Cite as: Keith M. Lundin, Lundin On Chapter 13, § 48.4, at ¶ ____, LundinOnChapter13.com (last visited __________).
Exemptions are claimed by the debtor in a Chapter 13 case based on the law in effect on the date the petition is filed.1 Several reported decisions—typically in the context of modification after confirmation or conversion from Chapter 13 to Chapter 7—have refused to allow debtors to use exemption laws that took effect after the filing of the Chapter 13 petition.2 In states that have opted out of the federal exemptions, Chapter 13 debtors should fill out Schedule C to Official Bankruptcy Form 63 based on the state law in effect on the date of the filing of the petition.
The Supreme Court’s 1992 decision in Taylor v. Freeland & Kronz4 puts sting into the careful claiming of exemptions in Chapter 13 cases. In Taylor, the Supreme Court held that a Chapter 7 trustee cannot object to exemptions after expiration of the 30-day period fixed by Bankruptcy Rule 4003(b)—without regard to whether the exemptions claimed would withstand scrutiny under applicable state law. After Taylor, property claimed exempt by a debtor in Schedule C to Official Bankruptcy Form 6 is exempt and beyond attack absent objection “within 30 days after the conclusion of the meeting of creditors . . . or the filing of any amendment to the list or supplemental schedules unless, within such period, further time is granted by the court.”5 There is nothing in Bankruptcy Rule 4003(b) to limit its application to Chapter 7 cases.
Taylor and Bankruptcy Rule 4003(b) have important implications for Chapter 13 practice. Chapter 13 debtors who carefully fill out and promptly file Schedule C to Official Bankruptcy Form 6 can expect the property claimed exempt in that schedule to be set aside from the estate and forever protected from attack once the 30-day period described in Bankruptcy Rule 4003(b) passes without an objection.6 Those exemptions then form the basis for other important calculations and potential actions by the Chapter 13 debtor. This impact of Taylor and Bankruptcy Rule 4003(b) demonstrates the wrongheadedness of the reported decisions reciting that exemptions are only “informational” or “not important” in Chapter 13 cases.7
For example, calculating the liquidation value of the estate to determine whether the Chapter 13 plan satisfies the best-interests-of-creditors test in § 1325(a)(4) inevitably involves consideration of the exemptions claimed by the debtor in Schedule C.8 Best-interests-of-creditors-test battles at confirmation in Chapter 13 cases often boil down to litigation over exemptions. If the debtor properly claimed exemptions in Schedule C and no one objected within the limits of Bankruptcy Rule 4003(b), those exemptions are not subject to collateral attack at confirmation in the guise of a best-interests-of-creditors-test objection to confirmation.9
Discussed in more detail immediately below,10 Chapter 13 debtors can use § 522(f) to avoid liens that impair exemptions.11 Taylor and Bankruptcy Rule 4003(b) impact a Chapter 13 debtor’s use of § 522(f). If the debtor carefully claimed exemptions in Schedule C to Official Bankruptcy Form 6, the absence of timely objection under Bankruptcy Rule 4003(b) will form the basis for lien avoidance under § 522(f).12
Applying § 522(h), many courts have concluded that a Chapter 13 debtor’s use of the avoidance and recovery powers in §§ 542, 544, 545, 547 and 548 is limited to the protection of exemptions.13 The predicate for the debtor’s use of these avoidance powers is a successful exemption, thus Taylor and Bankruptcy Rule 4003(b) become important to any avoidance or recovery action contemplated by the debtor. When the debtor claims an exemption and no timely objection is filed, the exemption is then a sound foundation for the debtor’s action through § 522(h).14
Taylor, Bankruptcy Rule 4003(b), and the exemptions in Schedule C are important at modification of a plan after confirmation under § 1329. One court held that Bankruptcy Rule 4003 does not prohibit a Chapter 13 debtor from asserting an exemption at modification after confirmation that the debtor failed to assert in the original schedules.15 In In re Ferretti,16 Taylor saved a Chapter 13 debtor from having to increase payments to creditors at modification after confirmation. In the original Schedule C, the debtor in Ferretti valued the potential recovery from an automobile accident at a dollar and claimed the potential proceeds exempt. No one objected. The 30-day period in Bankruptcy Rule 4003(b) expired. The lawsuit was eventually settled, and the debtor received $22,876.47 in cash proceeds. The bankruptcy court denied the trustee’s motion to modify the plan after confirmation to capture the lawsuit settlement proceeds for distribution to creditors. Citing Taylor, the court explained:
As Debtor herein has claimed the full value of the Auto Accident Claim proceeds as exempt and no objections to the claim were filed, the property is deemed exempt. The Debtor is entitled to the balance of the undistributed proceeds of the Auto Accident Claim, even though auto accident claim proceeds are not entitled to exemption under existing law.17
The courts have struggled to apply Taylor and Bankruptcy Rule 4003(b) at conversion from Chapter 13 to Chapter 7.18 The debtor will usually want to argue that Taylor and Bankruptcy Rule 4003(b) preclude exemption challenges upon conversion to Chapter 7 if the debtor claimed exemptions in Schedule C at the filing of the Chapter 13 case. In many jurisdictions, by local rule or custom, debtors file new statements and schedules at conversion from Chapter 13 to Chapter 7.19 Debtors who are happy with the exemptions claimed in the Chapter 13 schedules may want to omit filing a new Schedule C at conversion or may need to move for relief from any local rule that would require the filing of new exemptions. Otherwise, the debtor may have to file amended exemptions at conversion to Chapter 7, and the filing of amendments will trigger a new 30-day period for objections under Bankruptcy Rule 4003(b).
