of 11 USCS § 522(f)(1). In re Hutchinson (1988, BC MD Fla) 92 BR 950.

Waivers of exemptions under 11 USCS § 522 should be construed narrowly so as to give effect to purposes of Bankruptcy Code and exemptions. In re Dickinson (1995, BC DC Colo) 185 BR 840, 12 Colo Bankr Ct Rep 100.

206. Validity of particular waivers

Loan agreement signed by debtors and expressly waiving homestead exemption is not voided by operation of 11 USCS § 522(e) covering unsecured loans; however, such waiver is avoided under lien avoidance provision of § 522(f). Dominion Bank of Cumberlands, NA v Nuckolls (1985, CA4 Va) 780 F2d 408, 14 BCD 95, 13 CBC2d 1249, CCH Bankr L Rptr P 70885, 42 UCCRS 1508.

Chapter 11 debtor is not estopped from claiming homestead exemption in entire 129.47 acres of farm under Texas law even though she executed homestead disclaimer that purported to release all homestead claims to 114.47 acres and even though creditor asserts it relied on such disclaimer where creditor's predecessor should have known or suspected that homestead disclaimer was false because at time debtor represented that she did not have homestead rights in 114.47 acres, she and her family lived in house on farm and were using entire farm, including 114.47 acres for homestead purposes. In re Bradley (1992, CA5 Tex) 960 F2d 502, reh, en banc, den (1992, CA5 Tex) 966 F2d 1450 and cert den (1993) 507 US 971, 122 L Ed 2d 783, 113 S Ct 1412 and (criticized in Perry v Dearing (In re Perry) (2002, WD Tex) 289 BR 860) and (criticized in Perry v Dearing (In re Perry) (2003, CA5 Tex) 345 F3d 303, CCH Bankr L Rptr P 78909).

Waiver of right of exemption contained in obligation creating illegal preference is unenforce-able against bankrupt in bankruptcy proceedings. In re Bolinger (1901, DC Pa) 108 F 374.

Hospital may obtain equitable assignment of sums to be recovered by debtor from tortfeasor to extent of value of services provided by hospital in treatment of debtor's personal injuries; assign-ment is invalid if equity would treat unilateral mistake as mutual mistake. In re Musser (1982, WD Va) 24 BR 913.

Debtor, who under North Carolina opt-out legislation waived his right to claim exemption in real estate by failing to file motion claiming exemptions within 20 days, is entitled to relief from waiver because 11 USCS § 522(1) which provides no specific time limit for filing exemptions, pre-empts state statute; 11 USCS § 522(b) pertains only to 11 USCS § 522(d) and other sections of stat-ute operate independently of it. In re Howell (1985, MD NC) 51 BR 1015, 13 BCD 743.

Indiana homestead exemption need not be asserted at time of attachment lien, but at time of consequent judgment lien; thus Chapter 11 creditor has not waived exemption, especially since state attachment procedure provides debtor with no formal notice or procedure to contest attachment. In re Schwartz (1985, ND Ind) 53 BR 1018.

Under 11 USCS § 522, employer-creditor may not enforce waiver of wage exemption contained in employment contract whereby debtor consented, upon termination, to credit of wages against credit account for goods which debtor purchased from employer. In re Terry (1980, BC ED Va) 7 BR 880, 7 BCD 21, 3 CBC2d 517 (criticized in In re Bourne (2001, BC ED Tenn) 262 BR 745).

Pursuant to 11 USCS § 522(f), until such time as debtor files petition in Bankruptcy and takes active steps to avoid lien which impairs exemption of said debtor, waiver of exemption is valid and

Page 368 11 USCS § 522

security interest in those exemptions is also valid; therefore, debtor's waiver of exemptions is not void but voidable and therefore, creditor's disclosure statement which disclosed enforceable security interest in debtor's homestead exemption is valid. In re Caldwell (1981, BC ND Ga) 15 BR 811.

Waiver of exemption on homestead property is expressly prohibited under 11 USCS § 522(e); waiver of exemption contained in financial statement in fine print is unenforceable. In re Gilman (1983, BC SD Fla) 31 BR 930.

Motor vehicle disposed of prior to meeting held pursuant to 11 USCS § 341 is property of estate and subject to surrender to trustee, and debtor's disposition of vehicle does not waive allowable ex-emption existing on date of commencement of Chapter 7 case as there is no evidence of bad faith, fraudulent conduct, or attempt to withhold estate property from trustee; burden of proof lies with debtor to establish that vehicle was not worth more than allowable amount of exemption. In re Cat-tell (1983, BC SD Ohio) 32 BR 311.

Once debtor has validly waived his exemptions by failure to act after being given both notice and opportunity to claim them as required by state law, exemptions cannot be revived merely by filing bankruptcy petition and debtor will be foreclosed from asserting opt-out state's exemptions pursuant to 11 USCS § 522; although Chapter 7 debtors were given notice and opportunity to claim North Carolina exemptions and failed to do so, where debtors prudently sought advice on claiming state exemptions and failure to respond was fault of debtors' attorney, client will not be charged with inexcusable neglect of his attorney. In re Laughinghouse (1984, BC ED NC) 44 BR 789.

Debtors may claim homestead exemption under 11 USCS § 522(f)(1) despite prior judicial lien granted in state court in reliance in part on express waiver of homestead exemption because plain language of 11 USCS § 522(f)(1) invalidates such waiver. In re Webb (1984, BC ED Va) 49 BR 646.

Release of lis pendens in which parties agreed for allowance of debtor's homestead exemption did not prevent debtor from claiming exemption in burial plot on ground that debtor had previously used homestead exemption because property which was subject of lis pendens is not real property or personal property that debtor used as a residence as required by homestead statute. In re McCoy (1985, BC DC SC) 54 BR 189.

Attempt by debtor wife to assign her interest in profit-sharing plan to former employer bank in payment of promissory note owed to bank did not result in assignment or waiver of exemption un-der 11 USCS § 522 where (1) bank refused to accept assignment and (2) provisions of plan ex-pressly prohibit assignment. In re Pettit (1985, BC SD Iowa) 55 BR 394, affd (1985, SD Iowa) 57 BR 362.

Where Chapter 7 debtor executes document waiving vehicle exemption and releasing motor home to sheriff's office for levy to satisfy judgment on writ of execution, and sheriff levies on prop-erty on same date, debtor's withdrawal of waiver on following day is ineffective to render waiver inoperative; even if withdrawal were effective, debtor waives vehicle exemption in motor home by applying motor vehicle exemption to another vehicle when filing bankruptcy. In re Hoffner (1986, BC DC NM) 69 BR 70, CCH Bankr L Rptr P 71600.

Debtors' agreement that lien of prejudgment attachment against their homestead property would be transferred to escrow fund in return for release of property from lien in order to permit sale of

Page 369 11 USCS § 522

property is not, under 11 USCS § 522(f), enforceable as waiver of exemption, because attachment is judicial lien avoidable under 11 USCS § 522(b). In re Austin (1987, BC DC Vt) 73 BR 75.

Provision in construction contract between Chapter 7 debtor and builder prohibiting debtor's right to possession of her new residence until either builder had been paid or satisfactory financial arrangements made does not constitute waiver of homestead exemption under Arizona opt-out pro-visions, where homesteading is not mentioned in contract and contract gives no hint that debtor ex-pressly gives up right to exempt premises; debtor may exempt property even though she has wrong-fully possessed it prior to paying builder where she: (1) owns land; (2) has contracted to build resi-dence on it; and (3) is obligated by arbitration award to pay for it. In re Blair (1987, BC DC Ariz) 79 BR 1.

Homestead exemption under Arizona opt-out provisions will not be denied to Chapter 7 debtor who signed construction contract for residence 2 years before filing bankruptcy, under which con-tract debtor was prohibited from possession of premises until payment was arranged, where agree-ment to possession restrictions did not induce builder to build house or extend unsecured credit to debtor. In re Blair (1987, BC DC Ariz) 79 BR 1.

Chapter 7 debtors' failure to claim their homestead exemption during prepetition state court foreclosure proceedings did not waive debtors' rights in bankruptcy because debtors had no right to claim exemption under provisions of Bankruptcy Code until their petition was filed, and court will not construe failure to claim exemption in prepetition foreclosure suit as waiver of procedural rights that arise upon filing of bankruptcy petition; even if debtors had asserted their exemption in their answer in state court, such assertion would not have been effective claim of exemption in bank-ruptcy since 11 USCS § 522(l) requires debtors to file list of property that debtors claim as exempt. In re Shells (1994, BC SD Ohio) 171 BR 816.

Mortgage and waiver of homestead executed by Chapter 13 debtors' daughter, who was found to hold residence in resulting trust for debtors, who lived in residence, paid taxes and insurance, and made mortgage payments to credit union as part of scheme to avoid credit union's lending limits, is binding on debtors, because if debtors are true owners, mortgage and waiver of homestead are bind-ing on them as well; furthermore, debtors are procedurally barred from claiming homestead exemp-tion since claim of homestead was not raised by any pleading in, or during trial of, this adversary proceeding, but was raised for first time in post-trial briefs; although debtors' schedule of exemp-tions reflects that they claimed their interest in equity up to maximum allowable amount, no asser-tion was made that their claim was superior to that of credit union's. Heritage Fed. Credit Union v Cox (In re Cox) (1994, BC CD Ill) 175 BR 266.

