Bierbach v. Walck (In Re Walck)Bierbach v. Walck (In Re Walck)
OPINION
Before me is the Objection of Charles A. Bierbach (the “Trustee”) to the Amended Schedule of Exemptions filed by Sharon Marie Walck (“Walck”) in the above captioned bankruptcy case. For the reasons that follow, the Objection will be overruled.
I. Procedural and Factual History
Walck and her late husband, Ronald (collectively, “Debtors”), filed a voluntary Chapter 7 petition on June 10, 2009. Ronald Walck died six days thereafter. A meeting of creditors under
On September 1, 2009, a notice was sent to all creditors announcing that the case had been changed from a no-asset to an asset case and that December 2, 2009 was the bar date for filing proofs of claim. Eleven claims were filed before the bar date. On January 7, 2010, the Trustee submitted a final report on the administration of the estate to the Office of the United States Trustee (“UST”) for review prior to filing the report with the Court. 1
On February 25, 2010, Walck filed an Amended Schedule B listing the life insurance proceeds as an asset held jointly by Debtors. She also filed an Amended Schedule C seeking to exempt those proceeds pursuant to
If Walck’s amended exemption claim were allowed, all available assets for administration would be exempt. Nevertheless, on March 1, 2010, the UST proceeded with the review process and filed the Trustee’s • report along with its Statement of
On March 9, 2010, the Trustee objected to Walck’s Amended Schedule C. The Objection asserted that the amendment was untimely because Walck was aware of the insurance proceeds and delayed her claim until after notice had been provided to creditors that assets were available for distribution. The Trustee further argued that even if the amendment were timely, the funds were not reasonably necessary for her support as required by
II. Discussion
“Bankruptcy exemptions should be interpreted liberally in favor of debtors.”
In re Collins,
The Trustee asserts that Walck should not be permitted to exempt the proceeds of her husband’s life insurance policy because she was “deliberately dilatory” in filing Amended Schedule C. Although he alleges that her actions were “deliberate,” he does not posit how the delay would benefit Walck. He simply asserts that she should not be permitted to amend her schedules after significant steps were taken to close the case. Specifically, the Trustee asserts that having received the TFR Notice stating that their claims would be paid in full, creditors expectations will not be met if Walck is permitted to exempt the insurance proceeds at this juncture in her case.
The Trustee also argues that a prerequisite to an exemption under
A. Delay in filing Amended Schedule C
The Trustee’s first argument is that Walck’s amendment is untimely.
In this case, there is nothing in the record explaining why Walck delayed in filing the amendments. There is also nothing in the record to establish that Walck knew that the Trustee had submitted his Final Report to the UST for review. However, it is clear that she filed Amended Schedule C and served it on the Trustee four days before the notice was sent to creditors regarding payment of their claims. At this point, the UST and the Trustee would have been in the best position to stop the notice from being issued. But even for these parties, with only four days, including an intervening weekend, between the date Amended Schedule C was filed and the date the Final Report was filed, it would have been difficult to prevent the notice from being issued. Although the timing was unfortunate, the issuance of the notice to creditors is insufficient to establish bad faith by Walck as a basis for denying the amendment.
The Trustee further argues that prejudice will result if Walck is permitted to exempt the insurance proceeds because creditors have received notice that their claims will be paid in full. I cannot agree that unmet expectations of payment are the equivalent of prejudice. As defined in the cases cited in
Brooks,
prejudice from a delayed amendment to a bankruptcy schedule occurs only when the amendment
Prejudice also may occur when a delay in filing an amendment impairs a trustee’s ability to administer the debtor’s estate. For example, if a trustee has taken affirmative measures to administer an asset in reliance on the original exemption scheme, then an amendment to alter that scheme may be precluded as untimely. Thus, in
Daniels, supra,
the debtors claimed an exemption in a personal injury lawsuit in their original schedules, but they failed to assign an estimate of value to the suit. The trustee objected to the exemption, complaining that without a value estimate, he could not decide whether it would be beneficial to administer the asset. The debtors never responded to the objection, so the trustee proceeded to hire counsel and prosecute the suit, ultimately obtaining a $21,500 settlement. The debtors then sought to exempt the settlement. The court denied the amended exemption as untimely because it would impair the trustee’s ability to administer the asset he had effectively created.
