Exemptions General

Exemptions – 1) General

In re Nicholson, 435 B.R. 622 (9th Cir. BAP 2010)

Debtor initially listed stock in a corporation as being worth $0 and claimed no exemption

in the asset. After the trustee solicited and received bids for the stock, debtor amended his

exemption claim and asserted the full exemption amount for the stock. The trustee objected to the

amendment on the grounds of bad faith. The BAP held that although the bk court was not required

to hold an evidentiary hearing on the objection, the court should have used the preponderance of

the evidence standard, rather than requiring clear and convincing evidence, in overruling the

objection.

Schwab v. Reilly, -U.S.-, 130 S.Ct. 2652, 2669 (2010)

“Where, as here, a debtor accurately describes an asset subject to an exempt interest and on

Schedule C declares the “value of [the] claimed exemption” as a dollar amount within the range

the Code allows, interested parties are entitled to rely upon that value as evidence of the claim’s

validity. Accordingly, we hold that Schwab was not required to object to Reilly’s claimed

exemptions in her business equipment in order to preserve the estate’s right to retain any value in

the equipment beyond the value of the exempt interest.”

In re Applebaum, 422 B.R. 684 (9th Cir. BAP 2009)

California’s bankruptcy-only exemption statute is not preempted by the Bankruptcy Code

and does not violate the Uniformity Clause.

In re Gould, 401 B.R. 415 (9th Cir. BAP 2009), aff’d, 603 F.3d 1100 (9th Cir. 2010)

IRS had a valid right of setoff under 11 U.S.C. § 553 and IRC § 6402(a) as to chapter 13

debtors’ tax refunds, even though the debtor claimed them as exempt and no objection to the

exemption was filed. Bankruptcy court should have granted the IRS relief from the automatic stay

for cause to allow it to exercise its setoff rights.

In re Onubah, 375 B.R. 549 (9th Cir. BAP 2007)

Although the debtor did not conceal his residence, his refusal to vacate it, his conversion of

his case to a chapter 11 case, and his collusion with others to file an involuntary petition against

himself justified the surcharge against his exemptions.

In re Urban, 375 B.R. 882 (9th Cir. BAP 2007)

Section 522(b)(3), which allows states to opt out of the federal system but extends the

domicile requirement from 180 to 730 days, does not violate the uniformity clause of the

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Constitution.

In re Konnoff, 356 B.R. 201, 208 (9th Cir. BAP 2006)

“Although the petition determines the exemption rights of the debtor, where the state has

opted out of the federal exemption scheme. . .it is the facts of the case and the state law applicable

on the petition date that controls a debtor’s exemption rights. . . .By allowing them to opt out of the

federal exemption scheme, Congress has granted states the prerogative to determine the scope of,

and limitations on, the exemptions their residents may claim in a bankruptcy case.” Debtor could

not claim homestead exemption under Arizona law, where he sold the house prepetition and failed

to reinvest the proceeds in another home within 18 months, even though the 18 month period

expired postpetition.

In re Cogliano, 355 B.R. 792 (9th Cir. BAP 2006)

The denial of the debtor’s first amended claim of exemption did not preclude her assertion

in her secibd claim of exemption that her IRA was not property of the estate. Neither issue

preclusion nor claim preclusion applied, since the issue of property of the estate was not

necessarily decided in the initial exemption decision. Further, the issue of property of the estate

had to be decided by way of an adversary proceeding, not a contested matter.

Latman v. Burdette, 366 F.3d 774 (9th Cir. 2004)

“We hold that the bankruptcy court may equitably surcharge a debtor’s statutory

exemptions when reasonably necessary both to protect the integrity of the bankruptcy process and

to ensure that a debtor exempts an amount no greater than what is permitted by the exemption

scheme of the Bankruptcy Code.”

In re Gose, 308 B.R. 41 (9th Cir. B.A.P. 2004)

California Code of Civil Procedure §§704.140(a) & (b) are properly read together, and

allow the exemption of settlement proceeds from a personal injury claim only to the extent

necessary for the debtors’ support.

In re Goswani, 304 B.R. 386 (9th Cir. B.A.P. 2003)

Debtor’s right to amend their exemption schedule did not terminate upon closing the case.

Here, debtor had claimed the 15,000 wildcard exemption. Upon reopening to avoid a judicial lien

on the residence, the debtor substituted a $10 cash claim for a claim of $10 in exemption on their

house.