Clause in promissory note waiving homestead or exemption rights under state laws and in bank-ruptcy proceedings and authorizing trustee in bankruptcy to retain and sell sufficient of property claimed as exempt to pay amount allowed on debt is not sufficient assignment where it did not re-late to particular subject matter to which debtor then had title and which he could then assign and did not show an attempt on part of debtor to at once transfer any right or title belonging to him. Sil-ver v Ridley-Yates Co. (1928) 166 Ga 49, 142 SE 279.

VIII.AVOIDANCE OF LIENS ON EXEMPT PROPERTY


Page 370 11 USCS § 522

Under Georgia homestead exemption enacted pursuant to 11 USCS § 522(a), Chapter 13 debtors may avoid liens that encumber property they seek to exempt pursuant to 11 USCS § 522(f). In re Bland (1985, CA11 Ga) 760 F2d 1252, vacated, en banc (1985, CA11 Ga) 768 F2d 1212 and cor-rected, en banc (1986, CA11 Ga) 793 F2d 1172, 14 BCD 1416, 15 CBC2d 666, CCH Bankr L Rptr P 71219.

Provisions of 11 USCS § 522 granting debtor right to exempt certain property and provisions permitting him to void certain liens on exempt property must be construed to permit avoidance of judicial liens and nonpossessory, nonpurchase money liens, or security interests upon property that would be eligible for exemption but for such judicial or nonpossessory, nonpurchase money liens. In re Pape (1980, BC ND Fla) 7 BR 443, CCH Bankr L Rptr P 67878.

Prospective liens on future property obtained by debtor cannot be avoided by 11 USCS § 522(f) since relief provided reaches only that property included in property of estate pursuant to 11 USCS § 541 and provides that debtor may avoid lien on interest in property only to extent lien impairs ex-emption debtor would have been entitled under 11 USCS § 522(b); § 522(b) allows debtor to ex-empt certain types of property from "property of estate" which is defined by 11 USCS § 541(a)(1) as encompassing all legal and equitable interests of debtor in property as of commencement of case and, since debtor's after acquired property is distinctly different from property estate acquires after commencement of case, it is outside estate and cannot be exempted. In re Clowney (1982, BC MD NC) 19 BR 349, 9 BCD 375.

Legislative history of 11 USCS § 522(c) indicates clearly that Congress intended valid liens to survive discharge as long as they were not avoided during bankruptcy proceedings. In re Cassi (1982, BC ND Ind) 24 BR 619, 9 BCD 1022, 7 CBC2d 383.

11 USCS § 522(f) permits lien avoidance only for exemptable property. In re Zaicek (1983, BC WD Ky) 29 BR 31.

Avoidance of lien encumbering property claimed as exempt is necessary prerequisite to return-ing property free of liens to debtors. In re Lillard (1984, BC WD Ark) 38 BR 433.

Chapter 7 debtors who chose state exemptions may avoid liens under 11 USCS § 522(f)(2) only as to exempt property that is of same kind as that listed in 11 USCS § 522(d)(3), (4), (6), and (9). In re Brzezinski (1985, BC WD Wis) 65 BR 336.

Chapter 7 debtors may not, under 11 USCS § 522(f), avoid liens encumbering their alleged homestead exemption in order to facilitate voluntary sale of homestead, because California home-stead law exempts proceeds from sale only where there is forced judicial sale; liberal construction of California homestead exemption statute does not give license to Bankruptcy Court to rewrite California law. In re Knudsen (1987, BC CD Cal) 80 BR 193.

Claimed exemption in real estate of $ 0.00 is equivalent of no exemption whatsoever so that ju-dicial liens against that real estate are not avoidable pursuant to 11 USCS § 522(f). In re Berryhill (2000, BC ND Ind) 254 BR 242.

Debtors' motion to avoid creditor's judicial lien pursuant to 11 USCS § 522(f)(1)(A) was granted with regard to portion of lien that exceeded value of debtors' interest in their residential property but was denied with regard to remaining amount of lien that was not avoidable and that remained at-tached to debtors' residence. Lindsey v Spagnol (In re Lindsey) (2004, BC WD Pa) 313 BR 390.

Page 371 11 USCS § 522

Only way for debtor to claim exemption in property that has been preserved for benefit of bank-ruptcy estate is through 11 USCS § 522(g); under § 522(g), debtor does not have exemption right to property preserved for estate under 11 USCS § 551 when transfer was voluntary; any other conclu-sion would defeat purpose of § 551 by allowing debtor, after trustee avoided voluntary conveyance, to exempt property and gain equity for himself. Riley v Sullivan (In re Sullivan) (2008, BAP1) 387 BR 353.

208. Constitutionality of lien avoidance

Bankruptcy Court will not consider whether provisions of 11 USCS § 522 permitting avoidance of liens on exempt property are constitutional where issues were not raised, briefed, or argued by parties. In re Butler (1980, BC DC Md) 5 BR 360, 6 BCD 768, CCH Bankr L Rptr P 67659.

Test to be applied in determining constitutionality of lien avoidance powers granted by 11 USCS § 522 is whether such powers bear rational relationship to legitimate legislative objective; provi-sions of 11 USCS § 522 are rationally related to legitimate legislative goal of enhancing debtor's chances for fresh start, and are not violative of due process. In re Brown (1980, BC ND Tex) 7 BR 264, CCH Bankr L Rptr P 67943.

Congress has power under Art I, § 8, Cl. 4 to give debtor statutory lien superior to certain prior liens as limited by due process requirement of Fifth Amendment. In re Phillips (1981, BC CD Ill) 13 BR 82, 4 CBC2d 1467.

Compliance with 28 USCS § 2403(a) by creditor in challenge to constitutionality of 11 USCS § 522(f) is not jurisdictional requirement, where creditor failed to notify United States Attorney Gen-eral of challenge. In re Melvin (1981, BC SD Fla) 13 BR 95; In re Melvin (1981, BC SD Fla) 13 BR 96.

11 USCS § 522(f)(2) is constitutional as prospectively applied to security interests vesting after effective date of Bankruptcy Code and is neither grossly arbitrary nor unreasonable by giving prior-ity to compelling interest (debtor's fresh start) at expense of uncompelling interest (creditor's reten-tion of lien). In re Huggins (1981, BC DC Kan) 13 BR 704.

11 USCS § 522(f) is constitutional as applied prospectively to its enactment. In re Velez (1981, BC ND Ohio) 16 BR 23.

Provision incorporated in lengthy state child-support enforcement bill which would deny debtor's right to avoid nonpossessory and nonpurchase money liens on exempt household goods pursuant to 11 USCS § 522(f) is unconstitutional and void because (1) it violates article of state con-stitution which limits legislature's authority to include more than one subject matter in entitled act, and (2) under the circumstances, elimination of right of avoidance constitutes enactment of special legislation. In re Sapp (1987, BC WD Mo) 81 BR 545.

209.--Fifth Amendment

11 USCS § 522(f)(2) does not violate just compensation clause of United States Constitution, even though debtors avoid lien on tools of trade as defined by state, rather than federal, law, where statute has been enacted prior to extension of credit. In re Thompson (1989, CA7 Wis) 867 F2d 416, 18 BCD 1513, 22 CBC2d 1191, CCH Bankr L Rptr P 72740, 8 UCCRS2d 202.

Avoidance of creditor's judicial lien did not completely destroy creditor's property interest as ju-dicial lien was perfected thirteen years after 11 USCS § 522(f) became effective, and because credi-

Page 372 11 USCS § 522

tor's property rights in judicial lien are circumscribed by Chapter 7 debtor's ability under Bank-ruptcy Code to avoid lien, prospective application of 11 USCS § 522(f) does not constitute "taking" of creditor's property interest within meaning of Fifth Amendment Takings Clause. Patriot Portfo-lio, LLC v Weinstein (In re Weinstein) (1999, CA1 Mass) 164 F3d 677, cert den (1999) 527 US 1036, 144 L Ed 2d 794, 119 S Ct 2394.

Creditor's Fifth Amendment rights were not violated, and no illegal governmental taking oc-curred, when majority of amount that was owed on its judgment lien was avoided in Chapter 7 bankruptcy proceeding under 11 USCS § 522(f); although statute's impairment of creditor's business might arguably constitute "taking" for Fifth Amendment purposes, creditor could not claim that statute unfairly interfered with any of its financial expectations because it had registered its judg-ment lien after § 522(f)(2)(A) was enacted; statute's enactment put creditor on notice concerning operation of debtor protection provision and its potential application to its business activities. Brinley v LPP Mortg., Ltd. (In re Brinley) (2005, CA6 Ky) 403 F3d 415, CCH Bankr L Rptr P 80256, 2005 FED App 141P.

