In Re Jones
446 B.R. 466
| Bankr. D. Kan. | 2011Background
- Debtors filed for Chapter 7 on April 26, 2001 and claimed one remaining annuity lump-sum payment exempt under § 522(d)(10)(C) from a 1988 FELA settlement.
- The FELA settlement provided $155,000 upfront, $700 monthly for life (minimum 30 years), and escalating lump-sums at years 15, 20, 25, 30, and 35, with initial payment offset by other benefits and payments.
- Debtor later assigned or compensated via settlement amount with RRA/union benefits; he released seniority rights and retired early under the agreement.
- In 1998 Debtor sold rights to all but the last lump-sum payment; in 2009 Debtor sought to liquidate the last payment and Trustee objected to exemption.
- Debtors amended schedules to claim exemption; Trustee argues FELA settlement is a personal injury recovery not exempt; Debtors argue it is a disability/expectation substitute exempt under § 522(d)(10).
- Court finds the FELA settlement proceeds are exempt under § 522(d)(10) (C) and (E) and also orders a $5,000 reimbursement to Trustee for expenses due to non-disclosure.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the FELA settlement is exempt under § 522(d)(10). | Jones asserts the settlement constitutes a disability/personal-injury-based benefit exempt under § 522(d)(10)(C). | Trustee contends the FELA claim is a personal injury settlement not exempt under § 522(d)(10). | Yes; exempt under both § 522(d)(10)(C) and (E). |
| Whether failure to disclose the asset warrants denial of exemption. | Jones relied on counsel’s advice; asset was not disclosed inadvertently. | Trustee proves bad faith or prejudice, or failure to disclose. | Denied for exemption on failure to disclose; but Debtors must reimburse Trustee $5,000 for related expenses. |
Key Cases Cited
- In re Morehead, 283 F.3d 199 (4th Cir. 2002) (disability-related exemptions under § 522(d)(10) analyzed in context of morehead-type holdings)
- Rousey v. Jacoway, 544 U.S. 320 (2005) (annuity/benefit exemptions and replacement of earnings examined; guidance for "in lieu of earnings" analysis)
- In re Wegrzyn, 291 B.R. 2 (Bankr. D. Mass. 2003) (privately purchased disability proceeds exempt under § 522(d)(10)(E))
- In re Albrecht, 89 B.R. 859 (Bankr. D. Mont. 1988) (FELA settlement exempt under § 522(d)(10)(C) precedent cited)
- In re Cassell, 443 B.R. 200 (Bankr. N.D. Ga. 2010) (annuity considerations under § 522(d)(10)(E) discussed in context of retirement/benefits)