Menu    7 ABR 231

This document features "pop up" footnotes. To view the footnote, click the footnote icon [ ] To clear the footnote, click CLOSE.


UNITED STATES BANKRUPTCY COURT

DISTRICT OF ALASKA


 

In re:  

                                                                     

GWEN MAMIE ANAGICK-WALTERS,

 

                                 Debtor.

Case No. A00-01191-DMD

Chapter 7

ORDER SUSTAINING OBJECTIONS TO DEBTOR'S

CLAIM OF EXEMPTION


                        A hearing on the trustee's objection to the debtor's claim of exemptions was held on December 12, 2001. Gary Spraker appeared for the trustee, Kenneth Battley, who was also present. Chris Johansen appeared on behalf of the debtor, Jan Bolvin appeared for David Walters and the Walters children, and Robert Frenz appeared on his own behalf. Having reviewed the objection to exemptions filed by the trustee and the debtor's response thereto, considered the comments of counsel made at the hearing, and taken judicial notice of the papers and pleadings on file in this proceeding,


                      IT IS ORDERED that the trustee's objections to the debtor's claim of exemptions is sustained, and the debtor's exemptions of the following assets are disallowed:

      1)   $5,124.00 in excess equity over the amount allowable for a homestead under 11 U.S.C. § 522(d)(1);
      2)   $4,210.00 in excess equity over the amount allowable under the "wild card" exemption provisions of 11 U.S.C. § 522(d)(5);
      3)   household goods, pictures and artwork;
      4)   the debtor's interests in her former husband's BP America Capital Accumulation Plan and BP America Retirement Accumulation Plan;
      7 ABR 232   TOP  
      5)   The debtor's exemption of "ANS Hospital Personal";
      6)   the debtor's exemption of her Charles Schwab account, in the sum of $5,000.00; and
      7)   $5,500.00 in excess equity over the amount allowable for exemption of a vehicle under 11 U.S.C. § 522(d)(2).

In light of this court's rulings, the objections to debtor's exemptions filed by creditors Robert Frenz and David Walters and the Walters Children are moot.


Discussion


                      The debtor, Gwen Anagick-Walters, is in her early 40's. She has an MBA and has recently resumed employment as an accountant, after recovering from serious medical problems. She filed a chapter 7 petition on November 13, 2000. Her case was converted to one under chapter 13 on February 22, 2001, and then reconverted to chapter 7, on motion of creditor Robert Frenz, on July 24, 2001. On her amended schedules, filed June 13, 2001, the debtor took federal exemptions under 11 U.S.C. § 522(d). The trustee, as well as creditors Walters and Frenz, have objected to the debtor's exemption of several assets. The cumulative value of the assets claimed exempt exceeds $200,000.00. Each contested exemption will be discussed in turn.


                      First, the debtor has claimed $21,274.00 of the equity in her home exempt under § 522(d)(1). The trustee contends the debtor has overstated her homestead exemption by $5,124.00. The debtor conceded this point at the hearing. At the time she filed her petition, the maximum amount allowable as a homestead exemption under § 522(d)(1) was $16,150.00. The trustee's objection to the debtor's exemption of the excess over this amount is sustained.


7 ABR 233   TOP  

                       Next, the trustee objects to the debtor's exemption of certain assets under the "wild card" provisions of § 522(d)(5). Under subsection (d)(5), the debtor has claimed the following assets exempt:


                      Permanent Fund Dividend                                   $1,960.00

                      Cash                                                                      25.00

                      Clothes                                                                  300.00

                      Computer                                                              150.00

                      Diamond                                                               2,425.00

                      National Bank of Alaska                                      200.00


                      Total:                                                                    $5,060.00


Subsection (d)(5) would permit the debtor to exempt her "aggregate interest in any property, not to exceed in value $850 plus up to $8,075 of any unused amount of the exemption provided under paragraph (1) of this subsection." 1. Footnote As noted above, the debtor has already used the entire amount of the homestead exemption allowed under subsection (d)(1). Accordingly, she is only entitled to exempt assets having a value of up to $850.00 under subsection (d)(5). The excess equity claimed exempt, $4,210.00, belongs to the estate. The debtor's exemption of this excess equity is disallowed.


