Judges of the Court
3) Lien Avoidance
4) Retirement Accounts, Life Insurance and Annuities
6) Exemption planning
Exemptions - 1) General
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 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 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.
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. 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
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.
Exemptions - 2) Homestead
In re White, 389 B.R. 693 (9th Cir. BAP 2008)
Arizona’s 18-month temporary homestead for sale proceeds does not permit use of identifiable proceeds for purposes inconsistent with the statute (here, debtor invested the money in the stock market rather than a new homestead). Debtor, not trustee, bore risk of loss of such proceeds, and the trustee could bring a turnover action at the end of the 18-month limit without objecting to the debtor’s exemption claim.
In re Rabin, 359 B.R. 242 (9th Cir. BAP 2007)
Debtors who were registered domestic partners California law were limited to a single homestead exemption in residential property in which they each held a one-half interest, when they each filed a separate chapter 7 petition.
In re Kelley, 300 B.R. 11 (9th Cir. B.A.P. 2003)
Homestead exemption properly denied, where debtor abandoned his otherwise valid declared homestead by renting out the property and living in rented premises for an extended period of time.
In re Farr, 278 B.R. 171 (9th Cir. B.A.P. 2002)
Under § 522(c), debtor was only entitled to his $100,000 homestead exemption, not to the entire value of the residence. Lien arising from nondischargeability judgment attached to nonexempt portion of homestead.
In re Viet Vu, 245 B.R. 644 (9th Cir. B.A.P. 2000)
Bankruptcy debtors not entitled to postpetition appreciation in value of residential property belonging to estate regardless of whether they had any equity when petition was filed.
In re Arrol, 170 F.3d 934 (9th Cir. 1999)
Debtor who lived in CA then moved back to home in Mich., then properly filed bankruptcy in CA, could claim $75,000 homestead on Mich. residence.
In re Cataldo, 224 B.R. 426 (9th Cir. B.A.P. 1998)
Under Hawaii law, tenancy by entireties fully exempt. No fraudulent pre-bankruptcy planning found.
In re Steward, 227 B.R. 895 (9th Cir. B.A.P. 1998)
Bankruptcy court properly determined that state-law homestead exemption applied in administratively consolidated bankruptcy cases where only one of two spouses chose federal exemption, i.e. 703.140 (husband) v. 704.730 (wife).
In re Michael, 163 F.3d 526 (9th Cir. 1998)
The court of appeals affirmed a judgment of the B.A.P. The court held that a bankruptcy debtor may amend the petition’s schedules to add an exemption based on a post-petition homestead declaration.
Amiri v. Collection Bureau (In re Amiri), 184 B.R. 60 (9th Cir. B.A.P. 1995), contra, In re Wilson, 175 B.R. 735 (N.D. Cal. 1994), reversed 90 F.3d 347 (9th Cir. 1996)
A judicial lien does not impair a debtor’s automatic homestead exemption for purposes of bankruptcy code §522(f)(1) (in effect for cases filed prior to 10/22/94) when there is little or no equity in the property.
In re Alsberg, 68 F.3d 312 (9th Cir. 1995), cert. denied, 517 U.S. 1168 (1996)
Debtor’s right to exemption amount arises when house is sold; the estate retains the interest in the house until that time.
In re Jones, 180 B.R. 575 (9th Cir. B.A.P. 1995), reversed 106 F.3d 923 (9th Cir. 1997)
Cal law requires that debtor’s surplus equity in homestead be determined as of date of filing of bankruptcy petition.
In re Hall, 1 F.3d 853 (9th Cir. 1993), superseded, 42 F.3d 1399 (9th Cir. 1994)
Debtor claimed homestead exemption in chapter 11 under federal exemption statute claiming “all value in their homestead”, (at the time 16,539). Case converted to Chapter 7, debtor amended exemption to claim under Washington statute. Amount of equity at the time: 95,000. Held: Chapter 11 claim of exemption took property out of estate - entire 95,00 goes to debtor.
