Cirilli v. Bronk (In Re Bronk)
444 B.R. 902
Bankr. W.D. Wis.2011Background
- Bronk filed Chapter 7 on August 5, 2009; trustee Cirilli objects to exemptions and discharge.
- Pre-petition, Bronk borrowed $95,000 secured by a mortgage and funded EdVest college savings plans with proceeds.
- Bronk also converted a $42,000 CD into an annuity, later claimed exempt on Schedule C.
- Trustee asserts transfers converted non-exempt assets into exempt forms to shield assets from creditors.
- Court analyzes whether exemption planning is permissible under Wisconsin law and whether Bronk qualifies for exemptions.
- Court holds Bronk entitled to discharge, but college savings exemptions are limited; annuity exemption is allowed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether pre-petition transfers constitute hinder, delay, or defraud creditors under §727(a)(2). | Cirilli argues Bronk engaged extrinsic fraud signs in transfers. | Bronk contends transfers were proper exemption planning under the law. | Discharge denied is not warranted; Bronk entitled to discharge. |
| Whether Wisconsin's § 815.18(3)(p) college savings exemption extends to the account owner. | Trustee contends exemption covers only the beneficiary's right, not the account owner’s interest. | Bronk argues broad exemption for the account ownership and deposits. | Only the beneficiary's right to qualified withdrawals is exempt; accounts are non-exempt. |
| Whether the college savings accounts are exempt or must be turned over to creditors. | Trustee argues accounts are non-exempt due to ownership. | Bronk argues statutory exemption should apply to the account. | Accounts not exempt; turnover to trustee required. |
| Whether the $42,000 annuity is exempt under Wis. Stat. § 815.18(3)(j) or limited by § 815.18(3)(f). | Trustee argues unmatured annuity falls under the narrower life-insurance/annuities exemption with limits. | Bronk argues § 815.18(3)(j) provides broader exemption for unmatured annuities. | Annuity exempt under § 815.18(3)(j). |
| Whether the exemptions, if improper, justify denial of discharge or denial of exemptions under Wisconsin law. | Trustee seeks denial of exemptions and discharge based on attempted shielding of assets. | Bronk seeks to use exemptions within the bounds of the statute. | Discharge granted; exemptions limited (529 accounts not exempt); annuity exemption allowed. |
Key Cases Cited
- In re Smiley, 864 F.2d 562 (7th Cir. 1989) (fraud must be extrinsic to the asset conversion; mere conversion not per se fraudulent)
- Norwest Bank Nebraska, N.A. v. Tveten, 848 F.2d 871 (8th Cir. 1988) (discharge/ exemption standard same for discharge and exemption determinations)
- In re McWilliams, 284 F.3d 790 (7th Cir. 2002) (actual fraudulent intent must be shown; reliance on attorney advice can be non-defensive)
- In re Adeeb, 787 F.2d 1339 (9th Cir. 1986) (good faith reliance on attorney does not automatically negate intent)
- In re Stern, 345 F.3d 1036 (9th Cir. 2003) (pre-bankruptcy planning viewed in context; not automatically fraudulent)
- In re Crater, 286 B.R. 756 (Bankr. D. Ariz. 2002) (pre-bankruptcy planning allowed absent extrinsic fraud; timing factors considered)
- In re Bourguignon, 416 B.R. 745 (Bankr. D. Idaho 2009) (529 accounts not necessarily exempt; state exemptions vary; estate considerations)
- In re Przybylski, 340 B.R. 624 (Bankr. E.D. Wis. 2006) (consideration of multiple factors in exemption and intent analysis)
- In re Bruski, 226 B.R. 422 (Bankr. W.D. Wis. 1998) (annuity exemption near bankruptcy allowed under (j))
- In re Geise, 992 F.2d 651 (7th Cir. 1993) (broad liberal construction of exemptions consistent with debtor relief)