Debtor avoidance of judicial lien under 11 USCS § 522(f)(1) does not constitute "taking of property" in violation of Fifth Amendment where under state law judicial lien does not operate to endow creditor with vested property interest or transfer any estate in debtor's real property to credi-tor. In re Lattimore (1981, WD NY) 12 BR 111.

11 USCS § 522(f) does not violate Takings Clause in that avoidance of lien does not destroy un-derlying debt, but merely changes creditor's status from secured to unsecured. In re Falconer (1987, WD Mich) 79 BR 283.

11 USCS § 522 is not so sweeping as to deprive creditors of all rights in security agreements made after enactment date of Bankruptcy Code, but permits debtors to avoid only portion of secu-rity interest impairing debtor's exemptable equity in secured household goods, tools of trade, or health aids, and does not apply to purchase money security agreements, but rather to nonpurchase money agreements where debtor already owns goods made subject to security interest; even in situations where debtor can avoid creditor lien, creditors are not left wholly without recourse, since they still have right to file proof of claim as unsecured creditor and share in any possible distribu-tion of assets of estate. In re Webber (1980, BC DC Or) 7 BR 580, affd (1982, CA9 Or) 674 F2d 796, 8 BCD 1416, 6 CBC2d 1149, CCH Bankr L Rptr P 68657, cert den (1982) 459 US 1086, 74 L Ed 2d 931, 103 S Ct 567.

Lien avoidance under 11 USCS § 522(f) pursuant to congressional power to regulate subject of bankruptcy and for purpose of preventing enforcement of security interests which stifle debtor's fresh start does not come within traditional definitions of taking under Fifth Amendment. In re Pil-low (1981, BC DC Utah) 8 BR 404.

Pennsylvania judgment lien is charge against property but is not interest in property and there-fore 11 USCS § 522 may be applied to avoid judgment lien without violating Fifth Amendment. In re Ashe (1981, BC MD Pa) 10 BR 97, affd (1983, CA3 Pa) 712 F2d 864, 10 BCD 1172, 9 CBC2d 23, CCH Bankr L Rptr P 69287, cert den (1984) 465 US 1024, 79 L Ed 2d 683, 104 S Ct 1279, reh den (1984) 466 US 963, 80 L Ed 2d 564, 104 S Ct 2183.

Creditor's judgment lien on debtor's residential real property was avoidable pursuant to 11 USCS § 522(f) to extent that lien impaired debtor's exemption and provisions of 11 USCS § 522(f) were

Page 373 11 USCS § 522

not clearly repugnant to due process clause of Fifth Amendment where creditor failed to overcome presumption of constitutionality. In re Jenkins (1981, BC ND Ga) 11 BR 958.

Congress has determined that generally non-purchase money, non-possessory liens in household goods have little or no value and therefore such liens are avoidable under 11 USCS § 522(f)(2)(A) and avoidance does not violate due process clause of Fifth Amendment of United States Constitu-tion; however where it is alleged that household goods have greater than nominal value, court must hold hearing to determine value and to decide whether avoidance of all or part of lien would consti-tute substantial deprivation of creditor's property rights and goods without due process of law. In re Morris (1981, BC ND Ill) 12 BR 321, 7 BCD 1336, CCH Bankr L Rptr P 68219.

Avoidance of creditor's lien is not violative of Fifth Amendment taking clause under 11 USCS § 522(f) where, although § 522(f) may be violative of Fifth Amendment in certain situations, collat-eral here constitutes consumer goods of rapidly declining value and security interest could not rea-sonably have been taken to guarantee repayment of underlying debt, however, in fact, instant trans-action appears to be typical consumer loan arrangement in which security was taken to provide creditor with leverage to enable collection of debt and it may be avoided. Lucas v Beneficial Fi-nance Co. (1982, BC SD Ohio) 18 BR 179.

Lien avoidance provision of 11 USCS § 522(f) does not violate Fifth Amendment. In re Carr (1982, BC ED Pa) 18 BR 794.

11 USCS § 522(f) is not unconstitutional taking of property without due process. In re Elsner (1983, BC DC SD) 35 BR 115.

Allowing spillover exemption of 11 USCS § 522(d)(5) for lien avoidance purposes does not render § 522(f) unconstitutional taking under Fifth Amendment; creditors have notice of Bank-ruptcy Code provision prior to acquisition of security interests, lien avoidance is limited as to kinds of property subject thereto and specific dollar maximums; avoidance of lien does not destroy under-lying debt but changes status of creditor from secured to unsecured position; taking is merely rear-rangement of private contractual right and not for public purpose. In re Walkington (1984, BC WD Mich) 42 BR 67, 11 CBC2d 276, CCH Bankr L Rptr P 69987.

11 USCS § 522(f)(2)(B) lien avoidance does not constitute "taking" of property in violation of protections of Fifth Amendment where creditor's security interest arose after effective date of statute and was, pursuant to Wisconsin statute, conditioned on debtor's right to avoid such security interests under Bankruptcy Code; § 522(f)(2)(B) is rational exercise of Congress' bankruptcy power, is pro-spective in application, and is merely "regulation," not "taking." In re Thompson (1988, BC WD Wis) 82 BR 985, 19 CBC2d 297.

Application of 11 USCS § 522(f) to avoid nonpossessory, nonpurchase money lien on Chapter 7 debtors' household furnishings does not effect unconstitutional taking of property where lien has been created well after enactment date of statute. In re Caruthers (1988, BC ND Ga) 87 BR 723, CCH Bankr L Rptr P 72335.

Formula of 11 USCS § 522(f)(2)(A) should be applied to exclude junior nonavoidable liens in computation of whether particular judgment lien impairs debtor's exemption, thereby avoiding con-stitutional issue of whether avoidance of property interests not avoidable under 1978 provisions would violate Fifth Amendment takings clause. Dolan v D.A.N. Joint Venture (In re Dolan) (1999,

Page 374 11 USCS § 522

BC DC Conn) 230 BR 642, 41 CBC2d 594 (criticized in In re Smith (2004, BC DC Mass) 315 BR 636, 52 CBC2d 1656).

11 USCS § 522(f) was not intended to alter state law lien priorities; to allow such alteration would violate Fifth Amendment takings clause of U.S. Constitution by eliminating existing property rights. In re Radcliffe (2002, BC WD Ky) 278 BR 426, 48 CBC2d 241, revd, in part on other grounds (2003, WD Ky) 2003 US Dist LEXIS 5286, affd (2005, CA6 Ky) 2005 US App LEXIS 5198 and (criticized in In re Smith (2004, BC DC Mass) 315 BR 636, 52 CBC2d 1656).

Creditor's lien on Chapter 7 debtors' homestead was born subject to debtors' right to avoid it pursuant to 11 USCS § 522(f)(1). Bruin Portfolio, LLC v Leicht (In re Leicht) (1998, BAP1 Mass) 222 BR 670, CCH Bankr L Rptr P 77806.

210.--Tenth Amendment

Considerations of federalism under Tenth Amendment of Constitution do not require barring application of 11 USCS § 522(f) where debtor seeks to avoid state welfare lien on real property that is exempt under Bankruptcy Code since Congress has plenary power to enact Code, and state failed to meet burden of demonstrating that avoidance of state welfare lien on such property so disrupted or frustrated state in performance of its welfare function that avoidance powers should be limited. In re Holt (1981, BC WD Pa) 11 BR 797, CCH Bankr L Rptr P 68251.

Tenth Amendment does not bar application of 11 USCS § 522(f)(1) to avoid judgment lien of state department of public welfare on real property of debtor. In re Graham (1981, BC ED Pa) 15 BR 1010.

211. Purpose

Congress enacted avoidance of lien provisions of 11 USCS § 522 to protect debtor's exemptions, discharge, and thus debtor's fresh start, in view of practice of creditors with judicial liens and non-purchase-money security interests under former Bankruptcy Act in taking unfair advantage over debtor by threatening foreclosure on property with little actual resale value, but considerable re-placement cost. In re Hill (1980, BC ND Ohio) 4 BR 310, 6 BCD 307, 2 CBC2d 123, CCH Bankr L Rptr P 67666.

Lien avoidance provisions of 11 USCS § 522 were adopted by Congress specifically in recogni-tion of fact that some creditors lending money to consumer debtor will take security interest in all debtor's household goods, and then have debtor waive exemption rights, so that creditor then may use threat of repossession as means of leverage in obtaining payment, although household goods themselves may be of little resale value, because replacement cost is so high; by permitting debtor to avoid nonpurchase money security interests, 11 USCS § 522 eliminates any unfair advantage creditors may have; however, application of 11 USCS § 522 should not be extended beyond evil it attempts to reach, and results should differ where property in question is truly valuable and was given as security due to its value. In re Steinart (1980, BC WD La) 4 BR 354, 6 BCD 623, 2 CBC2d 166, CCH Bankr L Rptr P 67457.

Legislative history of Bankruptcy Code intimates that purpose of 11 USCS § 522(f) is to give consumer debtors fresh start and to cure inadequacies in prior bankruptcy legislation under which they were accorded inadequate exemption rights. In re Lee (1982, BC ED Tenn) 21 BR 774.

