Section 7.43 Exemptions

• Library: Bankruptcy Practice (2007 Ed. + 2015 Cum Supp)

VIII. (§7.43) Exemptions

In a Chapter 7 proceeding, one of the most important parts of the schedules is a proper claim of exemptions on Schedule C. Under 11 U.S.C. § 541(a), all property of the debtor is included in the debtor’s bankruptcy estate. Accordingly, for the debtor to retain personal interest in property, an exemption must be claimed.

As a general rule, exemptions are to be construed liberally in favor of the debtor while keeping in mind the purposes of the exemption. In re Andersen, 259 B.R. 687 (B.A.P. 8^th Cir. 2001).

The Chapter 7 trustee or a creditor must file an objection to the debtor’s claim of exemptions within 30 days unless the court extends the time. Fed. R. Bankr. P. 4003(b). Even an exemption claimed in bad faith will stand unless the trustee or a creditor files a timely objection. Taylor v. Freeland & Kronz, 503 U.S. 638 (1992). Note, however, that an exemption filed in bad faith could give rise to a denial of discharge for asserting a false claim under 11 U.S.C. § 727(a)(4)(B).

The Eighth Circuit has held that, whether objected to or not, the debtors can only exempt the amount to which they are lawfully entitled. In re Wick, 276 F.3d 412, 416 (8^th Cir. 2002). Additionally, debtors may lose their exemption by engaging in bad faith or other misconduct before the court. In re Bauer, 298 B.R. 353 (B.A.P. 8^th Cir. 2003); Williams v. Bradley, 294 B.R. 64 (B.A.P. 8^th Cir. 2003).

2015 SUPPLEMENT (§7.43)

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