                      The trustee also objects to the debtor's exemption of household furnishings and miscellaneous pictures and artwork under § 522(d)(3). This subsection permits a debtor to exempt "household furnishings, household goods, wearing apparel, appliances, books, animals, crops, or musical instruments, that are held primarily for the personal, family, or household use of the debtor." 2. Footnote At the time the debtor filed her petition, such items could not "exceed $425 in value in any particular item or $8,625 in aggregate 7 ABR 234   TOP   value." 3. Footnote The aggregate value of the assets the debtor has exempted under this subsection is $7,106.00. However, the debtor has failed to itemize the assets with particularity on her schedules. Her schedule B simply lists "household furnishings" and "misc. pictures/artwork." Such generic listings are insufficient. The trustee and creditors should be able to determine the validity of a claimed exemption simply by reading the schedules. 4. Footnote It is impossible to tell, from a review of the debtor's schedules, what exactly is being claimed exempt, or whether any of the items are worth more than $425.00.


                      Additionally, the trustee contends the debtor's pictures and artwork do not qualify as household goods. Because the debtor has not sufficiently described the pictures and artwork on her schedules, it would be premature for me to rule on this issue. I am not willing to adopt a per se rule that household goods can never include artwork. Some guidance can be found on this issue from the definition of "household goods" adopted by the Fourth Circuit. Household goods are "those items of personal property that are typically found in or around the home and used by the debtor or his dependents to support and facilitate day-to-day living within the home, including maintenance and upkeep of the home itself." 5. Footnote As noted by another court, "[m]ost household goods no matter how defined have little resale value. They are, however, expensive to replace." 6. Footnote Artwork and pictures that are more in the nature of basic home decoration would 7 ABR 235   TOP   probably qualify as household goods. On the other hand, collector's pieces would not. In any event, until more is known about the debtor's artwork, a specific ruling about her claimed exemption of these assets as household goods cannot be made. The debtor's exemptions of her household goods, pictures and artwork are denied, without prejudice, pending further amendment of her schedules.


                      Next, the trustee objects to the debtor's exemption of her interest in two of her former husband's British Petroleum ("BP") accounts. In conjunction with her divorce, the debtor was awarded $161,079.34 from David Walters's BP America Capital Accumulation Plan ("CAP"), and one half, or $19,222.50, of his BP America Retirement Accumulation Plan. In the state court's findings and conclusions, it was noted that Mr. Walters, a highly qualified engineer, had been laid off by BP, but that he was working on a contract basis for BP and had submitted contract proposals to the State of Alaska for additional work. The state court entered two Qualified Domestic Relations Orders ("QDROs") with regard to the debtor's interests in the BP accounts. Each one contains the following provision:

 

Distributions to be made as a result of the assignment set forth in Section 5 shall be made on the earliest of (1) the participant's death; (2) the date the participant attains the earliest retirement age, as defined in Code Section 414(p)(4)(B) and ERISA Section 206(e)(3)(E)(ii); (3) the termination of the participant's employment with the employer, as defined with the plan; or (4) as otherwise permitted by plan provisions. All distributions are subject to the terms of the applicable plan. 7. Footnote


7 ABR 236   TOP  

Each of the QDROs also specifies that the plan will pay the benefits to the debtor in any form which she selects at the time the distribution is to be made, with the exception of a joint and survivor annuity for herself and a subsequent spouse.


                      The debtor has claimed her entire interest in the BP plans, more than $180,000.00, exempt pursuant to § 522(d)(10)(A). The trustee objects to the exemptions. First, he correctly notes that subsection (d)(10)(A) is inapplicable to the BP accounts. 8. Footnote Even assuming the debtor intended to exempt these accounts under § 522(d)(10)(E), 9. Footnote the trustee objects to the exemption. He says that since the debtor's former husband is no longer employed by BP, she is entitled to an immediate distribution from both accounts. Further, he says the exemption should be disallowed because the funds in the account are not reasonably necessary for the support of the debtor.


                        A party objecting to a debtor's exemptions has the burden of proving that the exemptions were not properly claimed. 10. Footnote Based on the record before me, including the state court's findings and conclusions entered in the divorce proceeding, it appears that the debtor was entitled to an immediate distribution of the funds she was awarded from both accounts, prior to the time she filed her petition. This was implicit in the state court's findings. That court stated:

 

Considering that [the debtor] will have approximately $200,000 of assets with which to invest and assuming a 7 ABR 237   TOP   reasonable return of 10% per year on those assets she will receive approximately $1,666 per month in pre-tax income. Her wants at $5,000 per month are significantly higher than her lifestyle when she entered marriage. She is medically capable of resuming her accounting career. Therefore, future spousal support beyond property division is inappropriate. 11. Footnote


The debtor has sufficiently recovered from her health problems that she can again work and support herself. She has an MBA. Since she is only in her early 40's, she has enough time yet to build a retirement portfolio. The debtor has produced no evidence to rebut this.

