In Re Holstine
458 B.R. 392
| Bankr. E.D. Mich. | 2011Background
- Trustee moved for stay pending appeal of the September 8, 2011 order denying Trustee's objection to Debtors' exemption of a $138,000 workers' compensation redemption under § 522(d)(11)(E).
- Trustee seeks to prevent further diminution of Debtors' joint TCF Bank account by restricting withdrawals to at least $70,000 and to bar disposition of the first $70,000.
- Debtors filed a Chapter 7 petition on April 25, 2011; they claimed exempt the workers' compensation proceeds as traceable to lost future earnings under § 522(d)(11)(E) in Schedule C.
- Redemption payments totaling about $158,000 were deposited into Debtors' accounts; approximately $154,000 remained pre-petition in the accounts, with some funds used for medical and living expenses.
- Evidentiary hearing on September 7, 2011 held that the workers' compensation redemption is property traceable to loss of future earnings and is reasonably necessary for support, supporting exemption under § 522(d)(11)(E).
- The Court recognized Sanchez as controlling that bank accounts traceable to lump-sum workers' compensation can be exempted under § 522(d)(11)(E); the Trustee appealed the interpretation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 522(d)(11)(E) permits exemption of workers' compensation redemption | Holstine exemption is not limited to tort recoveries. | Trustee argues § 522(d)(11)(E) covers only tort recoveries, not workers' compensation. | Exemption under § 522(d)(11)(E) permitted; not limited to tort recoveries. |
| Likelihood of success on the merits on appeal | Sanchez supports exemption of workers' comp under 522(d)(11)(E). | Sanchez is distinguishable or not controlling for Holstine; error in applying 11(11)(E) to bank deposits. | Debtors have a substantial likelihood of success on the merits. |
| Irreparable harm absent a stay | Liquidation would harm creditors and diminish funds necessary for debtors' support; however, loss would be monetary, not irreparable. | Stay is needed to preserve funds for creditors; denial causes irreparable injury to Trustee’s interests. | No irreparable harm shown; monetary injury not irreparable. |
| Balance of equities and public interest | Debtors rely on funds for ongoing living expenses; impairing them would unjustly harm the debtors. | Estate could be harmed if funds are immediately available to satisfy creditors without stay. | Equities favor debtors; public interest not implicated; stay denied. |
Key Cases Cited
- In re Sanchez, 362 B.R. 342 (W.D. Mich. 2007) (bank accounts traceable to lump-sum workers' comp may be exempt under 522(d)(11)(E))
- Casarow v. Evans (In re Evans), 29 B.R. 336 (Bankr. D.N.J. 1983) (section 522(d)(11) limited to tort recoveries; employer workers' comp treated differently)
- In re Cain, 91 B.R. 182 (Bankr. N.D. Ga. 1988) (worker's compensation benefits exempted under § 522(d)(10)(C))
- In re LaBelle, 18 B.R. 169 (Bankr. D. Me. 1982) (worker's comp benefits exempted under § 522(d)(10)(C))
- In re Thomas, 1990 WL 62438 (Bankr. D. Minn. 1990) (illustrative pre-Sanchez analyses of exemption mechanisms)