In re Hyman, 123 B.R. 342 (9th Cir. B.A.P. 1991), aff’d. 967 F.2d 1316 (9th Cir. 1992)
1.) No presumption as to costs of sale being calculated into amount of equity for trustee
2.) Homestead attaches to equity rather than a physical asset
3.) Postpetition appreciation accrues to estate
Patterson v. Shumate, 504 U.S. 753, 112 S.Ct. 2242 (1992)
Applicable nonbankruptcy law includes ERISA’s nonalienation provisions
In re Reed, 940 F.2d 1317 (9th Cir. 1991)
Homestead attaches to sum of money - is not an interest in the property.
Joint tenancy v. Community property distinguished. Postpetition appreciation accrues to estate.
In re Gitts, 116 B.R. 174 (9th Cir. B.A.P. 1990) aff’d. 927 F.2d 1109 (9th Cir. 1991)
Post-petition filed homestead exemption enforceable against trustee’s objection
In re McFall, 112 B.R. 336 (9th Cir. B.A.P. 1990)
Homestead exemption not apportioned between spouses when one id bankruptcy debtor
In re Cole, 93 B.R. 707 (9th Cir. B.A.P. 1988)
Homestead exemption - sale of house is legitimate Chapter 11 = forced sale
Exemptions - 3) Lien Avoidance--see under this topic heading, infra.
In re Simpson, 366 B.R. 64 (9th Cir. BAP 2007)
Annuity was primarily for investment, and therefore did not qualify as life insurance. Court sets forth a nine part test. It also didn’t qualify as a private retirement plan under CCP 704.115, since it was not established or maintained by a third party.
Rousey v. Jacoway, 544 U.S.320, 125 S.Ct. 1561 (2005)
IRAs are exempt under 11 U.S.C. § 522(10)(E) of the federal exemptions.
In re Payne, 323 B.R. 723 (9th Cir. BAP 2005)
“An annuity may be exempt life insurance under California law if it primarily contains attributes of life insurance. That determination is a factual one, to be made on a case-by-case basis.” Factors include “whether the primary purpose of the annuity was for investment or life insurance.”
In re Stern, 317 F.3d 1111 (9th Cir. 2003), cert. denied, 124 S.Ct. 1657 (2004)
Under Cal.Civ. Pro. Code §704.115(a), funds transferred from an IRA into a non-ERISA qualified pension plan after an adverse judgment was entered and immediately before filing for bankruptcy is insufficient as a matter of law to constitute a fraudulent transfer. The private retirement plan was ruled exempt.
In re Dudley, 249 F.3d 1170 (9th Cir. 2001)
An IRA may qualify for the exemption under § 704.115(a)(3) if the IRA was designed and used principally for retirement purposes, as opposed to only for retirement purposes.
In re Lieberman, 245 F.3d 1090 (9th Cir. 2001)
California's private retirement plan statute (Cal. Civ. Pro. Code § 704.115(a)) does not exempt an arrangement by an individual to use specified assets for retirement purposes.
In re Kim, 257 B.R. 680 (9th Cir. B.A.P. 2000), aff’d, 35 Fed.Appx. 592 (9th Cir. 2002)
Retirement funds in a retirement plan on the date of filing were exempt, even though they were transferred to an IRA the day after the petition was filed. Exemption rights are determined as of the date of the filing of the petition.
In re Jacoway, 255 B.R. 234 (9th Cir. B.A.P. 2000), aff'd, 284 F.3d 1323 (9th Cir. 2002)
IRA was exempt even though debtor took monthly partial surrender payments prior to retirement, where the IRA was used principally for retirement purposes.
In re McKown, 203 F.3d 1188 (9th Cir. 2000)
California debtor’s IRA was exempt from the bankruptcy estate under bankruptcy California exemption scheme (Cal Civ. P. § 703.140(a))
In re Watson, 161 F.3d 593 (9th Cir. 1998)
The court of appeals affirmed a judgment of the B.A.P. The court held that ERISA does not exclude from the bankruptcy estate the profit-sharing plan of a corporation when the debtor is the sole shareholder and participant.
In re Metz, 225 B.R. 173 (9th Cir. B.A.P. 1998)
Company retirement plan became ERISA-qualified for exemption when sole owner-employee became joint owner with ex-spouse.
