Opinion
Case No. 98-35239-T, Chapter 7
February 19, 2002
MEMORANDUM OPINION
Hearing was held January 16, 2002, on the trustee's objection to debtor's claim of exemption filed on October 16, 2001, and the debtor's response disputing the objection. The court sustains the trustee's objection and will deny the claim of exemption for the reasons stated below.
Procedural Background.
This opinion incorporates previous opinions or orders entered by the court on October 10, 2001 (file document 171, approving trustee's motion to compromise); January 4, 2001 (file document 158, sustaining trustee's objection to earlier claim of exemptions); March 17, 2000 (denying debtor's discharge pursuant to 11 U.S.C. § 727 in AP NO. 99-3175).
Debtor pro se filed a chapter 13 petition on July 15, 1998, and converted the case to a chapter 7 on March 29, 1999. Sherman
B. Lubman serves as trustee.
At the time debtor's case was converted to a chapter 7, she was the holder of a beneficial interest in a family trust located in Lowell, Massachusetts. By order entered December 20, 2000, the court granted the chapter 7 trustee's motion authorizing the trustee to execute a deed transferring any interest of debtor's bankruptcy estate in a parcel of real property held in the Massachusetts trust. The purpose of the transfer was to allow the trustee of the trust to sell the realty. The court's order was affirmed on appeal by the United States District Court. See Leclair v. Lubman (In re Leclair), Civil Action No. 3:01CV071 (E.D.Va. October 29, 2001) (unpublished). By order entered January 4, 2001, the court sustained the trustee's objection to debtor's claim of exemptions (in amended schedule C) because debtor failed to timely file a homestead deed pursuant to Virginia Code §§ 34-4 and 34-17. The court's denial of the claimed exemption effectively denied her claim of exemption in the Massachusetts trust. Debtor did not file an appeal of this order.
By memorandum opinion and order entered October 10, 2001, the court approved the chapter 7 trustee's motion to approve compromise between the trustee and the Massachusetts trustee. Under the compromise, the trustee in bankruptcy was to receive the sum of $39,662.41 in full satisfaction of debtor's interest in the trust. Although debtor had opposed the compromise, she did not file an appeal of the order.
Debtor's New Claim of Exemption.
On October 16, 2001, debtor filed a second amended schedule C claiming an exemption pursuant to 11 U.S.C. § 522(b)(2) in the amount of $50,000.00 for property described as "Proceeds from sale of joint tenant property sold 12/28/00, held in escrow in Lowell, MA . . ." and valued by debtor at $40,000.00.
On November 15, 2001, the chapter 7 trustee filed an objection to the debtor's exemption claim on the following grounds: 1) debtor has no interest in the property claimed exempt because the court previously denied her exemption claim in the trust assets and authorized the trustee to liquidate the estate's interest in the trust free of any claim of exemption, 2) the claim of exemption is untimely due to the length of time after debtor's case was converted to chapter 7 and after the trustee has compromised the estate's interest in the trust, and 3) debtor has no interest in property that may be exempted pursuant to 11 U.S.C. § 522(b).
Debtor filed a response asserting in substance that the trustee's objection should be overruled because it was not timely filed. Her basic premise seems to be that F.R.Bankr.P. 4003(b) does not permit any objection to exemption to be filed beyond thirty days after the conclusion of the § 341 meeting of creditors.
Conclusions of Law.
The court agrees with the trustee that debtor's new claim of exemption should be denied.
Debtor claimed the exemption on October 16, 2001, by filing her second amended schedule C. The trustee filed his objection on November 15, 2001, within the thirty time limit allowed by F.R.Bankr.P. 4003(b). Debtor's argument that the objection was not timely filed is without merit.
"A party in interest may file an objection to the list of property claimed as exempt only within 30 days after the meeting of creditors held under § 341(a) is concluded or within 30 days after any amendment to the list or supplemental schedules is filed, whichever is later. . . ." Fed.R.Bankr.Proc.4003(b). (emphasis added).
Debtor previously sought to exempt her interest in the trust, under 11 U.S.C. § 522(b)(2) and specifically under Virginia Code §§ 34-4 and 34-17, the Virginia homestead exemption. The court's order of January 4, 2001, denied that exemption claim because debtor had failed to timely file a homestead deed. Debtor presently claims an exemption pursuant to 11 U.S.C. § 522(b)(2), of the proceeds derived by the trustee from the sale of debtor's trust interest. This is essentially the same property that was previously denied exemption. The court's order of January 4, 2001, remains the law of this case holding that debtor may not exempt the trust property in either its original or liquidated form.
Finally, aside from the court's earlier denial of debtor's homestead exemption in trust assets, the court considers whether debtor has an exemptible interest in the trust sale proceeds under any other provision of Code 11 U.S.C. § 522(b)(2).
Because Virginia has elected to opt out of the Bankruptcy Code exemptions prescribed in § 522(d), Virginia bankruptcy filers must claim exemptions as allowed by § 522(b)(2) rather than § 522(b)(1). Section 522(b)(2) allows a debtor to exempt the following:
522. Exemptions.
. . .
(b) Notwithstanding section 541 of this title, an individual debtor may exempt from property of the estate, the property listed in either paragraph (1) or, in the alternative, paragraph (2) of this subsection. . . . Such property is —
. . .
(2)(A) any property that is exempt under Federal law, other than subsection (d) of this section, or State or local law that is applicable on the date of the filing of the petition at the place in which the debtor's domicile has been located for the 180 days immediately preceding the date of filing of the petition, or for a longer portion of such 180-day period than in any other place; and
(B) any interest in property in which the debtor had, immediately before the commencement of the case, an interest as a tenant by the entirety or joint tenant to the extent that such interest as a tenant by the entirety or joint tenant is exempt from process under applicable nonbankruptcy law.
Schedule C to the form bankruptcy petition, property claimed as exempt, requires a debtor to check the applicable code section for exemptions. Bankruptcy filers in Virginia are thus required to claim exemptions under the following instruction set out in the form, which effectively summarizes § 522(b)(2):
Exemptions available under applicable nonbankruptcy federal laws, state or local law where the debtor's domicile has been located for the 180 days immediately preceding the filing of the petition, or for a longer portion of the 180-day period than in any other place, and the debtor's interest as a tenant by the entirety or joint tenant to the extent the interest is exempt from process under applicable nonbankruptcy law.
A careful reading of this paragraph reveals that debtor, as a domiciliary of Virginia, was required to file her claim of exempt property under nonbankruptcy federal law or Virginia law. The court is aware of no applicable nonbankruptcy federal law that would apply to debtor's trust interest. This leaves Virginia law, which leaves the homestead exemption, denied by the court. The language concerning tenancy by the entirety or joint tenancy has no applicability to a beneficial interest in a trust.
Accordingly, the court finds no basis to allow the debtor's claim of exemption, and the trustee's objection must be sustained. An separate order will be entered.