In re Daniels,
In this case, the Trustee was not required to undertake any action in order to obtain the life insurance proceeds. Walck disclosed the existence of the insurance policy at the creditors’ meeting, the Trustee requested the turnover of the proceeds, and Walck duly delivered them. The only impairment suffered by the Trustee was the time and effort he invested in preparing and filing a Final Report. While this is not insignificant, it insufficient to deny a debtor the liberal right to amend schedules afforded by
B. Whether the insurance proceeds are necessary for Walck’s support
Having determined that Walck’s amendment to her schedules was timely, I will now address the Trustee’s second argument — that the insurance proceeds are not necessary for Walck’s support. When a court determines whether insurance proceeds are necessary for a debtor’s support under
At the hearing, the Trustee adduced testimony from Walck that generally supported the amounts stated in her amended schedules of monthly income and expenses. 3 On the date of the hearing, Walck was 66 years of age and was employed as a housekeeper at a nursing home where she earned $1684 per month. She received $1010 per month from Social Security, $99 per month from her late husband’s pension, and $300 from her daughter, who resides with her. Her total monthly household income from these three sources was $2608. Walck testified that she enjoys her job at the nursing home and intends to continue working until she is 70 years of age, if her health permits. When she stops working, she will receive Social Security income of $1600 per month.
Walck’s monthly expenses are reasonable and within the range expected for her household size, geographic location, and income level.
4
The only disproportionate expense is her mortgage which, at $1458 per month, represents 55.9% of her monthly income. At the hearing, Walck testified that Debtors had refinanced their mortgage within the ten years preceding her husband’s death and that the term of the mortgage is thirty years. She also testified that if the amended exemption under
The Trustee did not challenge Walck’s testimony regarding the mortgage or introduce evidence that the expense was not reasonable or necessary under
The Trustee succeeded in proving that Walck’s actual income exceeded the amount stated on in her schedules by $99.72. He also successfully demonstrated that the monthly payment on a homeowners insurance policy of $61.42 was es-crowed with her mortgage payment and should not have been reported separately on her schedule of expenses. Even with these adjustments, Walck’s income of $2608 a month is less than her adjusted expenses of $2655.31. I also consider that Walck has attained the age of 67 since the date of the hearing, earns her income through manual labor, and intends to retire when she teaches age 70. When she retires she no longer will earn monthly wages of $1684. This loss will not be offset by the increase in her Social Security payments from $1010 per month to $1600. Thus, as of August 2014, assuming her daughter continues to contribute to Walck’s expenses, her total household income will decrease to $1999. Further, there is no reason to believe that her
Applying the factors employed by Judge Thomas in
Collins,
especially Walck’s anticipated reduction in income within the next three years, I conclude that Walck is entitled to amend her claim of exemptions to exempt the proceeds of the life insurance policy under
III. Conclusion
For the reasons set forth above, the Trustee’s Objection to Walck’s Amended Schedule C will be overruled. An appropriate order will follow.
Notes
. Under the terms of a Memorandum of Understanding between the Executive Office for United States Trustees and the Administrative Office of the U.S. Courts, a Chapter 7 trustee submits a Final Report to the UST for review. After the report is reviewed and all deficiencies are resolved, which must occur within sixty days, the UST files the report with the Clerk. After the Final Report is filed with the Clerk, notice to creditors is sent by the trustee or such other person as the court directs or the Clerk. Amended Memorandum of Understanding Between the Executive Office for United States Trustees and the Administrative Office of the United States Courts Regarding Case Closing and Post Confirmation Chapter 11 Monitoring, April 1,1999, available at http:/ www.justice.gov/ust/eo/rules_regulations/mou 99. In the Middle District of Pennsylvania, notice of the filing of the Final Report is issued by the Clerk.
. This Court has jurisdiction pursuant to
. The amended schedules that she filed after the hearing were consistent with her testimony at the hearing.
. Her specific expenses, other than her mortgage, were as follows: electricity and heating fuel — $198; water and sewer — $38; TV/cable/internet — $99; home maintenance — $20; food — $250; laundry and dry cleaning — $25; medical and dental — $100; transportation— $92; recreation — $10; charitable contributions — $25; life insurance — $229; auto insurance — $110; taxes — $2; water softener — $58.