In re Vazquez
516 B.R. 523
Bankr. N.D. Ill.2014Background
- Debtor Vazquez filed Chapter 7 on Aug 13, 2013.
- On Apr 1, 2014 the IRS issued a $10,576.00 2013 tax refund; Trustee intercepted the refund and tendered $4,057.32 representing the pre-petition portion.
- On Apr 21, 2014 the Debtor filed amended Schedules B and C listing the $10,576 refund.
- Debtor exempted $3,000 under 735 ILCS 5/12-1001(g)(1)-(3) and $1,700 under the wildcard exemption 735 ILCS 5/12-1001(b).
- Trustee objected to the $3,000 exemption and sought a second amended Schedule C within 14 days of the order on the objection.
- The court overruled the objection, recognizing a public assistance exemption under Illinois law and denying the request for a second amended Schedule C.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the child tax credit portion of the refund qualifies as public assistance under Illinois law. | Vazquez—claims the child tax credit is exempt as public assistance. | Leibowitz—argues the credit may not be exempt if nonrefundable. | Exemption allowed; whole child tax credit deemed public assistance. |
| Whether changes in the IRC affect the Illinois public assistance exemption. | Vazquez—IRS refundability changes warrant exemption. | Leibowitz—exemption depends on the law as of Koch (2003) or later. | Court adopts broader interpretation; allows exemption despite IRC changes. |
| Scope of public assistance exemption and legislative prerogatives. | Vazquez—Illinois legislature should decide exemption scope. | Leibowitz—limits should be based on existing exemptions. | Court defers to Illinois legislature; permits exemption of the child tax credit. |
Key Cases Cited
- In re Koch, 299 B.R. 523 (Bankr.C.D.Ill. 2003) (public assistance benefit may include refundable and nonrefundable credits depending on policy)
- In re Hardy, 503 B.R. 722 (8th Cir. BAP 2013) (refundable vs nonrefundable may affect public assistance classification)
- In re Johnson, 480 B.R. 305 (Bankr.N.D. Ill. 2012) (adoption tax credit as public assistance exemption)
- In re Royal, 397 B.R. 88 (Bankr.N.D. Ill. 2008) (earned income tax credit as public assistance exemption)