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UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF ALASKA


In re:) 
 ) 
GEORGE J. MURPHY and )Case No. F93-00256-DMD
ALICE MURPHY,)Chapter 7
 ) 
Debtors.     ) 
_____________________________________) 


ORDER GRANTING, IN PART, OBJECTION TO
DEBTORS' CLAIMS OF EXEMPTIONS


     The objection to claim of exemptions filed by creditor Alaska Housing Finance Corporation (AHFC) came on for hearing January 20, 1994. Arthur Robson appeared on behalf of the debtors. Joseph McKinnon appeared on behalf of AHFC. After considering the arguments of counsel and their memoranda, and a full review of the file,

     IT IS ORDERED that AHFC's objections to the debtors' claim of exemptions is granted, in part, as follows.
AHFC objected to the debtors' exemption of the following assets:

PERS retirement account$5,030.00
Account for deposit of VA benefits$30.00
Cash$100.00
Credit Union account$100.00
U.S. Savings Bonds$3,000.00
Trust account$3.52
     The debtors claimed these assets exempt under state law, AS 09.38.010 et seq., but did not specify under which provisions these assets qualify for exemption.

     At the hearing on January 20, 1994, the objections to the exemption of the PERS retirement account and the account for the deposit of VA benefits were resolved favorably to the debtor. The assets still at issue are the cash, the credit union account, the U.S. savings bonds and
TOP    3 ABR 346  the trust account.

     The scheduled value of the trust account was $3.52. This sum, held in Mr. Robson's trust account, represents funds remaining after the liquidation of Mr. Murphy's IRA. The trust account held $9,381.56 in IRA proceeds one day before the debtors filed their petition, when all but $3.52 was disbursed, via check, to various creditors and the debtors ( $381.56). The debtors argue that these funds were exempt, pursuant to AS 09.38. 060 (b), as they were traceable to an IRA account. Alternatively, the debtors argue that these funds no longer belonged to them once they were paid to creditors.

     AHFC doesn't dispute that the funds in the attorney's trust account were IRA proceeds. The IRA proceeds could have been claimed exempt under AS 09.38.017(a)(2) and AS 09.38.060(b), as they were easily traceable to an exempt IRA. However, this does not resolve the issue.

     The remaining $3.52 which is traceable to the IRA is exempt property. However, the balance of the funds from the IRA lost their exempt status when they were transferred to creditors.
It is well settled that the proceeds of exempt property are exempt to the debtor for a reasonable time, to enable him . . . to invest the money in other exempt property.
Gutterman v. First Nat. Bank of Anchorage, 597 P.2d 969, 974 (Alaska 1979), citing Tally v. Palmer, 112 Kan. 391, 210 P. 1104 (1922) [emphasis added].
When a debtor chooses to transfer exemptible property to a creditor, the debtor is deemed to have chosen not to claim that property as exempt.
In re Rundlett, 149 B.R. 353, 358 (Bankr. S.D.N.Y. 1993) [citation omitted]; see also Matter of Wickstrom, 113 B.R. 339, 345 (Bankr. W.D. Mich. 1990). The fact that exemptible property was involved in the prepetition transfers will not preclude the trustee from seeking to avoid its transfer as a preference. In re Owen, 104 B.R. 929, 932 (C.D. Ill. 1989); Wickstrom, 113 B.R. at 345-346. Further, since the debtors' transfer of the proceeds was voluntary, they are precluded from claiming exempt any funds which may be recovered by the trustee. 11 U.S.C. § 522(g), (i). I conclude that, with regard to the proceeds of the debtors' IRA, only the remaining $3.52 in their attorney's trust account is exempt. The balance, which has been transferred to creditors, has TOP    3 ABR 347  lost its exempt status and the debtors cannot claims these funds exempt in the event the trustee recovers them as preferences.

     With regard to the U.S. savings bonds, Mr. Murphy has filed an affidavit which states they are purchased semi-monthly from his salary and placed in what he believes to be "a retirement program." The debtors claim these bonds are exempt pursuant to AS 09.38.030, and argue that they can increase the liquid asset exemption of that section pursuant to AS 09.38.050 because of Mr. Murphy's disability. The bonds cannot be exempted under these statutes. The "liquid asset" exemption contained in AS 09.38.030(b) is available only to "an individual who does not receive earnings either weekly, semi-monthly or monthly." Mr. Murphy's affidavit establishes that he receives semi-monthly earnings. The increased exemption amount allowed by AS 09.38.050 is provided to injured or disabled individuals who prove, by affidavit, that they are the sole support of their household. A review of the debtors' schedule I reflects that both debtors are regular wage earners. Mr. Murphy's affidavit does not contradict this information, but he urges this court to increase his exemptions to allow retention of the savings bonds for retirement. I conclude the U.S. savings bonds do not qualify for exemption under AS 09.38.030 or 09.38.050. Nor do the bonds qualify for exemption under any other provision of the Alaska Exemptions Act. AHFC's objection to this claim of exemption is sustained.

     Finally, with regard to the exemption of the $100 cash and $100 in the credit union, I find that these assets, as well, do not qualify for the "liquid asset" exemption of AS 09.38.030 for the same reasons stated in conjunction with the U.S. savings bonds. AHFC's objection to these claims of exemption are also sustained. Therefore,

     IT IS ORDERED that AHFC's objections to the debtors' claims of exemption as to the U.S. savings bonds, the $100 cash, and the $100 deposited in the credit union, are sustained and these exemptions are disallowed.

     IT IS FURTHER ORDERED that AHFC's objection to the debtors' claim of exemption with regard to the $3.52 in their attorney,s trust account is overruled. However, the balance of the funds from the debtors' IRA, which were deposited into the trust account but paid to creditors prepetition, are not exempt assets.

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     IT IS FURTHER ORDERED that the parties file the original of the Stipulation for Exemptions Hearing, a copy of which was submitted via facsimile for the hearing on January 20, 1994.

          DATED: February 9, 1994.
 BY THE COURT
 DONALD MacDONALD IV
 United States Bankruptcy Judge