One bankruptcy court found “cause” to extend the Bankruptcy Rule 4003(b) deadline in every Chapter 13 case to 30 days after any conversion on this reasoning: “cause exists to extend the deadline in a Chapter 13 in order to provide parties in interest, including a Chapter 7 trustee, the opportunity to review and object to a debtor’s claim of exemptions following conversion to prevent the potential abuses which otherwise occur absent such an extension.”20 This practice effectively rewrites Bankruptcy Rule 4003(b) and neutralizes Taylor with respect to Chapter 13 cases.
Along the same lines, it is apparently routine in some jurisdictions for the Chapter 13 trustee to “indefinitely continue” the meeting of creditors to avoid the Taylor result. As discussed above, the 30-day period in Bankruptcy Rule 4003(b) begins at the “conclusion of the meeting of creditors . . . or the filing of any amendment.” If the meeting of creditors never “concludes,” it is arguable that the 30-day period does not run. One reported bankruptcy decision holds that the 30-day period in Bankruptcy Rule 4003(b) is not extended when the meeting of creditors is continued indefinitely, at least when the trustee fails to set a specific date and time for the continued meeting within 30 days of the adjournment.21
If the debtor does file an amended exemption schedule, notice of the amendment must be given else the 30-day period for objection in Bankruptcy Rule 4003(b) will not begin to run. In In re Aurelio,22 the debtor amended exemptions to claim tools of the trade when restaurant equipment was sold after the petition. The debtor failed to give notice of the amendment. The bankruptcy court found that an objection to the amended exemptions was timely though filed more than 30 days after the amended Schedule C: “Rule 1009 requires notice to be given to any creditor affected by such an amendment. . . . [T]he objection should be considered timely in view of the fact that no official notice of the amendment has yet been filed by the debtors.”23
The perception that strict application of Taylor in Chapter 13 cases produces harsh results has persuaded some courts to construct limitations on the 30-day bar to objections in Bankruptcy Rule 4003(b). For example, in Crowell v. Theodore Bender Accounting, Inc. (In re Crowell),24 a Chapter 13 debtor claimed a 42-acre rural homestead exemption based on Texas law. No one objected within the 30 days provided by Bankruptcy Rule 4003(b). Later, the debtor brought an adversary proceeding against a lienholder, challenging the extent of the lien on the debtor’s homestead. The lienholder defended on the ground that the debtor lived in an urban area and thus was limited to the one-acre urban homestead exemption under Texas law. The Fifth Circuit held that neither Taylor nor Bankruptcy 4003(b) precluded finding that the debtor’s homestead exemption was limited to one acre notwithstanding the absence of a timely objection to exemptions. It is hard to square Crowell with Taylor.
Some reported decisions avoid the result in Taylor by finding a timely objection to exemptions in other documents filed by creditors or by the trustee. For example, in In re Heretakis,25 the debtor moved under § 522(f) to void judicial liens26 that impaired the debtor’s homestead exemption. The lienholders responded by challenging the homestead exemption, but no separate objection to exemptions was filed. Serendipitously, the response to the motion was filed within 30 days after the conclusion of the § 341 meeting of creditors. The bankruptcy court concluded that the lienholders had timely challenged the exemptions: “Rule 4003(b) does not require a particular form for an objection to exemption.”27 Similarly, in In re Peters,28 the bankruptcy court held that an objection to exemptions contained within an objection to confirmation that was filed within 30 days after the conclusion of the § 341 meeting was timely for purposes of Bankruptcy Rule 4003(b) and Taylor.