                      The debtor argues that the two BP accounts are "spendthrift trusts created by ERISA" and, thus, not property of the estate. The two BP plans have not been submitted into evidence. An anti-alienation provision in a valid ERISA or other spendthrift trust will exclude the trust corpus from the bankruptcy estate under § 541(c)(2). 12. Footnote However, here the debtor is entitled to an immediate distribution of her interest. The anti-alienation restrictions in a spendthrift trust do not apply to benefits that are actually paid out from the trust. 13. Footnote Section 541(c)(2) will not exclude the debtor's interest in the BP accounts from property of the estate. 14. Footnote


                      Under § 522(d)(10)(E), the debtor can only exempt her right to receive the payments from the two accounts to the extent that they are "reasonably necessary" for 7 ABR 238   TOP   her support. Her amended schedules reflect that she is earning sufficient income from her current employment to cover her monthly expenses. The funds in the BP accounts are not needed for her support. The debtor holds the key to their release, and cannot shield these funds from creditors on the basis that they may be in ERISA qualified plans. 15. Footnote The trustee's objection is sustained and the debtor's exemption of her interest in two BP accounts is disallowed.


                         7 ABR 239   TOP   The trustee's remaining objections to exemptions will also be sustained. He objects to the debtor's exemption of "ANS Hospital Personal" under § 522(d)(10)(D). This exemption fails for lack of sufficient description, and is denied, without prejudice to the amendment of the debtor's schedules. The debtor has conceded that the trustee's objection to her exemption of the Schwab account and 1996 Ford Windstar are well taken. The objections to these exemptions are also sustained, and the debtor's exemption of her Charles Schwab account under § 522(d)(10)(E) and the excess equity of $5,500.00 in the Ford Windstar are disallowed.




      DATED: February 22, 2002




                BY THE COURT



                DONALD MacDONALD IV
                United States Bankruptcy Judge





N O T E S:

1.       11 U.S.C. § 522(d)(5) (2000).


2.       11 U.S.C. § 522(d)(3) (2000).


3.      Id.


4.      In re Mohring, 142 B.R. 389, 395 (Bankr. E.D. Ca. 1992), aff'd, 153 B.R. 601 (B.A.P. 9th Cir. 1993), aff'd, 24 F.3d 247 (9th Cir. 1994), citing Hyman v. Plotkin (In re Hyman), 967 F.2d 1316, 1319-20 at n.6 (9th Cir. 1992).


5.       McGreevy v. ITT Financ. Svc. (In re McGreevy), 955 F.2d 957, 961-62 (4th Cir. 1992).


6.       Barrick v. Avco Consumer Discount Co. (In re Barrick), 95 B.R. 310, 312 (Bankr. M.D. Pa. 1989).


7.       See ¶ 8 of Trustee's Ex. 1, QDRO for the retirement plan; and ¶ 6 of Trustee's Ex. 2, QDRO for the capital accumulation plan.


8.       Section 522(d)(10)(A) permits exemption of a debtor's right to receive "a social security benefit, unemployment compensation, or a local public assistance benefit. "


9.       Section 522(d)(10)(E) permits a debtor to exempt her right to receive "a payment under a stock bonus, pension, profitsharing, annuity, or similar plan or contract on account of illness, disability, death, age, or length of service, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor, . . . "


10.       Fed. R. Bankr. P. 4003(c).


11.       See State Court's Findings and Conclusions at p. 21 [attached to Trustee's Objection to Exemptions, filed Oct. 18, 2001, at Docket No. 85].


12.       Patterson v. Shumate, 504 U.S. 753, 758 (1992); Ehrenberg v. So. Calif. Permanente Medical Group (In re Moses), 167 F.3d 470, 473 (9th Cir. 1999).


13.       Wright v. Riveland, 219 F.3d 905, 919-921 (9th Cir. 2000).


14.       In re Reid, 139 B.R. 19, 21 (Bankr. S.D. Calif. 1992).


15.      In this regard, I disagree with the analysis of the court in In re Hageman, 260 B.R. 852 (Bankr. S.D. Ohio 2001), a case heavily relied on by the trustee. In that case, the court found that the debtor's interest in her former husband's ERISA retirement plan was estate property because it was created by virtue of a QDRO, rather than derived from her own employment. This distinction does not address the real issue in this case, which is that the debtor is entitled to an immediate distribution. Even a debtor who has " earned" his interest in an ERISA plan because of his employment cannot exempt the funds from the plan once he has received them. See, In re Cesare, 170 B.R. 37 (Bankr. D. Conn. 1994). The debtor's degree of control over access to the funds is the critical factor. See Reid, 139 B.R. at 21, and Ninth Circuit cases cited therein.