In re Morgan-Busby, 272 B.R. 257 (9th Cir. B.A.P. 2002)

Thirty-day time period for objecting to objects also applies to objecting to the value of the

property being claimed exempt. Here, the trustee did not object to the exemption claim in stock,

but reserved the right to challenge debtors’ valuation of the stock. Accordingly, the trustee had the

right to sell the stock, pay the debtors the amount of their grubstake exemption, and keep any

remaining proceeds.

In re Clark, 266 B.R. 163 (9th Cir. B.A.P. 2001)

“The non-specific claim of exemption gives the debtor no rights, legally or practically. It is

mandatory under the language of the statute that the debtor file a list of the property he claims

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exempt….A list of property connotes a selection of specific properties. The claim to “other assets

of the petitioner” does not comply with the statute.”

In re Clark, 262 B.R. 508 (9th Cir. B.A.P. 2001)

Creditor’s meeting was not concluded merely because trustee failed to vocalize continued

date, where continued date had been announced at previous meeting and in writing thereafter.

In re Smith, 235 F.3d 472 (9th Cir.2000)

1) Under Rule 2003(e), a § 341 meeting must be adjourned to a specific time; 2)

conversion of the case from chapter 11 to chapter 7 does not restart the running of the 30-day

period for filing objections to exemptions.

In re Reaves, 285 F.3d 1152 (9th Cir. 2002)

Debtor who claimed and was denied exemption in California state court levy proceeding

could claim exemption under state exemption statute applicable only in bankruptcy cases. Entire

amount of the $15000 wildcard exemption in CCP § 703.140(b)(2) could be used, even though the

debtor was not a homeowner.

In re Wolfberg, 255 B.R. 879 (9th Cir. B.A.P. 2000), aff’d, 37 Fed.Appx. 891 (9th Cir. 2002)

Debtor’s attempt to assert a claim of homestead exemption after confirmation of a chapter

11 plan was barred by res judicata

In re Arnold, 252 B.R. 778 (9th Cir. B.A.P. 2000)

Debtors did not act in bad faith, nor prejudice creditors or trustee, by adding pre-existing

personal injury lawsuit to exemption schedule three years after filing bankruptcy petition.

In re Smith, 235 F.3d 472 (9th Cir. 2000)

Adjournment “until further notice” of creditors’ meeting did not result in conclusion of the

meeting for purposes of filing timely objections under Rule 4003(b) merely because no future date

was specified.

In re Wolf, 248 B.R. 365 (9th Cir. B.A.P. 2000)

Debtor’s exemption rights with respect to estate property inherited after he filed for

bankruptcy was governed by law in effect when petition was filed.

Preblich v. Battley, 181 F.3d 1048 (9th Cir. 1999)

(1) Time for objecting to exemption does not begin to run until debtor exemption list is

“sufficient to notify the creditors and trustee exactly what property the debtor is claiming as

exempt.” 181 F.3d at 1052.

(2) Ruling on objection to exemptions is a final, appealable order.

In re Lares, 188 F.3d 1166 (9th Cir. 1999)

The court of appeals affirmed an order of the district court. The court held that the proceeds

from the sale of a bankruptcy debtor’s home are not protected from a lender’s setoff based on a

personal guarantee by a statute exempting them from attachment, execution, or forced sale.

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In re Carter, 182 F.3d 1027 (9th Cir. 1999)

Under California law, sole shareholder of Subchapter S Corporation could qualify as its

“employee” for purpose of state-law bankruptcy exemption for “employee earnings.”

In re Sylvester, 220 B.R. 89 (9th Cir. B.A.P. 1998)

Bankruptcy debtor may exempt portion of attorney malpractice damages attributable to

misappropriated personal injury settlement funds

In re Heintz, 198 B.R. 581 (9th Cir. B.A.P. 1996)

Where debtor got exemptions by default, brother had judicial lien on exempt property, but

transferred it to trustee for benefit of the estate, held

1) § 551 does not exclude exempt property from presentation

2) § 522(h) doesn’t apply because property claimed exempt wasn’t exemptible – In re

Morgan, 149 B.R. 147 (9th Cir. B.A.P. 1993)

In re Goldman, 70 F.3d 1028 (9th Cir. 1995)

“Gross annual income” in C.C.P. § 704.730(a)(3) means income over a calendar year, not

12 months prior to filing

In re Canino, 185 B.R. 584 (9th Cir. B.A.P. 1995)

No informal objection to exemption allowed under R. 4003 or § 105. Bad faith 105

argument not considered. Equitable estoppel applied to sale of car, where sale completed 8 days

before time for objection to exemption ran.

In re Bernard, 40 F.3d 1028 (9th Cir. 1994), cert. denied, 514 U.S. 1065 (1995)

1) 30 day period for objecting to exemptions begins when the 341 meeting actual

concludes, however, many sessions it takes.