Page 375 11 USCS § 522

Purpose of 11 USCS § 522(f) is to relieve debtors from creditor pressure to reaffirm debts on es-sential personal items where creditors have security interests in property that is necessary to debtor but of little resale value. In re Wetzel (1984, BC WD Va) 46 BR 254.

Congress intended, in 11 USCS § 522(f), to permit avoidance of creditors' liens obtained in rush before bankruptcy when liens attach after debtor had already acquired property and not in same transaction as judicial proceeding which transferred interest to debtor. In re Hart (1985, BC DC Nev) 50 BR 956, 13 CBC2d 190 (criticized in Huskey v Huskey (In re Huskey) (1995, BC SD Cal) 183 BR 218).

212. Relationship with other laws

Under 11 USCS § 522, which provides for avoidance of judgment liens on interest of debtor in property to extent that such lien impairs exemption, interest of debtor is limited to value of security which exceeds value due on secured indebtedness, so that where balance due on secured debt is greater than value of security, there is no interest which can be exempted, and, accordingly, lien avoidance is not ordinarily available remedy; however, where trustee, under 11 USCS § 547, would be able to avoid creditor's interest as preference, debtors may claim against him their exemption un-der 11 USCS § 522 once lien of creditor is avoided. In re Donaldson (1980, BC WD Mo) 7 BR 559.

Compliance with 28 USCS § 2403(a) by creditor in challenge to constitutionality of 11 USCS § 522(f) is not jurisdictional requirement, where creditor failed to notify United States Attorney Gen-eral of challenge. In re Melvin (1981, BC SD Fla) 13 BR 95; In re Melvin (1981, BC SD Fla) 13 BR 96.

Chapter 12 debtors may avoid, under 11 USCS § 522(f), bank's nonpurchase money security in-terest in exempt tools of trade, despite apparent conflict between § 522(f) and confirmation re-quirements of 11 USCS § 1225(a)(5)(B)(i). In re Dykstra (1987, BC ND Iowa) 80 BR 128, 16 BCD 907, 17 CBC2d 967, CCH Bankr L Rptr P 72040.

Correct way to establish effect, extent, and value of judicial lien not avoided by 11 USCS § 522(f), if any, is by use of 11 USCS §§ 502 and 506. In re Hermansen (1988, BC DC Colo) 84 BR 729, 18 CBC2d 952.

New Jersey statute providing that party may apply for order directing judgment to be canceled and discharged of record after one year has elapsed since that party was discharged from his or her debts in bankruptcy is merely alternative means to discharge judgment of record and it in no way prevents Bankruptcy Court from properly discharging judgment before expiration of one-year pe-riod; debtors may move to avoid fixing of lien under 11 USCS § 522(f) even after debtors have re-ceived discharge. In re Arevalo (1992, BC DC NJ) 142 BR 111, CCH Bankr L Rptr P 74712.

Where debtor voluntarily parted with value that trustee has recovered (for example, by consen-sual grant of security interest), debtor cannot meet requirement of 11 USCS § 522(g)(1)(A), and cannot use § 522(g)(1) as basis for his claim of exemption, but § 522(g)(2) opens debtor's right back out again for classes of assets that are subject to debtor's lien avoidance powers under § 522(f); thus, § 522(g)(2) trumps trustee's avoidance and recovery powers (11 USCS §§ 544, 550 and 551), to ex-tent of debtor's lien avoidance remedy under § 522(f). In re Flitter (1995, BC DC Minn) 181 BR 938.

Page 376 11 USCS § 522

11 USCS § 522 lien avoidance constitutes sufficient cause for reopening case under 11 USCS § 350(b), since lien avoidance affords relief to debtor. In re Levy (2000, BC DC NJ) 256 BR 563, 45 CBC2d 810.

Whether lien "impairs" exemption may be determined in every case by applying 11 USCS § 522(f)(2) formula, regardless of state-law limitations on exemption; thus, judgment lien could im-pair debtors' homestead even though New Mexico law did not allow it to attach to homestead. In re Cisneros (2000, BC DC NM) 257 BR 332.

Debtor who fails good faith test by not scheduling claim he had knowledge of loses federal rem-edy of lien avoidance as result of bad faith omission of debt, remedy which exists only pursuant to 11 USCS § 522, not as matter of state law; therefore, if case is not reopened, loss of federal jurisdic-tion will, unlike dischargeability question, preclude debtor's lien avoidance. In re Garrett (2001, BC SD Ga) 266 BR 910.

Under 11 USCS § 522(f), lien secured by motor vehicles was possessory and nonavoidable at commencement of debtor's Chapter 7 case, where parties had agreed that possessory status of lien would be preserved for later litigation as condition for debtor's having possession during prior Chapter 13 case, since, upon its dismissal, 11 USCS § 349(b) revested creditor with right to posses-sion. In re Beeman (2001, BC DC Kan) 268 BR 268.

Debtor's intent in failure to schedule claim was not relevant to bankruptcy court's decision to deny debtor's motion to reopen bankruptcy case, pursuant to 11 USCS § 350(b), in order to file mo-tion to avoid lien under 11 USCS § 522(f), where there were no assets and no bar date; case would not be reopened based upon doctrine of laches where debtor's delay in scheduling creditors and dealing with their liens resulted in prejudice to creditors. In re Frasier (2003, BC DC Colo) 294 BR 362, 50 CBC2d 1037.

Unlike other provisions in Bankruptcy Code and Federal Rules of Bankruptcy Procedure, 11 USCS § 522(f) and Fed. R. Bankr. P. 4003(d) did not set forth deadline for filing of lien avoidance motion, while 11 USCS § 350(b) and Fed. R. Bankr. P. 5010 did not contain any limitation on time for filing motion to reopen case; Fed. R. Bankr. P. 9024(1) also specifically excluded motions to reopen from one year time limitation prescribed by Fed. R. Bankr. P. 60(b). In re Frasier (2003, BC DC Colo) 294 BR 362, 50 CBC2d 1037.

In light of explicit language of 11 USCS § 522(f)(2)(A) defining "impairment," court was pro-hibited from looking to state law for definition; thus, bankruptcy court rejected creditor's contention that its lien had priority over later mortgage lien and, thus, should not be avoided as it did not impair debtors' homestead exemption because 11 USCS § 522(f)(2) required bankruptcy court to include mortgage in impairment analysis. In re Northern (2003, BC ED Tenn) 294 BR 821. Unpublished Opinions

Unpublished: Creditor had not established that stay pending appeal of bankruptcy court's inter-locutory order granting debtor's motion to reopen was warranted, in part, because creditor had not shown likelihood of success on merits when debtor's reasons for reopening, to determine status of lien on exempt property, were valid, pursuant to 11 USCS § 350, particularly when debtor sought to avoid lien pursuant to 11 USCS § 522(f). In re DuCharme (2008, BC DC Vt) 2008 Bankr LEXIS 764.

Page 377 11 USCS § 522

213. Application to Chapter 12

Lien avoidance provisions of 11 USCS § 522(f) are applicable in Chapter 12. In re Ptacek (1987, BC DC ND) 78 BR 986.

11 USCS § 522(f) applies in Chapter 12 cases. In re Dykstra (1987, BC ND Iowa) 80 BR 128, 16 BCD 907, 17 CBC2d 967, CCH Bankr L Rptr P 72040.

Lien avoidance under 11 USCS § 522(f) is available in Chapter 12 case but actual avoidance of lien may not occur until discharge becomes effective pursuant to 11 USCS § 1228. In re Huner-dosse (1988, BC SD Iowa) 85 BR 999.

Ohio homestead exemption may be used to avoid lien on debtor's property even if property is not presently subject of involuntary execution since 1994 amendment to 11 USCS § 522(f) had ef-fect of overruling contrary Sixth Circuit precedent; thus, judicial lien against Chapter 7 debtor's homestead may be avoided in full where amount of impairment is greater than amount of lien sought to be avoided. In re Jakubowski (1996, BC ND Ohio) 198 BR 262 (criticized in In re Colston (1997, BC SD Ohio) 213 BR 704, 38 CBC2d 1585). NOTES: 214. Application to Chapter 13

Lien avoidance power contained in 11 USCS § 522(f) applies in Chapter 13 proceedings. In re Hall (1985, CA11 Ga) 752 F2d 582, 12 BCD 949, 11 CBC2d 1367, CCH Bankr L Rptr P 70249 (criticized in In re Bland (1986, CA11 Ga) 793 F2d 1172, 14 BCD 1416, 15 CBC2d 666, CCH Bankr L Rptr P 71219) and (ovrld in part as stated in Gamble v Brown (In re Gamble) (1999, CA11 Ga) 168 F3d 442, CCH Bankr L Rptr P 77893, 12 FLW Fed C 550); Transouth Financial Corp. v Paris (1982, WD Tenn) 26 BR 184; In re Ohnstad (1980, BC DC SD) 6 BCD 6, 1 CBC2d 494; In re Thurman (1982, BC WD Tenn) 20 BR 978, affd (1982, WD Tenn) 26 BR 184; In re Coma (1982, BC WD Pa) 25 BR 103; In re Leecan (1983, BC ED Pa) 27 BR 907; In re Rasmus (1983, BC MD Fla) 34 BR 9, CCH Bankr L Rptr P 69514; In re Schneider (1984, BC ND Ga) 37 BR 747, 38 UCCRS 1013 (criticized in In re Gentry (2003, BC CD Ill) 297 BR 553); In re Quidley (1984, BC ED Va) 39 BR 362.