One bankruptcy court has done battle with the mechanics of setting aside exempt property in Chapter 13 cases. In In re Deeble,29 the confirmed plan called for the sale of real property owned by the debtor. The debtor was entitled to an exemption in the proceeds. The issue was whether the exempt portion of the proceeds should be turned over to the debtors or held by the trustee. The court held that the exempt portion of the sale proceeds should be retained by the Chapter 13 trustee until the debtor completed payments under the plan or became entitled to a discharge. In support of this outcome, the court cited § 522(c) of the Bankruptcy Code, which provides that “unless the case is dismissed, property exempted under this section is not liable during or after the case for any debt of the debtor . . . except . . . ”30 As explained by the court:
[P]ermitting a debtor to collect his or her exemption prior to the conclusion of the case may result in the debtor receiving substantial funds while remaining under bankruptcy protection for many months. At any time the debtor may elect to voluntarily dismiss the Chapter 13 case. Such a debtor would have benefitted fully from the exemption, without the quid pro quo anticipated in the Code of final payment in accordance with debtor’s confirmed plan. Upon dismissal, creditors could levy upon any funds remaining but that theoretical remedy may well be a hollow promise if the debtor has already spent the funds. . . . Accordingly, I hold that the funds remaining in the hands of the Chapter 13 Trustee which are subject to allowed claims of exemption . . . be retained by the Chapter 13 Trustee until the conclusion of all payments for the terms of the confirmed plan.31
If earnestly applied, the analysis in Deeble would wreak havoc in the administration of Chapter 13 cases. Section 522(c) applies in all Chapter 13 cases to all claims of exemptions. Deeble could require Chapter 13 trustees to take possession of all assets claimed exempt and would require the trustee to protect and preserve those assets for many years until the debtor completes payments under the plan, the debtor becomes entitled to a discharge, or the Chapter 13 case is converted or dismissed. Chapter 13 trustees (and their bonding companies) can be expected to be less than enthusiastic about becoming depositories for all exempt property in cases under their administration.
The Deeble court may have been propelled to its unusual conclusion by a peculiarity of Georgia law that seemed to unbalance the exemptions available in and out of bankruptcy. In most states that have opted out of the federal exemptions, the exemptions available to a Chapter 13 debtor will be the same as the exemptions under nonbankruptcy state law. In most opt-out states, that a Chapter 13 debtor might fail to complete payments under the plan and suffer dismissal should not put creditors at any greater risk with respect to the debtor’s exemptions.
In a state that has not opted out of the federal exemptions, creditors are more likely to face some risk of the sort feared by the court in Deeble. If the federal exemptions in a bankruptcy case are more generous than the exemptions under state law, then setting aside the full federal exemption and allowing the debtor to use exempt property during the Chapter 13 case could put creditors at risk of loss of the difference between the federal and state exemptions in the event the Chapter 13 case is dismissed. The logic in Deeble should at least be confined to the unusual situation in which the exemptions available to a Chapter 13 debtor are different in bankruptcy from what they are under nonbankruptcy law.
In any case, three years after Deeble, the same bankruptcy court was asked to reconsider its holding that the Chapter 13 trustee must safeguard exempt property until a Chapter 13 debtor completes payments under the plan. In In re Gamble,32 the bankruptcy court reaffirmed its holding in Deeble, finding that an exemption in cash that was beyond attack because of Taylor must be held by the Chapter 13 trustee until completion of payments under the plan.33 The debtor appealed. The Eleventh Circuit reversed, explaining as follows:
The plain language of the bankruptcy code and precedent from this court are clear that exempt property is no longer part of the bankruptcy estate, and is available for the debtor’s use. . . . This court held in [Hall v. Finance One of Georgia, Inc. (In re Hall), 752 F.2d 582 (11th Cir.1985),] that once the debtor lists property as exempt from the estate, and neither the trustee nor the creditors object during the 30-day time period, the property no longer belongs to the estate and the debtor “may use it as his own.”34
1 An individual debtor may claim exemptions based on “federal law, . . . 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 the filing of the petition, or for a longer portion of such 180 day period than in any other place.” 11 U.S.C. § 522(b)(2)(A) (emphasis added).
2 See Marcus v. Zeman (In re Marcus), 1 F.3d 1050 (10th Cir. 1993) (The law in effect on the date of filing the Chapter 13 case controls the exemptions available to the debtor because § 522(b)(2)(A) defines exempt property with respect to state or local law applicable “on the date of the filing of the petition.”); In re Boothe, 167 B.R. 943 (Bankr. D. Colo. 1994) (Exemptions are determined in Chapter 13 cases as of the date of the petition.); In re Toronto, 165 B.R. 746, 758 (Bankr. D. Conn. 1994) (State law in effect at the filing of the petition determines the exemptions available to a Chapter 13 debtor. “[T]he debtors may elect to employ only exemptions under the law ‘that is applicable on the date of the filing of the petition’. § 522(b)(2)(A). An exemption resulting from the postpetition amendment of state law may not be claimed in a pending bankruptcy case.”).