2) An annuity is not exempt under 704.100(a) because it has no risks, citing Pikush, supra.

It is not exempt in this case under 704.115, because it was not reasonably necessary for support of

debtor or dependents

In re Kahan, 28 F.3d 79 (9th Cir. 1994), cert. denied, 513 U.S. 1150, 115 S.Ct. 1100 (1995)

Trustee not barred from timely objecting to a debtor’s amended schedule where debtor’s

initial schedules did not sufficiently notify trustee he was claiming more than a $45,000

exemption.

In re Mayer, 167 B.R. 186 (9th Cir. B.A.P. 1994)

Entitlement to homestead determined as of date bankruptcy filed, not date lien attached.

At the date of the petition, the value of debtor’s homestead exemption, calculated by deducting the

amount of the liens from the value of the property, was approximately $34,000. Thus, there was

no equity for the trustee. Thereafter, the value of the property skyrocketed and the trustee sold the

property. The debtor claimed ownership of all of the net proceeds, arguing that the value of the

trustee’s interest must be determined as of the petition date.

The court held that because the trustee, not the debtor, owned the property, the trustee was

entitled to postpetition appreciation. The court also held, following California law, that the

amount of the homestead exemption must be determined as of the date of the sale by the trustee.

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Therefore, the debtor was entitled to the full amount of the $45,000 homestead exemption and the

trustee was entitled to the balance.

In re Graziadei, 32 F.3d 1408 (9th Cir. 1994)

No bankruptcy jurisdiction over homestead property because “an action relating to

homestead property could not conceivably have any effect” on the estate because the property is

exempt from the estate.

In re Glass, 164 B.R. 759 (9th Cir. B.A.P. 1994), aff’d, 60 F.3d 565 (9th Cir. 1995)

522(g) – trustee “recovers” transfer even though he didn’t file an avoidance action

In re Pikush, 157 B.R. 155 (9th Cir. B.A.P. 1993), aff’d. 27 F.3d 386 (9th Cir. 1994)

Single premium annuity is not exempt as life insurance under § 704.100(c)

In re Catli, 999 F.2d 1405 (9th Cir. 1993)

Pederson overruled by Farrey

Taylor v. Freeland & Kronz, 503 U.S. 638 (1992)

If trustee fails to object to exemption claim, it must be allowed

In re Bronner, 135 B.R. 645 (9th Cir. B.A.P. 1992)

Failure to object to lawsuit did not revest lawsuit settlement proceeds in debtors

In re Breen, 123 B.R. 357 (9th Cir. B.A.P. 1991)

Pickup truck was exempt tool of trade – lien avoided under § 522(f)(2)

In re Herman, 120 B.R. 127 (9th Cir. B.A.P. 1990)

Exemption determined as of date of petition

In re Moffatt, 119 B.R. 201 (9th Cir. B.A.P. 1990), aff’d. 959 F.2d 740 (9th Cir. 1992)

Single premium immediate annuity not exempt (1) because it matured (2) not necessary for

support of debtor and spouse (debtor orthodontist)

In re Homan, 112 B.R. 356 (9th Cir. B.A.P. 1989)

Nondebtor spouse could not claim state exemption under debtor/spouse’s list of federal

exemptions

In re Kincaid, 917 F.2d 1162 (9th Cir. 1990)

Reversing a decision of the B.A.P. upholding a ruling of the bankruptcy court, the court of

appeals held that the funds held by the administrator of an ERISA deferred salary plan could not

be turned over to the trustee of an employee’s bankruptcy estate

In re Baldwin, 70 B.R. 612, 613 (9th Cir. B.A.P. 1987)

In re McNutt, 87 B.R. 84 (9th Cir. B.A.P. 1988)

Pick-up truck may be a tool of the trade; exemption may be combined with wild card -

§522 (f)(2) applies

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In re Andermahr, 30 B.R. 532, 533 (9th Cir. B.A.P. 1983)

“An exemption should be allowed no matter when it is claimed absent a showing of bad

faith by the debtor or prejudice to creditors.”

‘Simple delay in filing an amendment where, as here, the case is not closed does not alone

prejudice creditors. Nor does prejudice to creditors occur merely because a claimed exemption, if

held timely, would be granted.” Id at 534, quoting Matter of Doan, 672 F.2d 831, 833 (11th Cir.

1982).

“A debtor does not need court permission to amend any of his schedules so long as the case

is still open. Bankruptcy Rule 110. By its terms, the rule permits amendments ‘as a matter of

course’. Bankruptcy rule 110 is not inconsistent with the code and therefore governs practice under

the code”, Id. at 534.