478 B.R. 275
E.D. Mich.2012Background
- Rice filed for Chapter 7 on 3/15/2011; amended Schedule C claimed exemptions for a $95,000 cashier’s check and $18,807.08 in garnished funds under §522(d)(12).
- Trustee objected to amended exemptions; Bankruptcy Court sustained based on concealment/reckless disregard and failure to meet exemption requirements.
- Facts show a $107,552.35 retroactive Michigan retirement benefit deposited 11/15/2010, with subsequent partial withdrawal and transfer prior to petition.
- A $95,000 cashier’s check and $18,807.08 in garnished funds were not in exempt accounts on petition date; Trustee discovered assets at first/adjourned creditor meetings.
- Bankruptcy Court held that the omissions were intentional or at least reckless; exemption denied even if no bad faith, and §522(b)(4)(C) not applicable; Michigan exemptions not preserved on appeal.
- Court affirms Bankruptcy Court’s decision sustaining trustee’s objection to exemptions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether omission of assets supports bad faith findings | Rice argues omissions were inadvertent; relied on attorney’s belief funds were exempt | Bankruptcy Court found intentional/at least reckless omissions after credibility assessment | Yes; bad faith or reckless omission found |
| Whether §522(d)(12) exemption applies when funds aren’t in exempt accounts | Funds retain exempt status despite transfer to cash | Funds were not in exempt accounts on petition date; exemption fails | Exemption denied; not in exempt accounts on petition date |
| Whether §522(b)(4)(C) preserves exemption for direct transfers from exempt accounts | Transfers to cash should not negate exemption under §522(b)(4)(C) | §522(b)(4)(C) lacks application to transfers to cash; Doeling does not support this case | Not applicable; Doeling does not control; exemption denied |
| Preservation of Michigan exemptions on appeal | Rice seeks Michigan exemptions; issue not addressed below | Appellate review limited to issues actually decided; raised too late | Not reviewed; Michigan exemptions argument not supported on appeal |
Key Cases Cited
- Lucius v. McLemore, 741 F.2d 125 (6th Cir. 1984) (amendments of exemptions allowed absent bad faith)
- In re Colvin, 288 B.R. 477 (Bankr.E.D.Mich. 2003) (bad faith assessed by totality of circumstances)
- In re H.J. Scheirich Co., 982 F.2d 945 (6th Cir. 1993) (standard of review on appeal; factual findings respected if not clearly erroneous)
- Doeling v. Nessa, 426 B.R. 312 (8th Cir. BAP 2010) (§522(d)(12) requires retirement funds be in exempt accounts)
- In re Daniels, 270 B.R. 417 (Bankr.E.D.Mich. 2001) (bad faith or prejudice grounds for denying exemptions)
- Hood v. Tenn. Student Assistance Corp. (In re Hood), 819 F.3d 755 (6th Cir. 2003) (appellate review limits arguments raised for first time on appeal)