In re Friedman, 220 B.R. 670 (9th Cir. B.A.P. 1998)
Bankruptcy debtor could not claim state law exemption for pension plan funds borrowed from debtor’s own company to pay household debts
In re Moses, 215 B.R. 27 (9th Cir. B.A.P. 1997), aff’d, 167 F.3d 470 (9th Cir. 1999)
Debtor entitled to exemption for Keough plan set up by employer which contained enforceable anti-alienation provision
In re Spenler, 212 B.R. 625 (9th Cir. B.A.P. 1997)
Income from IRAs not necessary for healthy 55 year old physician’s support upon retirement
In re Rawlinson, 209 B.R. 501 (9th Cir. B.A.P. 1997)
IRA exempt under Fed exemptions
In re MacIntyre, 74 F.3d 186 (9th Cir. 1996)
Cal legislature exempted ‘private retirement accounts’ from a debtor’s bankruptcy estate, and defined ‘private retirement accounts’ as (1) private retirement plans, (2) profit-sharing plans designed and used for retirement purposes, and (3) self-employed retirement plans and IRAS....(a)(3) is conditions “to the extent necessary” to provide for the retirement of the debtor and his dependents.
403(b) annuities are neither self-employed retirement plans nor IRAS thus not subject to 704.115(e) ‘extent necessary’ condition and are 704.115(1)(1) and thus fully exempt under 704.115(b)
In re Conner, 165 B.R. 901 (9th Cir. B.A.P. 1996), aff’d. 73 F.3d 258 (9th Cir. 1996), cert. denied, 519 U.S. 817 (1996)
Debtor’s interest in ERISA plan exempt from bankruptcy estate regardless of debtor’s control of assets in plan
In re Turner, 186 B.R. 108 (9th Cir. B.A.P. 1995)
Annuity which has life insurance characteristics may be exempt under CCP 704.100(a) (Pikush distinguished)
Exemptions - 4) Retirement Accounts
In re Reed, 951 F.2d 1046 (9th Cir. 1991), op withdrawn and superseded, 985 F.2d 1026 (9th Cir. 1993)
Again interpreting Arizona law, court finds that debtor’s control over trust makes it not a spendthrift trust and not exempt property under state statute, which is preempted under ERISA
Pitrat v. Garlikov, 947 F.2d 419 (9th Cir. 1991), superseded 992 F.2d 224 (9th Cir. 1993)
1. Court refuses to follow Lucas adhered to Daniel in holding that ERISA is not applicable to nonbankruptcy law
2. Remands to determine if plan is spendthrift trust under state law (AZ)
3. ERISA’s exemption is not an exemption under federal law for purposes of the federal exemption
In re Cheng, 943 F.2d 1114 (9th Cir. 1991)
A corporate retirement plan under Cal. CCP § 704.115(a)(1) or (2) is not subject to the “extent necessary to provide for the support” language of §704.115(e) as are self-employed plans
Exemptions - 5) Standing
In re Noblit, 166 B.R. 906 (D. Az. 1994) aff’d. 72 F.3d 757 (9th Cir. 1995)
Creditor lacks standing to assert exempt status of preferentially transferred property as a defense against avoidance
In re Alderman, 195 B.R. 106 (9th Cir. B.A.P. 1996)
Court’s recognition of Ch 13 debtor’s maximum homestead exemption does not bar recharacterization when debtors convert to Ch 7, i.e., value of homestead exemption not barred by Rule 4003
Exemptions-6) Exemption planning
In re Beverly, 374 B.R. 221 (9th Cir. BAP 2007)
Debtor who, by way of a marital settlement agreement, exchanged his right to proceeds from the sale of the marital residence for wife’s interest in an exempt ERISA-qualified pension plan made a transfer with intent to hinder, delay or defraud under both California’s UFTA and § 727(a)(2). The combination of the size of the transfer and the fact that it left the debtor with no assets with which to pay the debtor put this case outside the realm of legitimate pre-bankruptcy planning.
In re Stern, 345 F.3d 1036 (9th Cir. 2003), cert. denied, 124 S.Ct. 1671 (2004)
Transfer of IRA assets into a non-qualified ERISA pension plan was not fraudulent.
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