647 B.R. 767
Bankr. W.D. Wash.2022Background
- Mr. Cotton was convicted in 1999 of two counts of first‑degree child molestation; the victim was Suzanne Moore.
- Ms. Moore obtained a civil judgment against Mr. Cotton for $358,775 in October 2020 and recorded a lien on the Cottons’ residence (4128 S J St, Tacoma) in November 2020.
- Debtors bought the residence in 2014; title was Mr. Cotton’s separate property after a 2014 quitclaim by Mrs. Cotton.
- Washington increased the homestead exemption effective May 12, 2021; Debtors filed Chapter 7 on May 17, 2021 and claimed a $254,782.60 homestead exemption against property valued at $400,614 with a $145,831.40 deed of trust.
- Ms. Moore objected under 11 U.S.C. § 522(q)(1)(A), arguing the exemption cap of $170,350 applies because Mr. Cotton’s felony conviction demonstrates the bankruptcy filing was an abuse.
- The court held that a sufficient nexus and the totality of circumstances show abuse, granted partial summary judgment to Ms. Moore applying the § 522(q)(1)(A) cap, and left § 522(q)(2) (reasonable‑necessity exception) for further factfinding.
Issues
| Issue | Plaintiff's Argument (Moore) | Defendant's Argument (Debtors / Cotton) | Held |
|---|---|---|---|
| Whether § 522(q)(1)(A) cap applies (does felony demonstrate abuse) | Conviction and facts show filing was abuse and cap applies | Felony unrelated to bankruptcy; cap should not apply | Court: cap applies; partial SJ for Moore |
| Whether a nexus exists between the felony and the bankruptcy filing | Judgment and lien arise from the same criminal conduct (victim is creditor) — nexus exists | Conviction is old and non‑financial; no nexus to filing | Court: sufficient nexus exists |
| Relevance of timing (filed 5 days after exemption increase) | Filing immediately after increase shows intent to maximize avoidance of Moore’s lien | Timing alone is not necessarily bad faith | Court: timing supports abuse finding though not by itself dispositive |
| Whether § 522(q)(2) permits exemption above $170,350 (reasonable necessity) | Cap should remain unless debtor proves necessity | Debtors: may prove amount above cap is reasonably necessary for support | Court: reserved for further factfinding; burden on Debtors to prove necessity |
Key Cases Cited
- Carter v. Anderson, 182 F.3d 1027 (9th Cir. 1999) (claimed exemption presumptively valid; objector bears burden and then burden shifts to debtor)
- In re Price, 353 F.3d 1135 (9th Cir. 2004) (substantial‑abuse inquiry under pre‑BAPCPA rules does not require malicious purpose)