Debtor must cross best-interests-of-creditor threshold to have confirmable plan under Chapter 13, and under 11 USCS § 1325 plan generally must provide that unsecured creditors receive at least as much value as they would have received in Chapter 7 liquidation, and that secured creditors must receive present value of collateral; thus, under relatively limited circumstances, avoiding lien under § 522(f) would allow debtor to file Chapter 13 bankruptcy that he would not otherwise have been able to file; he may do so because § 522(f) converts creditor's status from secured to unsecured, thereby changing amount due that creditor. Tower Loan v Maddox (In re Maddox) (1994, CA5 Miss) 15 F3d 1347, 30 CBC2d 1510, CCH Bankr L Rptr P 75764.

In typical Chapter 13 case, lien avoidance under 11 USCS § 522(f) only adjusts distribution of payments under creditors; putative secured creditor drops into unsecured creditor class, thereby de-creasing his share of payments, while share of payments received by original class of unsecured creditors increases concomitantly; consequently, in great majority of Chapter 13 cases trustee is as-serting lien avoidance under § 522(f) to protect interests of this original class of unsecured creditors. Tower Loan v Maddox (In re Maddox) (1994, CA5 Miss) 15 F3d 1347, 30 CBC2d 1510, CCH Bankr L Rptr P 75764.

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11 USCS § 522(f) applies in Chapter 13 bankruptcies. Tower Loan v Maddox (In re Maddox) (1994, CA5 Miss) 15 F3d 1347, 30 CBC2d 1510, CCH Bankr L Rptr P 75764.

Lien avoidance, pursuant to 11 USCS § 522, is not improper under provisions of 11 USCS § 1327 where lien avoidance is sought after confirmation of plan pursuant to § 1327. In re Ward (1981, SD Ga) 14 BR 549, 32 UCCRS 1215.

Application of 11 USCS § 522 to Chapter 13 case does not conflict with 11 USCS § 1325(a)(5)(B); after lien is awarded under 11 USCS § 522(f), it is not an allowed secured claim pro-vided for by plan. Transouth Financial Corp. v Paris (1982, WD Tenn) 26 BR 184.

Chapter 13 debtor has strong arm powers of trustee under 11 USCS § 544 so long as require-ments of 11 USCS § 522, and §§ 544-547 are fulfilled; Chapter 13 debtor, as property owner against whom creditor did perfect statutory lien under applicable state law, may avoid such lien to amount such lien impairs exempt property under 11 USCS § 522, if under such section, transfer is avoidable by trustee and trustee does not choose to act; thus debtor may avoid such transaction if transfer was involuntary, debtor did not conceal property, and debtor could have exempted such property but for transfer, and lien, although valid against debtor, would not have been valid against bona fide pur-chaser of property under state law, and thus would not be valid against trustee. In re Saberman (1980, BC ND Ill) 3 BR 316, 6 BCD 146, 1 CBC2d 671, CCH Bankr L Rptr P 67416.

Bankruptcy Court will specify, as condition to approval of Chapter 13 plan, that plan be modi-fied so as to void judgment liens against debtor's property, which are voidable under 11 USCS § 522 because they impair debtor's homestead exemption, in order to provide adequate protection to mort-gagee, as required by 11 USCS § 1325 as condition for confirmation. In re Polvino (1980, BC WD NY) 4 BR 677.

Lien avoidance provisions of 11 USCS § 522 are applicable in Chapter 13 proceeding, and are not inconsistent with provisions of 11 USCS § 1325 that secured creditor who does not accept plan may be crammed down only if said creditor is permitted to retain lien on subject collateral; under 11 USCS § 1322, debtor is permitted to classify unsecured claims, and creditor with avoided lien in Chapter 13 case becomes part of separate class of unsecured creditors who are compensated for loss of security by obtaining indubitable equivalent of secured claim as compared to other unsecured creditors. In re Snow (1980, BC SD Ohio) 8 BR 113, CCH Bankr L Rptr P 68078.

Chapter 13 debtor may not use 11 USCS § 522(f) to avoid nonpossessory, nonpurchase-money security interests in household and personal goods where debtor's interests in goods does not exceed value of exemptions available to him under § 522(b) and (d). In re Sands (1981, BC MD NC) 15 BR 563, 8 BCD 424, 5 CBC2d 832, CCH Bankr L Rptr P 68471.

Debtor in Chapter 13 case is not entitled to exempt property from property of estate under 11 USCS § 522(b), therefore, there can be no impairment of exemption and 11 USCS § 522(f) is not applicable in Chapter 13 case. In re Aycock (1981, BC ED NC) 15 BR 728, 8 BCD 507, 5 CBC2d 856.

11 USCS § 522(f) lien avoidance is designed to protect debtor's exemption rights, but since there are no exemptions granted in Chapter 13, no such protection is required for Chapter 13 proceedings; exemption issues in Chapter 13 are limited to advising Bankruptcy Court of existence of such ex-emptions in required Chapter 13 statement so that court may determine whether confirmation stan-dard of 11 USCS § 1325(a)(4) is met by debtor; therefore, in Chapter 13 case, debtor will not be

Page 379 11 USCS § 522

permitted to utilize 11 USCS § 522(f) to avoid either judicial lien or non-possessory or nonpurchase money security interest but security interest, if otherwise valid, will be recognized and paid through plan according to confirmation order. In re Corden (1982, BC MD Fla) 19 BR 552, 6 CBC2d 594.

Chapter 13 debtor can use 11 USCS § 522(f) to avoid nonpurchase money nonpossessory secu-rity interest in household goods, however, where creditor and debtor consolidated several purchase money agreements, secured agreement provided clear and fair way to apportion payments made by debtors among purchase prices of various collateral, and, therefore, creditor retains its purchase money liens upon household items and gun and must be treated as having secured claim to extent of $ 2,100 under debtor's Chapter 13 plan, and unsecured claim for remainder of debt. In re Mattson (1982, BC WD Wis) 20 BR 382.

Inasmuch as neither Bankruptcy Code nor Interim Bankruptcy Rules fix bar date for filing ac-tion under 11 USCS § 522(f) for lien avoidance of non-purchase money and non-possessory liens, there is no valid reason why Chapter 13 debtor should not be able to seek lien avoidance so long as Chapter 13 case is pending or at least prior to expiration of time allowed for debtor to file Chapter 13 plan. In re Babineau (1982, BC MD Fla) 22 BR 936, 9 BCD 855.

Provisions of 11 USCS § 522(f) are applicable in Chapter 13 proceeding and where creditor's loan to debtor is not purchase-money loan since, although portion of loan enabled debtor to pur-chase household goods, portion of loan was also consolidation of pre-existing debt, consequently, creditor does not have purchase-money security interest and security interest in property may be avoided. In re Cameron (1982, BC ND Ga) 25 BR 410.

Chapter 13 debtors may avoid nonpossessory, nonpurchase-money security interest in house-hold goods and other exempt personal property under 11 USCS § 522(f); 11 USCS § 522(f) relief is available to Chapter 13 debtors. In re Lincoln (1982, BC WD Mich) 26 BR 14.

11 USCS § 522(f) is available to Chapter 13 debtor; Chapter 13 debtor is entitled to claim same exemptions that Chapter 7 debtor is allowed and may avoid nonpossessory, nonpurchase money se-curity interest in property which is subject to exemption under 11 USCS § 522(b) and is of type des-ignated in § 522(f)(2); § 522(f) is not in conflict with 11 USCS § 1325(a)(5)(b). In re Slykerman (1983, BC ED Mich) 29 BR 82, 10 BCD 1033.

Chapter 13 debtor cannot avoid prepetition execution lien on personal property and cause prop-erty to be turned over to him. In re Berry (1983, BC ED Mich) 30 BR 36, 10 BCD 1425, 8 CBC2d 967, CCH Bankr L Rptr P 69323.

Construing 11 USCS § 522(f) and 11 USCS § 1325(a)(5) together, lien avoidance provisions of § 522(f) apply to bankruptcy proceedings under Chapter 13; since New York debtor filing under Chapter 13 is entitled to homestead exemption not exceeding $ 10,000 in his principal residence under New York Debtor and Creditor Law § 282 and New York Civil Practice Law § 5206(a), and debtor's residence is valued at $ 7,000, debtor is entitled to homestead exemption for latter amount, and debtor may avoid judicial lien to that extent. In re Blake (1984, BC ED NY) 38 BR 604, CCH Bankr L Rptr P 69819.