3 See § 35.4 [ Schedule C—Exemptions ] § 36.10 Schedule C—Exemptions.
4 503 U.S. 638, 112 S. Ct. 1644, 118 L. Ed. 2d 280 (1992).
5 Fed. R. Bankr. P. 4003(b). See In re Smith, 179 B.R. 437, 446 (Bankr. E.D. Pa. 1995) (Creditor’s objection to exemptions was untimely where bar date for objections was January 20, 1995, next business day was January 23, but objection was not filed until January 24 or January 26. Order setting bar date for objecting to exemptions “must be construed in the spirit of the Supreme Court’s [Taylor v. Freeland & Kronz, 503 U.S. 638, 112 S. Ct. 1644, 118 L. Ed. 2d 280 (1992)] decision, i.e., strictly against [the creditor].”).
6 See In re Martinez, 293 B.R. 387, 390 (Bankr. N.D. Tex. 2003) (Personal injury claim became property of the Chapter 13 estate at the petition, but the cause of action and all proceeds from its postpetition settlement became exempt and ceased to be property of the estate when no objection was filed to Schedule C within the 30-day time period permitted by Bankruptcy Rule 4003. “The Debtors unambiguously claimed ‘100%’ of the personal injury claim as exempt property. No objection was filed to either the validity or to the amount of the exemption within the time period permitted by Rule 4003. The exemption, therefore, extends to the gross settlement proceeds of $23,000.” Because settlement proceeds were exempt and were not property of the Chapter 13 estate, distribution to personal injury counsel and to prepetition medical providers is beyond review or control by the bankruptcy court.); In re Barksdale, 281 B.R. 548 (Bankr. D.N.J. 2002) (Exemption claim in residence to which no objection was filed within 30 days after the conclusion of the meeting of creditors is set aside for the debtor; equity in the residence in excess of the exemption remains property of the estate.).
7 See § 49.1 [ Available and Important in Chapter 13 Cases ] § 48.1 Available and Important in Chapter 13 Cases.
8 See § 161.1 [ Exemption Issues ] § 90.2 Exemption Issues.
9 See Kwiecinski v. Community First Nat’l Bank (In re Kwiecinski), 245 B.R. 672, 675 (B.A.P. 10th Cir. 2000) (Failure of creditor to object to homestead exemption within 30 days allowed by Taylor v. Freeland & Kronz, 503 U.S. 638, 112 S. Ct. 1644, 118 L. Ed. 2d 280 (1992), is fatal to best-interests-of-creditors test objection to confirmation. Debtor owned farm divided into two tracts, a 20-acre tract that included the house and a 60-acre tract. On Schedule C the debtor claimed an exemption in “family residence and 80 acres.” No one objected within the time fixed by Rule 4003(b). Later, the debtor amended the plan to surrender the house and 20 acres and keep the unencumbered 60-acre tract. Bank objected that the separate 60-acre tract was not the debtor’s homestead and should be valued for best-interests-of-creditors test purposes. “[A]fter the Supreme Court’s decision in Taylor . . . the court had to accept the validity of the exemption claims because no one timely objected to them. Nevertheless, the bankruptcy court . . . determined that the Debtors could not claim a homestead exemption in the sixty-acre tract . . . . Under Taylor, this reasoning is incorrect even if Wyoming law provided no good faith basis for the exemption claim. As the Supreme Court held, when no objection is made within the time established by Federal Rule of Bankruptcy Procedure 4003(b), § 522(1) provides that the property claimed as exempt in the Debtors’ schedules is exempt. . . . Perhaps more importantly, we are not convinced that the bankruptcy court properly interpreted Wyoming’s homestead law.”); In re Ruggles, 210 B.R. 57, 59–60 (Bankr. D. Vt. 1997) (For purposes of the best-interests-of-creditors test, homestead exemption in both sides of a duplex is beyond attack because of Taylor v. Freeland & Kronz, 503 U.S. 638, 112 S. Ct. 1644, 118 L. Ed. 2d 280 (1992). Debtor claimed homestead exemption in a duplex. Debtor lived in one unit and rented out the other. “[A]fter the expiration of the thirty-day period, a party cannot contest the claimed exemption ‘whether or not [the debtor] had a colorable statutory basis for claiming it.’ See Taylor . . . . [W]e are without authority to re-create the estate of a debtor and ponder over what a hypothetical liquidation ‘should’ bring. . . . Debtor’s estate was fixed at the time of the expiration of the thirty-day objection period of Rule 4003(b). Accordingly, we hold that when undertaking a liquidation analysis to determine what is in the best interests of the estate’s creditors, property which was exempted from the estate without objection may not be considered.”); In re Allard, 196 B.R. 402, 408–11 (Bankr. N.D. Ill.), aff’d, 202 B.R. 938, 941–45 (N.D. Ill. 1996) (“Because Great Southern failed to object within the permissible time period, under [Taylor v. Freeland & Kronz, 503 U.S. 638, 112 S. Ct. 1644, 118 L. Ed. 2d 280 (1992)], it may no longer challenge the validity of the exemption. . . . [T]he exemption of Allard’s interest in his residence from his bankruptcy estate—an exemption that Great Southern cannot challenge—also applies in the best interest analysis under Section 1325(a)(4).”); In re Davis, 167 B.R. 104, 107 (Bankr. S.D. Ohio 1994) (Chapter 13 debtor can exempt child support arrearages under Ohio law to the extent such arrearages are reasonably necessary for support. This exemption is important in Chapter 13 cases to determine whether a debtor scheduling child support arrearages as an asset satisfies the best-interests-of-creditors test at confirmation. Although exemption claims are “evaluated somewhat more informally” in a Chapter 13 case than in a Chapter 7 case, where the debtor asserts an exemption in a Chapter 13 case, “creditors or the Trustee must object to confirmation and raise the exemption issue formally in order to call into question satisfaction of the best interest of creditors test as part of the confirmation process. If no such timely objection is filed, the exemption will stand, as asserted by the debtor, for the limited purpose of the ‘best interest of creditors’ test required for confirmation by 11 U.S.C. § 1325(a)(4). Cf. Taylor v. Freeland & Kronz,[503 U.S. 638, 112 S. Ct. 1644, 118 L. Ed. 2d 280 (1992)].”); In re Alderman, 150 B.R. 246 (Bankr. D. Mont. 1993) (In Chapter 13 cases, exemptions are informational only and serve the narrow purpose of allowing the court to apply the best-interests-of-creditors test at confirmation under § 1325(a)(4). Taylor v. Freeland & Kronz, 503 U.S. 638, 112 S. Ct. 1644, 118 L. Ed. 2d 280 (1992), applies in Chapter 13 cases and prohibits a creditor or the Chapter 13 trustee from challenging a Chapter 13 debtor’s exemption claim after the 30-day period in Bankruptcy Rule 4003(b). In the absence of a timely objection to the debtor’s homestead exemption in a minority interest in a partnership that owns real property, Taylor prohibits an indirect attack on that exemption by objection to confirmation under § 1325(a)(4).). But see In re Walker, 153 B.R. 565, 569–70 n.2 (Bankr. D. Or. 1993) (For purposes of the best-interests-of-creditors test under § 1325(a)(4) at modification after confirmation, the fact that the debtor failed to claim an exemption in real property at confirmation of the original plan is not fatal to the debtor’s argument that a homestead exemption fully exhausts appreciation in the value of the real property that occurred between the petition and the motion to modify. “A debtor in chapter 13 does not claim exemptions. Rather, in chapter 13, a debtor lists property he would claim exempt if the case were filed under chapter 7. Thus, the chapter 13 schedules in this regard are merely informative and do not constitute a judicial admission.” In a footnote the court explains, “In a Chapter 13 case exemptions are neither allowed nor disallowed. Chapter 13 does not contemplate liquidations of property. . . . The purpose of requiring the filing of a schedule of exempt property is so that the creditors and the court can determine what property would be exempt were the assets to be liquidated in a Chapter 7. . . . If the trustee or the unsecured creditor believes that the plan does not satisfy the test of § 1325(a)(4), the appropriate procedure is not to object to the claim of exemptions, but to object to confirmation on the ground that the plan does not meet this test. Included in such an objection could be a contention that the property shown as exempt . . . would not in fact be exempt in a Chapter 7 case. . . . It is pointless in a Chapter 13 case to enter an order granting or denying a claim of exemption when, if the plan is confirmed, the property will vest in the debtor free of creditors and there will be no liquidation. . . . If, in the Chapter 13 case, the court had entered an order approving a claim of exemptions, should this be binding on the Chapter 7 trustee in a later conversion to Chapter 7? This would not seem appropriate since the Chapter 7 trustee has not had an opportunity to object. . . . Would a creditor who failed to object to the claim of exemption within 30 days of the § 341 meeting be barred from thereafter objecting to confirmation on the ground that the plan did not meet the test of § 1325(a)(4)? . . . [T]he only reason for requiring a statement of exemptions in chapter 13 is in order that the court can determine hypothetically what the dividend to creditors would be in a Chapter 7 liquidation in order to determine whether the debtor’s plan meets the requirement of § 1325(a)(4). To the extent F.R.B.P. 4003 requires a chapter 13 debtor to file a claim of exemptions and creditors to object to that claim within a given time, it is inconsistent with the Code and must fail.”).
