559 B.R. 766
Bankr. D.N.M.2016Background
- Debtor Scott A. Bushey filed Chapter 7 and claimed New Mexico exemptions (notably §§ 42-10-2 and 42-10-3) for household goods, a homestead on Prairie Way Property, and cash-surrender value of a life insurance policy.
- Debtor is unmarried, lives with girlfriend Cecelia de la Fuente, who pays most household expenses; Debtor reports $901/month take-home pay and girlfriend contributes $2,800/month.
- Creditors (Roger & Nancy Cronk, Brandon & Amber Ashcraft, and Blonde and Bitter, LLC) objected that Bushey cannot claim § 42-10-1 exemptions (not married/head of household) or § 42-10-2 (does not support himself), and raised specific objections to claimed items.
- At trial the court considered statutory language, legislative purpose (humanitarian), and precedent; it found no statutory requirement of full support or job-seeking to claim § 42-10-2 exemptions.
- The court allowed exemptions in the life insurance cash-surrender value (§ 42-10-3), the homestead (§ 42-10-9), furniture/electronics and certain jewelry; it disallowed exemptions in several business interests, cash, and sports/photographic gear because the $500 personal-property exemption was already exhausted by firearms.
Issues
| Issue | Creditors' Argument | Bushey's Argument | Held |
|---|---|---|---|
| Entitlement to New Mexico exemptions (§§ 42-10-1 & 42-10-2) | Bushey is not married/head of household and does not "support" himself, so cannot claim § 42-10-1 or § 42-10-2 exemptions | Statutes' plain language and purpose allow a debtor who provides some support or whose income is insufficient to fully support himself to claim exemptions under § 42-10-2 | Court: Debtor may claim exemptions under § 42-10-2 despite depending on girlfriend for majority of household expenses; statutes construed liberally to effect humanitarian purpose |
| Requirement of active job-seeking or full support to qualify | Creditors: debtor reduced income in bad faith and thus should be denied exemptions | Bushey: statute contains no job-seeking or full-support requirement; bad-faith pay cut is not a statutory basis to deny exemptions | Court: No statutory basis to impose job-seeking or full-support requirement; Law v. Siegel bars denying exemptions on unenumerated equitable grounds |
| Life insurance cash-surrender value (§ 42-10-3) — ownership and exemption | Creditors: premiums paid by companies and policy described as "key man" suggest debtor may not own or be entitled to cash value exemption | Bushey: he is the policy owner and § 42-10-3 exempts cash-surrender value of life policies on debtor's life | Court: Evidence shows Bushey is owner; cash-surrender value exempt under § 42-10-3; creditors failed to rebut ownership |
| Homestead exemption and § 522(o) limitation | Creditors: down payment from life-policy loan may trigger § 522(o) reduction for fraudulent transfer within 10 years | Bushey: life-policy cash value is exempt (so § 522(o) inapplicable) and no evidence of intent to hinder/delay/defraud creditors in purchase | Court: § 522(o) inapplicable because life-policy was exempt; even if nonexempt, creditors failed to prove fraudulent intent; homestead exemption allowed |
| Specific personal property items (furniture vs electronics vs sports/photo gear) | Creditors: electronics and wall art are not "furniture"; camera, bicycles, skis not exempt because $500 personal property exemption already used by firearms | Bushey: electronics and wall art are household furnishings; claimed small-value jewelry and fur are within jewelry/clothing exemptions | Court: Televisions, Blu-ray, stereo, speakers and wall art are "furniture" and exempt; jewelry/beaver fur allowed; Canon camera, bicycles, skis, boots, ski gear disallowed because $500 personal-property exemption was exhausted by firearms |
Key Cases Cited
- In re Warren, 512 F.3d 1241 (10th Cir. 2008) (statutory exemptions are to be liberally applied to allow debtors to retain necessities)
- Law v. Siegel, 134 S. Ct. 1188 (2014) (bankruptcy courts lack authority to deny exemptions on equitable grounds not provided in the Code)
- In re Foah, 482 B.R. 918 (10th Cir. BAP 2012) (New Mexico exemption statutes interpreted to effect humanitarian purposes)
- Dona Ana Sav. & Loan Ass’n v. Dofflemeyer, 855 P.2d 1054 (N.M. 1993) (New Mexico exemptions construed to effect legislative intent and fraud on creditors can defeat exemptions)