Where clear trend of authority is contrary to Bankruptcy Court's earlier holding in Re Corden (1982, BC MD Fla) 19 BR 552, court will recede from its earlier position and allow Chapter 13 debtor to avoid judicial liens and nonpossessory purchase-money security interests under 11 USCS § 522(f); pursuant to general provisions of 11 USCS § 103 based upon reasoning that (1) value of

Page 380 11 USCS § 522

exemptions may be material in determining whether plan meets best interests test of 11 USCS § 1325(a)(4) or impact upon waiver of discharge under 11 USCS § 1328(a) or hardship discharge un-der 11 USCS § 1328(b), (2) threat of repossession of household goods may encourage coerced reaf-firmation agreements, and (3) chances of success of plan may be enhanced by ability to treat debt as unsecured under plan and by loss of ability of creditor to bring motion for relief from automatic stay. In re Cowart (1984, BC MD Fla) 43 BR 110, 12 BCD 512, 11 CBC2d 530, CCH Bankr L Rptr P 70070.

Lien avoidance procedures of 11 USCS § 522(f) clearly apply to Chapter 13 proceedings pursu-ant to 11 USCS 103(a). In re Berrong (1985, BC DC Colo) 53 BR 640, 13 CBC2d 669, CCH Bankr L Rptr P 70760.

11 USCS § 522(f) remedy may be applied to avoid nonpossessory, nonpurchase money liens against large farming equipment and implements in Chapter 13 case. In re Schyma (1985, BC DC Minn) 68 BR 52.

Chapter 13 debtor may utilize 11 USCS § 522(f) to avoid nonpossessory nonpurchase money lien on household goods; lien avoidance under § 522(f) applies to available state exemptions not-withstanding any limitations state may put on available exemptions--once state lists particular type of property as available exempt property, any further state action defining lien-encumbered property as not exempt is subject to provisions of 11 USCS § 522(f). In re Thompson (1986, BC WD Tex) 59 BR 690.

Chapter 13 debtors may avoid liens under 11 USCS § 522(f). In re Bowers (1987, BC DC Conn) 69 BR 822, revd on other grounds (1987, DC Conn) 78 BR 388, app dismd (1988, CA2 Conn) 847 F2d 1019.

Secured creditor is not obligated to object to debtor's claim of exemption or to file proof of claim in order to preserve its lien, especially in Chapter 13 case; failure by judicial lien creditor to object to exemption claims within time frame set out in Bankruptcy Rule 4003(b) will not prevent that creditor from asserting invalidity of lien under § 522(b) as defense to debtor's lien avoidance action. In re Mitchell (1987, BC WD Tex) 80 BR 372, 17 CBC2d 1379.

Because Chapter 13 debtor's objection to secured status of creditor's claim is predicated entirely upon her attempt to avoid lien under 11 USCS § 522(f)(1), this objection is subsumed by her motion to avoid judicial lien. In re Windfelder (1988, BC ED Pa) 82 BR 367.

Chapter 13 debtor's adversary proceeding under 11 USCS § 506(a) seeking to determine secured status of creditor's claim is subsumed by her motion to avoid creditor's lien under 11 USCS § 522(f)(1); Bankruptcy Rule 4003(d) requires that cases under § 522(f) be heard, on motion, as con-tested matters. In re Windfelder (1988, BC ED Pa) 82 BR 367.

For purposes of 11 USCS § 522(f)(1), valuation of Chapter 13 debtor's interest in property is es-tablished as of date bankruptcy case commenced. In re Windfelder (1988, BC ED Pa) 82 BR 367.

Adversary complaint filed by Chapter 13 debtors against vendee of commercial property that was seized by judgment creditor and sold to vendee was dismissed on ruling that debtors lacked standing to exercise avoidance powers granted to trustee under 11 USCS § 544 or 11 USCS § 548 because only transfers that were voidable by Chapter 13 debtor pursuant to 11 USCS § 522(h) were those affecting property that debtors could have exempted and because debtors had elected applica-tion of exemptions in Tex. Prop. Code Ann. §§ 41.001(a) and 41.002(a), which did not provide any

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basis for debtor to claim exemption as to interests in commercial property. Salaymeh v Plaza Centro LLC (In re Mohyadein) (2007, BC SD Tex) 361 BR 822.

Although wholly unsecured junior mortgage on principal residence was not protected from modification by 11 USCS § 1322(b)(2), if lien had any value, regardless of how small, it was con-sidered "secured claim" and creditor's rights could not be modified; because there was equity in debtors' real property, creditor's judgment lien was considered secured and could not be stripped. In re Edmunds (2007, BC WD Ky) 373 BR 5.

215. Applicable law

Although state law governs question of Chapter 7 debtors' exemption of their breeding cattle, federal law determines availability of lien avoidance under 11 USCS § 522(f); liens on property ex-empt under Kansas law are avoidable only if enumerated in 11 USCS § 522(f)(2). In re Heape (1989, CA10 Kan) 886 F2d 280, 19 BCD 1397, CCH Bankr L Rptr P 73160.

Chapter 13 debtor may avoid nonpossessory, non-purchase-money lien under 11 USCS § 522(f) on property exempt from seizure under state law, even though that lien falls within state law excep-tion to such exemption; although states remain free to define property eligible for exemptions under § 522(b), particular liens that may be avoided on that property are determined by reference to fed-eral law, specifically § 522(f). Tower Loan v Maddox (In re Maddox) (1994, CA5 Miss) 15 F3d 1347, 30 CBC2d 1510, CCH Bankr L Rptr P 75764.

Although Bankruptcy Courts defer to state law when determining amount of allowable state homestead exemption, 11 USCS § 522(f) still controls availability of lien avoidance. David Dorsey Distrib. v Sanders (In re Sanders) (1994, CA10 Utah) 39 F3d 258, 32 CBC2d 582, CCH Bankr L Rptr P 76187 (superseded by statute as stated in Pepper v Public Serv. Emples. Credit Union (In re Pepper) (1997, BC DC Colo) 210 BR 480, 14 Colo Bankr Ct Rep 205, 38 CBC2d 596) and (super-seded by statute as stated in In re Richardson (1998, BC ND Okla) 224 BR 804, 40 CBC2d 980, CCH Bankr L Rptr P 77815) and (superseded by statute as stated in Parsons v Investment Co. (In re Parsons) (1999, BAP10 NM) 16 Colo Bankr Ct Rep 55).

Federal District Court looks to state law to determine validity, nature, and effect of liens in bankruptcy proceedings, with substantive law of state with jurisdiction over property governing dis-position of issue; thus, Pennsylvania law governed determination of validity, nature, and effect of attorney's lien against Chapter 7 debtor's interest in spendthrift trust where trust was created under Pennsylvania law and trust corpus was located in Pennsylvania. Schreiber v Kellogg (1996, ED Pa) 194 BR 559, affd, in part, revd, in part on other grounds (1997, CA3 Pa) 124 F3d 188.

Language of 11 USCS § 522(f)(1), which permits debtor to avoid fixing of judicial lien, must be read in conjunction with state law; court must determine that debtors are entitled under state law to exemptions claimed, in amount claimed, and court must determine whether lien impairs debtor's exemption by applying state law governing priorities of real property interest. In re Register (1983, BC ND Ga) 37 BR 708.

If unencumbered property of specified type may be exempted under state exemption statute, then nonpurchase money lien on that type of property can be avoided under 11 USCS § 522(f), be-cause although state may elect to control what property is exempt under state law, federal law de-termines availability of lien avoidance; in present case, although Texas law specifically excludes encumbered property from qualifying as exempt, debtors may avoid nonpurchase money lien on

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furniture and piano which secures amount greater than value of property because debtors would be entitled to interest in property to which § 522(b) exemption could attach in absence of lien. In re Kelly (1991, BC ND Tex) 133 BR 811, 22 BCD 479.

Homestead exemption under Connecticut statute was available to Chapter 7 debtors so as to permit avoidance of judgment lien as impairing that exemption where credit card debt on which judgment was obtained had been incurred after reduction of account balance to zero, which oc-curred after effective date of homestead exemption statute, even though credit card had been issued prior to statute's effective date. Caraglior v World Savings & Loan (In re Caraglior) (2000, BC DC Conn) 251 BR 778.

216. Discretion of court

Bankruptcy Court should be initial judge of whether any lien is avoidable under 11 USCS § 522 or other provisions of Bankruptcy Code. In re Donahue (1988, CA10 Kan) 862 F2d 259, 18 BCD 980.

Where literal interpretation of 11 USCS § 522(f)(2)(A) would produce result at odds with con-gressional intent, court will not follow literal language of statute, but rather, will utilize equity analysis. In re Ware (2001, BC DC SC) 274 BR 206, 47 CBC2d 1489.

Bankruptcy court's order regarding lien motion had to be vacated because § 522(f) required that court could not use its discretion in applying section because statute provided simple arithmetic test to determine whether exemption was impaired; bankruptcy court only looked to prejudice of credi-tor as opposed to applying strict mathematical test to lien motion. Snyder v Rockland Trust Co. (In re Snyder) (2002, BAP1) 279 BR 1, 39 BCD 190, 48 CBC2d 538.

217. Sovereign immunity

Sovereign immunity is not available to Farmers Home Administration in connection with 11 USCS § 522(f) claims. In re Yoder (1984, WD Pa) 48 BR 744.

