483 B.R. 713
9th Cir. BAP2012Background
- Collect Access LLC levied $712.39 from debtor Jose J. Hernandez’s deposit account via a California writ of execution; funds were held by Wells Fargo and later turned over to Sheriff.
- Debtor filed for chapter 7 and claimed the levied funds exempt under CCP § 703.140(b)(5); turnover orders were sought under § 542.
- Bankruptcy court held the funds remained property of the debtor’s estate due to exempt rights and ordered turnover; Collect moved to vacate Turnover Order II which the court denied.
- Debtor argued exemption under California law (automatic SSN exemption) and rights to recover under §§ 522(g)/(h); Collect argued the levy extinguished ownership and that the funds were not within the estate.
- The court found the levy created an execution lien under California law, but the interplay with exemptions and the state scheme required analysis of whether the funds remained property of the estate prepetition.
- The panel held the funds were property of the estate because of the debtor’s exempt rights and affirmed turnover, though on different grounds than the bankruptcy court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the appeal moot? | Hernandez argues mootness due to funds now with debtor and discharged debt. | Collect contends relief possible by ordering repayment if reversal occurs. | Not moot; relief possible by ordering repayment. |
| Were the levied funds property of the debtor's estate? | Debtor maintained funds remained exempt and within the estate despite levy. | Collect argued ownership transferred to creditor upon levy. | Funds were property of the estate due to exemption rights. |
| Did the bankruptcy court err in denying Vacate Turnover Order II? | Debtor asserted turnover was proper to recover exempt funds; order should stand. | Collect argued procedural and statutory grounds to vacate should prevail. | Affirmed turnover denial; rationale tied to exemption and estate ownership. |
| Did the ex parte turnover without an adversary proceeding comply with Rule 9014/Rule 7001 implications? | Ex parte motion to turnover did not require an adversary proceeding due to exemption context. | Procedural rights require notice and opportunity to contest; an adversary proceeding may be necessary. | No adverse effect; turnover proper under exemption-avoidance framework. |
Key Cases Cited
- United States v. Whiting Pools, Inc., 462 U.S. 198 (1983) (distinguishes when property becomes part of estate and issues of ownership)
- In re Ramirez, 183 B.R. 583 (9th Cir. BAP 1995) (treatment of liens and exemptions in turnover context)
- Del Riccio v. Superior Court, 115 Cal.App.2d 29 (Cal. Ct. App. 1952) (ownership/possession of money collected on levy by sheriff)
- In re Caldwell, 111 B.R. 836 (Bankr. C.D. Cal. 1990) (levy effects on ownership and funds in bank proceedings)
- Butner v. United States, 440 U.S. 48 (1979) (defining how property interests are determined in bankruptcy via nonbankruptcy law)