In re Johnson
480 B.R. 305
Bankr. N.D. Ill.2012Background
- Debtor Nekessa Danyelle Johnson filed a Chapter 7 petition and claimed an Adoption Tax Credit exemption under Illinois law for 2011.
- Trustee objected to the exemption as unauthorized under Illinois Exemption Statute 735 Ill. Comp. Stat. 5/12-1001(g)(1).
- March 27, 2012, the court disallowed the exemption and required a third amended Schedule C.
- Debtor amended schedules and moved to vacate or amend the order, arguing for reconsideration.
- Court granted the motion, held the Adoption Tax Credit under 36C of the Internal Revenue Code is an exempt “public assistance benefit,” and overruled the Trustee’s objection; discussion of PPACA’s constitutionality was moot after grant.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Adoption Tax Credit qualifies as a public assistance benefit | Johnson argues the Credit is a public assistance benefit under Illinois exemption law | Leibowitz contends the Credit does not fit the exemption | Yes; Credit is exempt as a public assistance benefit under Illinois statute |
| Effect of PPACA refundability on the exemption | Johnson asserts refundability makes the Credit exempt | Trustee contends no impact or different outcome | moot with grant of relief; ultimately the Credit remains exempt based on 2011 facts |
| Proper standard for Rule 59(e) reconsideration | Debtor argues discovery of overlooked issues warrants reconsideration | Trustee asserts no manifest error or new law; no reconsideration warranted | Rule 59(e) proper; reconsideration granted to prevent manifest injustice and address new arguments retained by counsel |
Key Cases Cited
- In re Koch, 299 B.R. 523 (Bankr. C.D. Ill. 2003) (public assistance benefits interpretation for exemptions; nondefinitional statute analysis)
- In re Walsh, 298 B.R. 894 (Bankr. D. Colo. 2003) (discusses adoption tax credit exemption context; nonrefundable credit analysis)
- Barker, 768 F.2d 196 (7th Cir. 1985) (Illinois exemptions liberally construed in debtor's favor)
- Brockhouse, 220 B.R. 623 (Bankr. C.D. Ill. 1998) (exemption statutes protect debtors; liberal construction for debtor)
- In re Sterling Mining Co., 415 B.R. 762 (Bankr. D. Idaho 2009) (unsettled state-law questions do not preclude reconsideration on merits)