11 USCS § 522(f) could be used to avoid certain liens possessed by FmHA in crops, equipment, and livestock since government, like any secured party, is subject to avoidance of lien; pursuant to 11 USCS § 106, sovereign immunity does not apply. Flick v United States (1985, WD Pa) 47 BR 440, CCH Bankr L Rptr P 70379.

Sovereign immunity does not bar application of 11 USCS § 522(f) to United States to defeat ex-emption. In re Yoder (1983, BC WD Pa) 32 BR 777, affd in part and revd in part on other grounds (1984, WD Pa) 48 BR 744 and (criticized in In re Larson (2001, BC DC Colo) 260 BR 174, 2001 Colo J C A R 2723).

Doctrine of sovereign immunity does not act as bar to debtor's action to avoid nonpossessory, nonpurchase-money security interest in certain tools of debtor's trade which have been claimed as exempt by debtor; although 11 USCS § 522(f)(2)(B) does not contain words "creditor," "entity," or "governmental unit," which are specified in 11 USCS § 106(c) being applicable to governmental units, lien avoidance statute applies to United State in light of legislative history to 11 USCS § 522, which suggests lack of distinction between governmental and non-governmental units. In re Dim-mig (1984, BC ED Pa) 41 BR 396, CCH Bankr L Rptr P 70007.

Terminology of 11 USCS §§ 106 and 522 is sufficiently explicit to waive right of Farmers Home Administration to assert defense of sovereign immunity as against right of debtor farmers to

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avoid nonpossessory, non-purchase money security interest in items of farm equipment claimed as exempt. In re Kight (1985, BC WD Pa) 49 BR 437.

Bankruptcy court granted debtors' motion to avoid lien where (1) lien attached when creditor served bank in which debtors maintained account with writ of execution, (2) lien was never extin-guished because funds remained in bank's control, (3) lien was subject to 11 USCS § 522(f) because it was in existence when debtors filed for bankruptcy, and (4) lien impaired exemption to which debtor wife would have been entitled, in that she had enough unapplied value under "pour-over" exemption of 11 USCS § 522(d)(5) to cover funds. In re Howard (2004, BC DC Minn) 307 BR 659.

Tribal sovereign immunity was matter of common law, not Eleventh Amendment; however, case law defining parameters of states' sovereign immunity and interpreting term "suit" under Elev-enth Amendment was persuasive and bankruptcy court's order dismissing debtor's motion to avoid judicial lien under 11 USCS § 523(f)(1)(A) was upheld on sovereign immunity grounds, as motion would divest creditor Indian tribe of property interest which otherwise could be be enforced against exempt property under 11 USCS § 522(c)(2), and was suit for sovereign immunity purposes. Mayes v Cherokee Nation (In re Mayes) (2003, BAP10) 294 BR 145.

218. Effect of lien avoidance

Debtor may avoid judicial lien against property exempted under North Carolina's homestead ex-emption; however, lien is not cancelled because under North Carolina law, debtor would not be en-titled to homestead exemption if she discontinues using property as residence or conveys ownership to another party. In re Love (1985, ED NC) 54 BR 947.

11 USCS § 522(f) gives debtor statutory lien superior to judicial lien or nonpossessory, nonpur-chase-money security interest in categories of personalty enumerated in § 522(f)(2)(A), (B) and (C). In re Phillips (1981, BC CD Ill) 13 BR 82, 4 CBC2d 1467.

Right of debtor to avoid lien under 11 USCS § 522(f) has effect of making perfected judicial and certain other liens avoidable, but not void. In re Serafini (1983, BC WD Pa) 30 BR 606, 8 CBC2d 1334, CCH Bankr L Rptr P 69259, affd (1984, WD Pa) 41 BR 880.

Any lien or portion of lien in excess of value of property and consequently avoided pursuant to 11 USCS § 522(f) will be unsecured claim under 11 USCS § 506. In re Duncan (1984, BC DC Alaska) 43 BR 833, 12 BCD 685, 11 CBC2d 677, CCH Bankr L Rptr P 70119.

Judicial liens on debtor's residential property which had been avoided pursuant to 11 USCS § 522(f) are void and not merely subordinated to debtor's exemption although obligation underlying lien is not negated and creditor has unsecured claim where property is not to be abandoned from estate and is not to be subjected to foreclosure; allowing liens to remain intact until debtor develops equity in property would frustrate "fresh start" objective and debtor's right to finality of proceed-ings. In re Morelock (1985, BC ND Ohio) 47 BR 533, 12 BCD 1154, 12 CBC2d 570.

Under 11 USCS § 522(f), when Chapter 7 debtors have avoided judgment lien on homestead property, holder of lien cannot claim any of debtors' postpetition, additional interest in property to satisfy lien; rather, lien is avoided to extent of exemption, and when amount of exemption is greater than amount of prepetition equity, there is nothing to which lien may attach. In re Blevins (1985, BC WD Va) 53 BR 74.

Once debtors' claim of exemption to property has been allowed by running of period for objec-tion to claim of objections under Bankruptcy Rule 4003(b), property revests in debtors and is no

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longer property of estate; however, substantive transfer of exempt property from estate to debtors occurring when exemptions are allowed does not affect debtors' right to use remaining exemption rights not so exhausted to defeat rights of judicial lien creditors under 11 USCS § 522(f). In re Hahn (1985, BC DC Minn) 60 BR 69.

Homestead deed does not extinguish judgment liens against exempt property but merely pre-vents seizure and sale of encumbered property in order to satisfy debt underlying lien and absent lien avoidance proceeding under 11 USCS § 522(f), lien survives discharge in bankruptcy and con-tinues in force even on exempt homestead property; subsequent purchaser of encumbered home-stead property then takes property subject to creditor's liens. In re Trammel (1986, BC ED Va) 63 BR 878, 15 CBC2d 998.

11 USCS § 522(f)(1) does not authorize avoidance of any portion of judicial lien to extent it ex-ceeds amount by which Chapter 7 debtor's exemption is impaired--lien is valid and enforceable to extent it secures indebtedness in excess of amount by which exemption is impaired. In re Sanglier (1991, BC ED Mich) 124 BR 511.

Judgment creditor's lien, to extent it remains on bankruptcy debtor's property, rides through debtor's bankruptcy unaffected; bankruptcy court has no authority to stop accruing of postpetition interest or modify creditor's unaffected judgment lien by virtue of debtor's avoidance action. In re Kanakaris (2006, BC SD Cal) 341 BR 33.

Where one of creditor's judgment liens was partially avoided to protect bankruptcy debtor's homestead exemption under 11 USCS § 522(f), liens were otherwise unaffected by debtor's bank-ruptcy and thus creditor was entitled to post-petition accrual of interest on liens. In re Kanakaris (2006, BC SD Cal) 341 BR 33.

In Kansas, as in most if not all other states, while discharge in bankruptcy will prevent debtor from being personally liable on dischargeable debt, debt itself is not extinguished and creditor hold-ing security interests in exempt property may look to that property for satisfaction of debt. Garnett State Sav. Bank v Tush (1983) 232 Kan 447, 657 P2d 508, 35 UCCRS 608.

In bankruptcy, only personal liability is discharged; unavoided liens may be enforced notwith-standing discharge. Reichert v Koch (1983) 202 Mont 167, 655 P2d 993.

Debtor-attorney's homestead exemption in house, of which he owned 25 percent and his wife owned 75 percent, was not impaired by judgment lien because, after deducting all prior liens and homestead exemption, there was no surplus to which lien could attach, since surplus equity must be calculated after deducting all joint encumbrances from total value of residence, not from debtor's fractional interest. Wiget v Nielsen (In re Nielsen) (1996, BAP9 Cal) 197 BR 665, 96 CDOS 5516, 96 Daily Journal DAR 8807, CCH Bankr L Rptr P 77052 (criticized in In re Piersol (2000, BC ED Pa) 244 BR 309, 43 CBC2d 1268, CCH Bankr L Rptr P 78112). Unpublished Opinions

Unpublished: Although creditor's lien was avoided under 11 USCS § 522(f), creditor was granted relief from stay to renew judgment because, if debtor failed to complete his plan, and case was dismissed, then judgment would have once again become valid and enforceable lien upon debtor's property. In re Austin (2007, BC DC Vt) 2007 Bankr LEXIS 3196.

B.Determination of Impairment of Exemptions

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Creditor's judicial lien on debtor's property did not impair his homestead exemption, under state law, because he could not stack exemption he claimed under Mass. Gen. Laws ch. 188, § 1A, for being disabled person, with exemption his spouse claimed under Mass. Gen. Laws ch. 188, § 1, as homeowner, and, using formula in 11 USCS § 522(f)(2), sum of creditor's lien and another lien on property, plus one homestead exemption debtor could claim, did not exceed property's value as of date bankruptcy petition was filed. Garran v SMS Fin. V, LLC (In re Garran) (2003, CA1 Mass) 338 F3d 1, CCH Bankr L Rptr P 78887.

