484 B.R. 735
Bankr. N.D. Ind.2013Background
- Chapter 7 case filed by Temeca D. Marve; Trustee filed turnover for $3,819.44 from two bank accounts.
- Marve objected to turnover arguing $8,236.46 federal earned income credit (EIC) funds, $5,291 of which is EIC, were exempt and in a joint Chase account ending 985.
- Court recognized two contested issues: whether EIC retains Indiana exemption post-receipt/deposit, and how to determine exempt amount when EIC funds are co-mingled with non-exempt funds.
- Prior Norwood decision held EIC remains exempt after receipt and deposit; second issue (how to apportion exempt funds in co-mingled accounts) was left unresolved in Norwood.
- Court evaluated three tracing methods (LIBT, Ross approach, FIFO) and rejected LIBT as reflective of trust-fund contexts rather than general co-mingled funds.
- Final posture: due to missing balance pre-deposit data and joint-account complications, final amount subject to turnover for the 985 account could not be determined; $613.91 turnover were sustained for the 580 account.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does Indiana's EIC exemption survive after receipt and deposit? | Trustee relies on Norwood: EIC remains exempt after receipt and deposit. | Marve contends exemptions may be limited by co-mingling and tracing method. | Yes; EIC remains exempt after receipt and deposit. |
| What method should determine exempt portion when EIC funds are co-mingled with non-exempt funds? | Trustee advocates alternative methods (LIBT or other) to maximize exempt portion. | Marve advocates LIBT interpretation as controlling. | Court adopts first-in, first-out (FIFO) approach. |
| What is the final amount subject to turnover for the challenged Chase accounts given missing facts? | Trustee seeks turnover of amounts in the disputed accounts per stipulations. | Marve disputes certain allocations and exemptions in the accounts. | Turnover sustained for $613.91 in Chase account ending 580; 985 amount pending due to missing balance data and joint-account complexities. |
Key Cases Cited
- In re Norwood, N/A (N/A) (supports continued exemption for EIC after receipt and deposit)
- In re Appalachian Oil Co., Inc., 471 B.R. 199 (Bankr.E.D.Tenn. 2012) (discusses tracing funds in co-mingled accounts)
- In re LGI Energy Solutions, Inc., 460 B.R. 720 (Bankr.BAP 2011) (co-mingling and tracing issues in bankruptcy)
- U.S. v. McConnell, 258 B.R. 869 (N.D.Tex. 2001) (constructive trust and tracing concepts in bankruptcy context)
- Connecticut General Life Ins. Co. v. Universal Ins. Co., 838 F.2d 612 (1st Cir. 1988) (LIBT origins discussed in tracing discussions)