Background

• Debtor Pepper Minthia Hardy filed a Chapter 13 petition and claimed as exempt the portion of her 2012 federal income tax refund attributable to the refundable Child Tax Credit (the “Additional Child Tax Credit”) under Missouri’s exemption statute, Mo. Rev. Stat. § 513.430.1(10)(a) ("public assistance benefit").
• Chapter 13 Trustee Richard Fink objected to the claimed exemption; the bankruptcy court sustained the objection and held the refundable child tax credit is not a "public assistance benefit."
• Debtor did not contest the bankruptcy court’s alternative rulings denying exemptions under other Missouri exemption subsections (veterans’ benefits; disability/illness/unemployment benefits).
• The issue on appeal: whether the refundable portion of the federal child tax credit qualifies as a “public assistance benefit” exempt from the bankruptcy estate under Missouri law.
• The appellate court reviewed statutory interpretation de novo and affirmed the bankruptcy court’s order sustaining the Trustee’s objection.

Issues

Key Cases Cited

• Ungar v. Islamov, 633 F.3d 675 (8th Cir. 2011) (standards of review for bankruptcy findings and legal conclusions)
• Benn v. Cole (In re Benn), 491 F.3d 811 (8th Cir. 2007) (exempt property is excluded from the bankruptcy estate)
• Law v. Stover (In re Law), 336 B.R. 780 (8th Cir. BAP 2006) (bankruptcy estate includes refundable portion of the child tax credit)
• Steinmetz (In re Steinmetz), 261 B.R. 32 (Bankr. D. Idaho 2001) (child tax credit not intended as public assistance due to high income thresholds)
• Beltz (In re Beltz), 263 B.R. 525 (Bankr. W.D. Ky. 2001) (primary purpose of child tax credit is to benefit middle-class taxpayers)
• Koch (In re Koch), 299 B.R. 523 (Bankr. C.D. Ill. 2003) (contrary view that refundable child tax credit may be akin to public assistance)