In re Gregory

487 B.R. 444, 2013 WL 866069, 2013 Bankr. LEXIS 851
CourtUnited States Bankruptcy Court, E.D. North Carolina
DecidedMarch 7, 2013
DocketNos. 12-06668-8-JRL, 12-06847-8-JRL, 12-06693-8-JRL, 12-02763-8-JRL, 12-05451-8-JRL, 12-05538-8-JRL, 1205456-8-JRL
StatusPublished
Cited by4 cases

This text of 487 B.R. 444 (In re Gregory) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. North Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Gregory, 487 B.R. 444, 2013 WL 866069, 2013 Bankr. LEXIS 851 (N.C. 2013).

Opinion

ORDER

J. RICH LEONARD, Bankruptcy Judge.

These matters came before the court on the objection of Gregory B. Crampton (“trustee”) to the above-captioned debtors’ claims of exemptions in Schedule C-l of their petitions. A hearing on the matters took place on January 15, 2013 in Raleigh, North Carolina. At the conclusion of the hearing, the court took the matter under advisement.

BACKGROUND

Each of the above-captioned debtors (collectively “debtors”) filed voluntary petitions for relief under chapter 7 of the Bankruptcy Code between April 10, 2012 and September 25, 2012. The trustee was appointed as chapter 7 trustee and conducted the meeting of creditors pursuant to § 341(a) in each case. The Schedule C-1, filed by the debtors in each case, contained the following prefatory paragraph:

We, ... the undersigned Debtors, claim the following property as exempt pursuant [to] § 522 and the laws of the State of North Carolina and non-bankruptcy Federal law. Undersigned Debtors are claiming and intend to claim 100% of Debtors’ interest and 100% fair market value in each and every item list[446]*446ed, irrespective of the actual value claimed as exempt.

(emphasis in original) (hereinafter “100% language”).

The trustee timely objected to the 100% language present in the prefatory paragraphs of the debtors’ Schedule C-l. According to the trustee, the debtors were not entitled to exempt 100% of their interest or 100% of the fair market value in every item listed as exempt, irrespective of the item’s actual value. Because this language was precatory, it would apply to each of the items claimed by the debtors as exempt in their Schedule C or Schedule C-l. Responding to the objections raised by the trustee, the debtors indicated that they would amend their Schedule C-l to delete the language forming the basis of the trustee’s objection.1

The amended Schedule C-l removed the 100% language in the prefatory paragraph and to address further objections by the trustee, the debtors submitted to the court and the trustee the following provision amending their Schedule C-l:

NOTICE: With respect to each asset claimed as exempt on this Claim of Exemptions, the debtor asserts that the value listed is the actual fair market value on the date of the petition, and that the nature and/or use of the asset is such that it qualifies for the exemption claimed. The debtor also asserts that the liens listed are valid and enforceable liens against the asset and the amount of each lien is accurate as of the date of the petition. If the “net value” of an asset listed below is equal to or less than the amount of the exemption claimed and if that value is less than the maximum amount of the exemption allowance under applicable law, the debtor exempts the asset from the estate and his entire interest in the asset from the estate. If the “net value” is greater than the amount of the exemption claimed or the maximum amount of the exemption allowance under applicable law, he limits his claim of exemptions to the lesser of the amount claimed or the maximum amount allowed under the law. Where the value of an asset is listed as “unknown” and the asset is claimed as exempt pursuant to a provision that limits the maximum amount of the allowable exemption to that maximum amount, neither the trustee no[r] any party in interest needs to object to the claim of exemption to preserve for the estate any value that actually exceeds the allowable amount of the exemption.

(emphasis added) (hereinafter “notice provision” or “provision”). This provision, placed at the top of the Schedule C-l, presents three separate scenarios for each item listed as exempt. First, debtors exempt the asset and their entire interest [447]*447from the estate where the “net value” of the asset is less than or equal to the claimed exemption and the “net value” is less than the maximum exemption amount allowed under applicable law. Second, if the “net value” of the asset is greater than the exemption amount claimed or the maximum amount allowed under applicable law, the claim of exemptions is limited to the lesser of the amount claimed or the maximum allowed by applicable law. Third, where a value of “unknown” is assigned to the asset, the value of the debtors’ exemption is expressly limited to the maximum amount allowed by statute, and neither the trustee nor a party in interest need object to preserve any value for the estate that exceeds the allowable amount of the exemption. The debtors have clearly sought to maximize their exemptions by inserting this provision. However, the effect of the phrase emphasized above would permit the debtors to exempt their entire interest of every item listed in the debtors’ Schedule C-l whenever the “net value” is less than the allowable exemption, irrespective of the item’s actual fair market value. To illustrate, as the court understands this language, if an individual debt- or listed the “net value” in his residence as $30,000.00 and claimed that amount as exempt, the trustee would be unable to administer the property if his investigation revealed the value to be higher unless he had timely objected; this is so despite the fact that the $30,000.00 is within the permissible exemption amount.

Although satisfied with the portions regarding a “net value” greater than the maximum exemption allowed and an “unknown” valuation attributed to an exemption, the trustee contends that the remainder of the provision requires him to object within the thirty-day period proscribed by Federal Rule of Bankruptcy Procedure 4003 (hereinafter “Bankruptcy Rule 4003”), to preserve his right to subsequently administer the property. Neither the Bankruptcy Code nor Schwab v. Reilly, - U.S. -, 130 S.Ct. 2652, 177 L.Ed.2d 234 (2010) require the trustee to object to a claim of exemption, based on a debtor’s scheduled value of the item. The emphasized portion of this provision, according to the trustee, interposes ambiguity into the debtors’ claims for exemptions, causing him and other trustees to guess whether the debtors are claiming an exemption in the item itself, regardless of any statutory limitation placed on the amount of the particular exemption.

The debtors contend that the notice provision would, in the absence of a timely objection by the trustee under Bankruptcy Rule 4003, allow an exemption for the entire value of the item or the situation to which the emphasized portion applies. The debtors maintain that, under Schwab, they are authorized to claim the full value of an item as exempt and the notice provision is sufficient to indicate their intent to claim, as exempt, their entire interest in an item in accordance with North Carolina law.

DISCUSSION

When a debtor files a voluntary petition for relief under chapter 7, a bankruptcy estate is created that contains “all legal or equitable interests of the debtor in property as of the commencement of the case.” 11 U.S.C. § 541(a)(1). Bankruptcy Rule 4003(a) provides that every “debtor shall list the property claimed as exempt under § 522 of the [Bankruptcy] Code on the schedule of assets required to be filed by Rule 1007.” Fed. R. Bankr.P. 4003(a); Fed. R. Bankr.P.

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Cite This Page — Counsel Stack

Bluebook (online)
487 B.R. 444, 2013 WL 866069, 2013 Bankr. LEXIS 851, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-gregory-nceb-2013.