Avoidance power of debtor under 11 USCS § 522(f) may be applied to security interest held by United States only to extent that lien impairs exemption allowable under § 522(b). Augustine v United States (1981, WD Pa) 5 CBC2d 542.

Liens are to be avoided under 11 USCS § 522 in descending order of their priorities as estab-lished by 11 USCS § 724. In re Hoffman (1983, BC DC Md) 28 BR 503, CCH Bankr L Rptr P 69126.

Under 11 USCS § 522(f), debtors may avoid judicial lien on homestead even though lien would be unimpaired under state homestead law, and even if debtors failed to perfect their homestead dec-laration until after fixing of lien. In re Stacher (1985, BC ED Cal) 50 BR 18.

Pursuant to state law, nonpossessory, nonpurchase-money security interest may be avoided un-der 11 USCS § 522(f)(1)(B) only when property affected by exemption is subject to execution, gar-nishment, attachment or sale to satisfy judgment or order. In re Morgan (1995, BC SD Ohio) 179 BR 868.

Calculation of impairment under section 522(f) is relatively straightforward, consisting of ag-gregating amounts represented by subsections (i)-(iii) and then comparing that sum to value of debtor's unencumbered fee simple interest in residence, and difference is extent to which attachment impairs debtor's presumed exemption and extent to which attachment will be avoided by court or-der. Corson v Fidelity & Guar. Ins. Co. (In re Corson) (1997, BC DC Conn) 206 BR 17.

Plain meaning of 11 USCS § 522(f)(2)(A) dictates that in applying formula for determining im-pairment of exemption, partially undersecured judicial liens that encumber equity over and above total sum of unavoidable liens and allowable exemption need not be avoided in their entirety. In re Ryan (1997, BC DC Mass) 210 BR 7.

Where Chapter 7 debtor claimed as exempt residence owned with non-debtor spouse, Bank-ruptcy Court would not determine extent of impairment by deducting all encumbrances on property from debtor's interest since, notwithstanding plain language of 11 USCS 522(f)(2)(A) dictates this result, this would lead to absurd windfall for debtor; court would determine impairment by (1) de-ducting amount of mortgage from value of entire property, (2) calculating debtor's interest in prop-erty to be one half that sum, (3) deducting debtor's exemption from amount of his interest to arrive at sum which would be compared to creditor's lien to determine whether that lien impaired debtor's exemption. Lehman v VisionSpan, Inc. (In re Lehman) (1998, BC ND Ga) 223 BR 32 (criticized in In re Piersol (2000, BC ED Pa) 244 BR 309, 43 CBC2d 1268, CCH Bankr L Rptr P 78112) and affd (2000, CA11 Ga) 205 F3d 1255, 43 CBC2d 1369, CCH Bankr L Rptr P 78125, 13 FLW Fed C 437 (criticized in Milgard Tempering, Inc. v DaRosa (In re DaRosa) (2004, BAP9) 318 BR 871, CCH Bankr L Rptr P 80249).

Page 386 11 USCS § 522

Petition date is operative date to make all 11 USCS § 522(f) determinations. In re Salanoa (2001, BC SD Cal) 263 BR 120.

Pursuant to 11 USCS § 522(f)(2)(A), lien impairs exemption under Chapter 7 of Bankruptcy Code to extent that sum of following exceeds value that debtor's interest in property would have in absence of any liens: (1) lien at issue, (2) all other liens on property, and (3) amount of exemption that debtor could claim if there were no liens on property; this provision was intended to provide simple arithmetic test to determine whether judicial lien impairs exemption. Thigpen v Cadle Co. (In re Thigpen) (2007, BC SD Ga) 374 BR 374.

220. Formal requirements

Three-step process is utilized to determine whether 11 USCS § 522(f) applies: (1) court deter-mines whether debtor is entitled to exemption; (2) court determines extent to which lien can be avoided; and (3) court determines whether lien does, in fact, impair exemption. David Dorsey Dis-trib. v Sanders (In re Sanders) (1994, CA10 Utah) 39 F3d 258, 32 CBC2d 582, CCH Bankr L Rptr P 76187 (superseded by statute as stated in Pepper v Public Serv. Emples. Credit Union (In re Pep-per) (1997, BC DC Colo) 210 BR 480, 14 Colo Bankr Ct Rep 205, 38 CBC2d 596) and (superseded by statute as stated in In re Richardson (1998, BC ND Okla) 224 BR 804, 40 CBC2d 980, CCH Bankr L Rptr P 77815) and (superseded by statute as stated in Parsons v Investment Co. (In re Par-sons) (1999, BAP10 NM) 16 Colo Bankr Ct Rep 55).

To avoid lien under 11 USCS § 522(f), debtor must demonstrate, in order, that there is (a) prop-erty of estate, (b) in which debtor can claim valid exemption, to extent of which (c) lien against that property may be avoided under § 522(f). In re Gibbs (1984, BC WD Ky) 39 BR 214.

Where literal interpretation of 11 USCS § 522(f)(2)(A) would produce result at odds with con-gressional intent, court will not follow literal language of statute, but rather, will utilize equity analysis. In re Ware (2001, BC DC SC) 274 BR 206, 47 CBC2d 1489.

Judgment creditor failed to show that liens which allegedly constituted fraudulent transfers were excludable in determining whether bankruptcy debtor's exemption in real property was impaired for purposes of avoiding creditor's lien under 11 USCS § 522(f), since bankruptcy trustee did not pursue avoidance actions with regard to transfers, statutory period for bringing such actions expired, and creditor was precluded from asserting untimely and defensive avoidance of liens. In re Bowshier (2008, BC SD Ohio) 389 BR 542.

Where judgment creditor asserted that lien against bankruptcy debtor's real property was also secured by other assets and argued that assets should be marshaled in determining whether debtor's exemption in real property was impaired for purposes of avoiding creditor's lien under 11 USCS § 522(f), there was no basis for marshalling assets to determine that portion of lien which was ade-quately secured by other assets, since § 522(f) expressly required that amounts of all liens be to-talled unless lien was actually avoided. In re Bowshier (2008, BC SD Ohio) 389 BR 542.

221. Ownership requirement

Debtor need not have interest in property at time debtor moves to avoid lien because operation of 11 USCS § 522(f) is not to avoid "lien," per se, although that is its practical effect in most cases, but rather, it provides for avoidance of "fixing" of certain liens; § 522(f) operates retrospectively to annul event of fastening subject lien upon property interest and fundamental question of ownership is whether property encumbered by subject lien was "property of the debtor" at time of fixing of that

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lien upon such property. Culver, LLC v Kai-Ming Chiu (In re Kai-Ming Chiu) (2002, CA9) 304 F3d 905, 2002 CDOS 9617, 40 BCD 63, CCH Bankr L Rptr P 78719.

Pennsylvania debtor who elects exemption under 11 USCS § 522(b)(2) may claim as exempt only undivided interest in ownership equity rather than entire value of property; 11 USCS § 522(f) is inapplicable since judicial lien sought to be enforced by creditors does not impair debtor's allowable exemption under state law. In re Cipa (1981, BC WD Pa) 11 BR 968, 7 BCD 1026.

Debtor will not be allowed to avoid perfected security agreement against vehicle pursuant to 11 USCS § 522(b)(2)(B) where there is no evidence introduced by debtor to establish ownership of ve-hicle as estate by entirety, transfer of vehicle was to spouse and not to him and debtor as tenants by entirety, and there was no evidence of intent on part of spouse to make gift to debtor of an interest in vehicle. In re Lefevre (1983, BC DC Vt) 27 BR 40, 35 UCCRS 614, affd (1983, DC Vt) 38 BR 980, 38 UCCRS 602.

Where Chapter 7 debtors transferred realty to trustee for benefit of their children over one year prior to filing of bankruptcy petition, debtors had no legal or equitable interest in property at time of filing and therefore property is not within estate as defined in 11 USCS § 541; therefore, debtors may not invoke 11 USCS § 522(f) to avoid attempted revival of lien against realty. In re Mills (1984, BC WD Pa) 41 BR 849.

Under 11 USCS § 522(f) debtor may avoid only those liens fixed on debtor's own property and once debtor transfers title to encumbered property, he loses ability to avoid liens. In re Trammel (1986, BC ED Va) 63 BR 878, 15 CBC2d 998.

Chapter 7 debtor wife who acquired interest in real property as a joint tenant only 12 days prior to bankruptcy filing may not avoid liens on exempt real property under 11 USCS § 522(f)(1), where wife acquired her interest in property subject to judicial liens sought to be avoided. In re Saturley (1993, BC DC Me) 149 BR 245 (superseded by statute as stated in Bruin Portfolio, LLC v Leicht (In re Leicht) (1998, BAP1 Mass) 222 BR 670, CCH Bankr L Rptr P 77806).

Judicial lien against bankruptcy debtors' real property held in trust created by debtors as both settlors and beneficiaries was not avoidable under 11 USCS § 522(f)(1)(A), since trust was revoca-ble, debtors' interest in property was limited to their homestead exemption, and non-exempt portion of property was property of trust rather than debtors. In re Bogetti (2006, BC ED Cal) 349 BR 14.

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