10 See § 49.1 Available in Chapter 13 Cases, § 49.2 Procedure for Lien Avoidance, § 49.3 Limitations on Lien Avoidance, § 49.4 Section 522(f) after BAPCPA: Household Goods Corrupted and § 49.5 Protecting Lienholder after Lien Avoidance.
11 See 11 U.S.C. § 522(f).
12 See § 50.2 [ Procedure for Lien Avoidance ] § 49.2 Procedure for Lien Avoidance. See, e.g., In re Blocker, 242 B.R. 75, 76–77 (Bankr. M.D. Fla. 1999) (Creditor’s failure to object to homestead exemption within the 30 days allowed by Taylor v. Freeland & Kronz, 503 U.S. 638, 112 S. Ct. 1644, 118 L. Ed. 2d 280 (1992), is fatal to creditor’s objection to lien avoidance under § 522(f). “Debtor claimed the property at issue as exempt. Neither the Trustee nor FUNB filed an objection within the thirty-day (30) time period prescribed by Bankruptcy Rule 4003. Therefore, the exemption for the property at issue was allowed once the thirty-day time period ran, even though the legal basis for the exemption is at issue.”); In re Fulton, 148 B.R. 838 (Bankr. S.D. Tex. 1992) (Bank cannot contest a Chapter 13 debtor’s exemption claims as a defense to a lien avoidance action under § 522(f) when the bank failed to object to exemptions within the time fixed by Bankruptcy Rule 4003(b) as interpreted by the Supreme Court in Taylor v. Freeland & Kronz, 503 U.S. 638, 112 S. Ct. 1644, 118 L. Ed. 2d 280 (1992).).
13 See § 50.1 Turnover of Property, § 50.2 Relief from Garnishments, § 50.3 Strong-Arm Powers, Statutory Liens, Preferences and Fraudulent Conveyances, § 50.4 Avoidance Powers after BAPCPA, § 50.5 Preferences after BAPCPA, § 50.6 Fraudulent Transfers after BAPCPA and § 50.7 Postpetition Transfers.
14 See, e.g., Quisenberry v. American State Bank (In re Quisenberry), 295 B.R. 855 (Bankr. N.D. Tex. 2003) (To the extent of an exemption under § 522(h), debtor has standing to avoid bank’s setoff of checking account during the 90 days before the petition under §§ 553(b) and 547(b).); DeBarros v. National City Bank (In re DeBarros), 275 B.R. 251 (Bankr. D. Md. 2002) (Citing Taylor v. Freeland & Kronz, 503 U.S. 638, 112 S. Ct. 1644, 118 L. Ed. 2d 280 (1992), exemptions claimed by Chapter 13 debtor to which no objection was timely filed determine the extent to which debtor can avoid a prepetition lien as a preference under § 522(j).); Callanan v. International Fidelity Ins. Co. (In re Callanan), 190 B.R. 137, 138–39 (Bankr. D. Mass. 1995) (Section 522(h) gives a Chapter 13 debtor standing to avoid a prepetition attachment that impairs an exemption. “Because of the limited power which 11 U.S.C. § 1303 provides to a Chapter 13 debtor, it would appear at a first reading that a debtor in Chapter 13 cannot avail him or herself of the provisions of 11 U.S.C. § 547. 11 U.S.C. § 522(h), however, provides as follows . . . . The Debtor claimed an exemption of $15,000 in his property pursuant to 11 U.S.C. § 522(d)(1). No objections to the Debtor’s exemption were filed. If the trustee had avoided the transfer, the Debtor would have been entitled to his claimed exemption. Having met the requirements of 11 U.S.C. § 522(h), the Debtor is entitled to bring this action.”).
15 In re Walker, 153 B.R. 565 (Bankr. D. Or. 1993). See §§ 253.1 [ Standing, Timing and Procedure ] § 126.1 Standing, Timing and Procedure and 254.1 [ Application of Tests for Confirmation ] § 126.2 Application of Tests for Confirmation.
16 203 B.R. 796 (Bankr. S.D. Fla. 1996).
