On March 7, 1991, a hearing was held in Juneau on the trustee's objection to debtor's claim that his fishing vessel, Nine Lives, was exempt as a homestead under AS 09.38.010. In attendance were debtor; his attorney William E. Olmstead; Gordon Zerbetz, Trustee; and his attorney Cabot Christianson, appearing telephonically. For the reasons set out herein, the objection is sustained. This ^memorandum order constitutes findings of fact and conclusions of law

      Debtor testified that he paid rent to Julie Bennett after April 1990 because he used the location as his business office and to store his skiff, motors, coolers, fishing gear and other accessories relating to his charter business. Debtor also testified that in the fall of 1990 he house-sat at the house and took care of the pet while Julie Bennett was out of town on extended trips.

      Debtor filed Chapter 7 on June 8, 1990. Four days prior to the petition, debtor sold $3,000 of stock and utilized the proceeds to pay down the mortgage on the Nine Lives, the 40 foot twin diesel vessel that debtor uses in connection with his fishing charter business. One day prior to the petition, debtor sold a 1955 Cessna airplane for $17,000 and utilized the proceeds to pay down the mortgage on the vessel. According to debtor's schedules, the vessel is worth $68,500 and has debt against it (after the $20,000 paydown) of $49,400.

      Debtor claimed the vessel as exempt as a homestead under AS 09.38.010. The trustee objected on June 18, 1990, ten     1 ABR 461  days after the petitlon was filed. The hearing on the objection was March 7, 1991.

      The debtor's schedule of current income and current expenditures includes the following expenditure item:

"Rent or Home Loan Payment

$500.00"

The monthly payment on the vessel's mortgage is approximately $768, but this payment is not referenced anywhere in the schedule of current income and current expenditures.

      Debtor testified that he moored his vessel both at Aurora Harbor and Auke Bay Harbor in Juneau. Auke Bay is used exclusively for transient moorage: there is a 3-day limit for any vessel. Aurora is used both for long-term liveaboards as well as transient moorage. The liveaboard rate at Aurora is approximately $20 per month. The transient moorage rate at Aurora applicable to the Nine Lives is a pro-rated rate based on vessel length and annual usage that works out to about $900 per month. Beginning in January 1991, debtor began paying the liveaboard rate at Aurora; prior to then he used both Aurora and Auke Bay on a transient basis.

      When asked to reconcile the $500 "rent or home loan" figure with his claim that the vessel was exempt as a residence, debtor testified that the $500 consisted of $400 rent to Julie Bennett, plus $100 for transient moorage fees for both Aurora and Auke Bay. When asked to explain why the rental rate stayed     1 ABR 462  at $400 per month through September 1990 even though he was supposed to have moved out in April 1990, debtor had no real explanation.

      Debtor also testified that he moved into the vessel and paid down the debt on the vessel by $20,000 days before the petition because he intended to exempt the equity in the boat. Apart from that purpose, he had no answer to the questin put to him by the trustee, namely whether there was any other reason debtor moved onto the vessel other than attempting to exempt it. The debtor could only say that, "It seemed like the thing to do."¹

      The legislative history of the 1978 Bankruptcy Code is clear that debtors are permitted to make full use of their exemptions.² In the Ninth Circuit, it is permissible to convert     1 ABR 463  nonexempt assets to exempt assets, even on the eve of bankruptcy. In re Daniels, 771 F.2d 1352 (9th Cir., 1985). Other circuits³ and some commentators⁴ have attempted to identify the point beyond which legitimate pre-bankruptcy planning becomes fraudulent activity. In this connection, the phrase, "Pigs get fed, hogs get slaughtered," has gained some accuracy. The Ninth Circuit has not attempted to define any such standard, and no Ninth Circuit case has denied an exemption solely on the basis of conversion of nonexempt to exempt assets.

      In this case, I am upholding the trustee's objection to the exemption because I do not believe that the debtor had a bona fide intention of making the boat his permanent residence at the time of filing. There are too many unusual features surrounding his move: his continuing to pay rent at the old $400 per month rate for five months after he moved out; his failure to obtain permanent moorage for the boat; his including the $400 per month rent as part of the $500 per month figure in the statement of income and expenses. ⁵ The debtor has explanations     1 ABR 464  for all of these things, but his demeanor was such that I did not find them credible. ⁶

      For the foregoing reasons, the exemption is DENIED. Debtor is directed not to move or utilize the boat without the trustee's consent. A separate order will be filed.

    1 ABR 462  1. The debtor stated that he moved onto the boat because of the press of his charter business. This would not explain why he did not move onto the boat in April 1989 or any other previous year; nor would it explain why he failed to move off the boat in the fall.

1 ABR 462  2.

As under current law, the debtor will be permitted to convert nonexempted property into exempt property before filing a bankruptcy petition .... The practice is not fraudulent as to creditors, and permits the debtor to make full use of the exemptions to which he is entitled under the law.

H.R. Rep. No. 595, 95th Cong., 1st Sess. 361 (1977) reprinted in 1978 U.S. Code Cont. & Ad. News 5963, 6317; S. Rep. No. 989, 95th Cong., 2d Session 76, reprinted in 1978 U.S Code Cong. & Ad. News 5787, 5862.

    1 ABR 463  3.  Compare Northwest Bank Nebraska v. Tueten, 848 F.2d 871 (Sth Cir. 1988) with Hanson v. First National Bank in Brookings, 848 F.2d 866 (8th Cir. 1988)

    1 ABR 463  4.  See, e.g., Comment, The Night Before Bankruptcy: The Eighth Circuit's Response to Bankruptcy Planning, 15 Wm. Mitchell L. Rev. 643 (1988)

    1 ABR 463  5.  Debtor's counsel stated that his practice is to exclude from the schedule of income and expenses any debt that is also listed on the schedules. This practice is inappropriate because the schedule of income and expenses should include all income and expenses. For example, the "Rent or Home Loan Payment" entry on the schedules of income and expenses quite clearly would typically include a home mortgage which would also be included on schedule A-2.

    1 ABR 464  6.  At the commencement of the hearing, I had anticipated I would rule for the debtor because converting exempt to nonexempt assets is not in itself a basis for denying an exemption. The debtor's testimony led me to believe that the factual basis for the exemption itself - an intent to reside on the boat - was lacking. I simply did not believe the debtor, who was the only witness.