462 B.R. 324
Bankr. D. Mass.2011Background
- Debtor's exemptions include the TSP and FERS accounts; LiBassi objects to TSP exemptions and to funds held in escrow from the TSP loan/escrow arrangement.
- Probate and Family Court orders directed Debtor to borrow from her TSP or pay funds into escrow for LiBassi, to be held pending appeal and/or further order.
- Escrowed funds originated from a TSP loan disbursement under Probate Court orders and were placed with an IOLTA/escrow arrangement; Debtor later filed bankruptcy Chapter 13, converted to Chapter 7.
- Court determined the TSP funds were not property of the estate; escrowed funds were in custodia legis and not estate property, with postpetition use controlled by prior court orders.
- Postpetition actions included Debtor's partial use of escrow funds, transfer of funds to counsel and to a Chapter 7 trustee, and an unresolved pending probate matter stayed by bankruptcy.
- Court issued orders to overrule exemption objections for the TSP and escrow funds and to turn over funds to the Probate Court First Justice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Debtor may exempt the TSP account. | LiBassi contends TSP funds are estate property. | O'Neal claims TSP funds are non-estate due to anti-alienation provisions. | TSP funds are not property of the bankruptcy estate; exemptions are superfluous. |
| Whether escrowed funds were property of the estate or custodia legis. | Funds should be assets of the estate free for exemption. | Funds were custodia legis under Probate Court orders. | Escrowed funds were custodia legis; not property of the estate. |
| Whether LiBassi's motion to enforce the June 20, 2011 order and restore escrow funds should be granted. | Escrow funds must be maintained and restored to the proceedings. | Debtor violated court orders; funds misused. | Grant LiBassi's motion; restore escrow funds. |
| Disposition of the FERS exemption and related non-TSP exemptions. | FERS exempt status contested. | FERS funds exempt under 11 U.S.C. § 522(d)(10)(E). | FERS exemption denied as moot; TSP/escrow issues control; exemptions deemed superfluous. |
Key Cases Cited
- Davis v. Cox, 356 F.3d 76 (1st Cir. 2004) (escrow funds placed in custodia legis; title vesting in court officers; funds not attached)
- Randall v. Haddad (In re Haddad), 2011 WL 4381872 (Bankr.D.Mass. 2011) (custodia legis concept applied to TSP-like funds)
- In re Johnson, No. 09-16345-SSM, 2009 WL 3763709 (Bankr.E.D.Va. 2009) (TSP funds excluded from estate under ERISA/§541(c)(2) principles)
- In re Gill, 2007 WL 2990564 (Bankr.D.D.C. 2007) (treats TSP as potentially exempt under certain provisions; specifics depend on estate status)
- Enfield, 133 B.R. 515 (Bankr.W.D.Mo. 1991) (anti-alienation protections for CSRS/FERS; bankruptcy treatment discussion)
- Davis v. Mazzuchelli, Davis v. Mazzuchelli (238 Mass. 550, 131 N.E. 186 (1921)) (custodia legis analogies for court-held funds)