17 203 B.R. at 800. Accord In re Graham, 258 B.R. 286, 289 (Bankr. M.D. Fla. 2001) (Applying In re Green, 31 F.3d 1098 (11th Cir. 1994), and Taylor v. Freeland & Kronz, 503 U.S. 638, 112 S. Ct. 1644, 118 L. Ed. 2d 280 (1992), $1 exemption in a postpetition personal injury claim to which no objection was filed exempts the entire $46,000 settlement received two years later, and no portion of the settlement can be captured for creditors through the trustee’s motion to modify. “An exemption in property is conclusively established under § 522(l) once the thirty-day Rule 4003(b) period has elapsed, even if a debtor claiming an objection had no colorable legal basis to do so. . . . If a debtor makes it clear in a schedule or claim of exemption that a debtor seeks to exempt an entire cause of action, then a debtor effectively exempts all eventual proceeds of the cause of action despite the assignment of a nominal value to the cause of action in the schedule or claim of exemption. . . . The personal injury settlement in the instant case is exempt under § 522(l) and thus protected from liability for prepetition debts under § 522(c). . . . It is also irrelevant that Debtors valued the personal injury claim at one dollar.”). See also American Gen. Fin., Inc. v. Tippins (In re Tippins), 221 B.R. 11 (Bankr. N.D. Ala. 1998) (Postconfirmation amendment of schedules to disclose a lawsuit and claim an exemption was effective to create a property interest and standing of the debtor to maintain that lawsuit when no party objected. Debtor did not schedule cause of action in 1995. Confirmed plan treated AmGen as a secured claim to be paid in full with interest. Plan did not mention cause of action against AmGen for fraud, misrepresentation, and conspiracy in connection with credit life insurance included in the loan. Two years after confirmation, debtor filed lawsuit in state court and amended schedules to reveal the lawsuit and to claim an exemption in the cause of action and its proceeds. No party objected to the amendments. Citing Taylor v. Freeland & Kronz, 503 U.S. 638, 112 S. Ct. 1644, 118 L. Ed. 2d 280 (1992), exemption was allowed.).
18 See §§ 317.1 [ Exemptions at Conversion ] § 144.1 Exemptions at Conversion and 318.1 [ Lien Avoidance at Conversion ] § 144.2 Lien Avoidance at Conversion. See, e.g., Moldo v. Clark (In re Clark), 266 B.R. 163, 166 (B.A.P. 9th Cir. 2001) (“[A]mbiguous and imprecise” claim of exemption in “‘FIVE LOTS LISTED IN QUALIFIED RETIREMENT PLAN’” does not trigger the Taylor v. Freeland & Kronz, 503 U.S. 638, 112 S. Ct. 1644, 118 L. Ed. 2d 280 (1992), time period and does not preclude Chapter 7 trustee’s objection to exemptions after conversion from Chapter 13.); Alderman v. Martinson (In re Alderman), 195 B.R. 106, 109–11 (B.A.P. 9th Cir. 1996) (Neither Taylor v. Freeland & Kronz, 503 U.S. 638, 112 S. Ct. 1644, 118 L. Ed. 2d 280 (1992), nor Bankruptcy Rule 4003(b) limits a trustee’s motion to value homestead where the exemption claimed by the debtor is ambiguous.); Weissman v. Carr (In re Weissman), 173 B.R. 235 (M.D. Fla. 1994) (At conversion from Chapter 13 to Chapter 7, the Chapter 7 trustee has a new period within which to object to property claimed exempt by the debtors during the original Chapter 13 case.); In re Furuyama, No. 02-00281, 2002 WL 32332546 (Bankr. D. Haw. Oct. 25, 2002) (unpublished) (Citing In re Smith, 235 F.3d 472 (9th Cir. 2000), because Chapter 7 trustee might be precluded from objecting to exemptions if the Chapter 13 trustee did not, it is appropriate for Chapter 13 trustee to object to amended exemption in personal injury claims valued as “unknown.”); In re Ruggles, 210 B.R. 57, 59–60 (Bankr. D. Vt. 1997) (“[I]f this case were to convert to one under Chapter 7, a trustee would not be given a second chance to object to Debtor’s claim of exemptions.”); In re Brown, 178 B.R. 722 (Bankr. E.D. Tenn. 1995) (At conversion from Chapter 11 to Chapter 7, Bankruptcy Rule 4003(b) does not trigger a new period for objections to exemptions allowed during the Chapter 11 case.); In re Davis, 167 B.R. 104, 107 (Bankr. S.D. Ohio 1994) (In dicta, that the debtor asserts an exemption in a Chapter 13 case “does not bind creditors or a chapter 7 trustee if the case converts to chapter 7.”); In re Toronto, 165 B.R. 746, 758 (Bankr. D. Conn. 1994) (Arguably in dicta, upon conversion, the Chapter 7 trustee is not necessarily precluded from challenging the improper exemptions claimed in the Chapter 13 schedules. The Supreme Court in Taylor v. Freeland & Kronz, 503 U.S. 638, 112 S. Ct. 1644, 118 L. Ed. 2d 280 (1992), did not preclude the use of § 105(a) “to disallow an exemption not claimed in good faith even in the absence of a timely objection.”); In re Walker, 153 B.R. 565 (Bankr. D. Or. 1993) (It “would not seem appropriate” to bind a Chapter 7 trustee to the exemptions claimed by the debtors during the Chapter 13 case prior to conversion.).
19 See § 313.1 [ New Schedules, Statement, Meeting of Creditors and Deadlines ] § 142.1 New Schedules, Statement, Meeting of Creditors and Deadlines.
20 In re Booth, 259 B.R. 413, 416 (Bankr. M.D. Fla. 2001).
21 In re James, 260 B.R. 368, 371–72 (Bankr. E.D.N.C. 2001) (Bankruptcy Rule 4003(b) applies in Chapter 13 cases, and the 30-day limit on objections to exemptions is not extended when the trustee indefinitely continued the meeting of creditors. Debtors were cooperative and truthful at the meeting of creditors, but the trustee announced that the meeting would be continued. No date was fixed for reconvening, and the § 341 meeting was never reconvened. Citing Smith v. Kennedy (In re Smith), 235 F.3d 472 (9th Cir. 2000), the bankruptcy court adopted the “Bright Line Rule” with respect to the running of the 30-day period in Bankruptcy Rule 4003(b): “The Bright Line Rule requires a trustee to arrive at a date and time for the continued § 341 meeting within 30 days of adjournment. . . . The Trustee failed to set a date certain for the continued § 341 meeting; the meeting would thus be deemed to have concluded on December 9, 1999 [the date the first meeting of creditors began]. . . . [U]nder the Bright Line Rule, the Trustee failed to timely object to the debtors’ exemptions.” Because the Bright Line Rule had never been announced in the district, the bankruptcy court also applied the “case-by-case approach,” concluding that “[t]he eleven months that passed between the initial meeting of creditors and the objections filed are not reasonable and the Trustee is deemed to have waived his objections to the debtors’ claimed exemptions through his failure to file a timely objection.”).
22 252 B.R. 102 (Bankr. N.D. Miss. 2000).
23 252 B.R. at 104.
24 138 F.3d 1031 (5th Cir. 1998).
25 293 B.R. 82 (Bankr. D. Mass. 2003).
27 293 B.R. at 85.
28 No. 03-11077 DWS, 2003 WL 22331899 (Bankr. E.D. Pa. Oct. 7, 2003) (unpublished).
29 169 B.R. 240 (Bankr. S.D. Ga. 1994).
30 11 U.S.C. § 522(c) (emphasis added) (exceptions not applicable).
31 169 B.R. at 242–43.
32 208 B.R. 598 (Bankr. S.D. Ga. 1997).
33 208 B.R. at 600–02 (“[A]s I read [Taylor v. Freeland & Kronz, 503 U.S. 638, 112 S. Ct. 1644, 118 L. Ed. 2d 280 (1992)], it does not establish the timing of delivery of possession of exempt property, but rather governs the timing of objections to claims of exemption. . . . Section 522(c) provides that as to property which is exempted, no pre-petition claim attaches to it, unless the case is dismissed. . . . I hold that property claimed exempt is property of the estate at filing. Upon resolution of any objection to the claim of exemption, it is carved out of the estate, but is not freed from the claims of pre-petition creditors until the case is concluded—and thus cannot be dismissed. . . . At first glance, section 1327 does appear to contradict the [In re Deeble, 169 B.R. 240 (Bankr. S.D. Ga. 1994),] holding that the Trustee should hold exempt funds until plan completion. A closer reading of Section 522 makes it clear, however, that there is no contradiction. The debtor’s exercise of an exemption ‘exempt[s] from property of the estate . . . the property listed . . . .’ In other words, it reduces estate property by the amount of the exempt property. Then, when confirmation revests property of the estate in the debtor, the property which was estate property at filing no longer includes the property carved out of the estate as exempt. As a result, exempt property is not revested in the debtor upon confirmation under Section 1327. Congress thus provided that property exempted in Chapter 13 be placed, in effect, in suspense, pending completion of the plan. It was to be removed from the estate which revests in debtor upon confirmation, yet its release from pre-petition claims remains subject to the ‘unless the case is dismissed’ qualifier. . . . To hold that exempt property revests in debtors at confirmation and allow unfettered use of the property would . . . potentially result in property being placed beyond the reach of creditors’ claims prior to the time that debtor’s Chapter 13 plan is consummated by distribution of the monthly payments of debtor’s disposable income. To avoid this injustice, I hold that the Code contemplates that possessory enjoyment of debtors exemptions be postponed, contingent on future payments. Pending completion of a Chapter 13 case, exempt property which has been converted to cash must remain in safekeeping . . . . [T]he appropriate repository for the safekeeping of such funds is the Chapter 13 Trustee.”).
34 Gamble v. Brown (In re Gamble), 168 F.3d 442, 443–44 (11th Cir. 1999).