Dittmaier v. Sosne

Filing 16

MEMORANDUM: Based upon the foregoing, the Court concludes that United States Bankruptcy Court for the Eastern District of Missouri correctly ruled that debtor is not entitled to an exemption under § 513.430.1(10)(a) for the earned income credit received before she filed her petition. Therefore, the order will be affirmed. Signed by District Judge Carol E. Jackson on 1/7/2015. (KMS)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
In re:
STEPHANIE GEORGEAN DITTMAIER,
Debtor,
________________________________
STEPHANIE GEORGEAN DITTMAIER,
Appellant,
vs.
DAVID SOSNE, Trustee,
Appellee.

)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)

Case No. 4:14-CV-883 (CEJ)

MEMORANDUM
This matter is before the court on appeal from a bankruptcy court order granting
the trustee’s motion to compel turnover of funds received by the debtor. The issues
are fully briefed.
I.

Background

The relevant facts in this matter are not in dispute. On February 12, 2013,
debtor filed a voluntary petition for relief under Chapter 13 of the bankruptcy code,
which was later converted to a case under Chapter 7. Before she filed her petition,1
debtor received a refund for her 2012 federal and state income taxes in the amount
of $7,965.00; of that amount, $5,891.00 was an earned income tax credit (EIC),
$1,707.00 was a child tax credit, and $187.00 was a state tax refund. The refund was

1

Debtor states that the funds were applied to her debit card on February 12,
2013, before she filed her petition, and that she was unaware of the deposit at the
time she filed.

deposited to a prepaid debit card obtained for the exclusive purpose of receiving the
2012 refund.
The trustee moved to compel debtor to turn over $7,868.03, the balance on the
debit card on the date of the petition. Debtor opposed the motion, claiming various
state-law exemptions.2

On February 27, 2014, the bankruptcy court granted the

motion in part, directing debtor to turn over $4,968.03. The court found that debtor
was entitled to a homestead exemption in the amount of $2,300.00, under § 513.440,
Mo.Rev.Stat.,3 and a “wild card exemption” in the amount of $600, under §
513.430.1(3).4 The court rejected debtor’s argument that she was entitled to an
exemption for the amount of the earned income tax credit under § 513.430.1(10)(a).
Debtor moved for reconsideration, which the bankruptcy court denied on April 17,
2014.
In this appeal, debtor contends that the bankruptcy court erred in concluding
that the earned income credit was not exempt as a public assistance benefit under §
513.430.1(10)(a).
II.

Jurisdiction and Legal Standard

2

Debtor claimed a homestead exemption in the amount of $2,650.00 under §
513.440, Mo.Rev.Stat.; a “wild card” exemption in the amount of $600.00 under §
513.430.1(3); and a “public benefit” exemption in the amount of $4,175.00 under §
513.430.1(10)(a).
3

Section § 513.440 allows a debtor to exempt $1,250.00 plus $350.00 for each
dependent child. At the time she filed her petition, debtor had three children. The
bankruptcy court disallowed an exemption for debtor’s fourth child, who was born after
the petition was filed. Debtor does not contest the court’s application of § 513.440 to
disallow an exemption for this child.
4

Section 513.430.1(3) permits exemption of “[a]ny other property of any kind,
not to exceed in value six hundred dollars in the aggregate.”

-2-

This court has jurisdiction over this appeal pursuant to 28 U.S.C. § 158(a)(1).
Debtor filed a timely notice of appeal on April 23, 2014, and the trustee filed an
election to have the appeal heard by the district court, as provided in 28 U.S.C. §
156(c)(1) and Fed. R. of Bankr. P. 8001(e).
“When a bankruptcy court’s judgment is appealed to the district court, the
district court acts as an appellate court and reviews the bankruptcy court’s legal
determinations de novo and findings of fact for clear error.” Fix v. First State Bank of
Roscoe, 559 F.3d 803, 808 (8th Cir. 2009) (citation omitted).
regarding equitable relief are reviewed for abuse of discretion.

Determinations

In re Nat’l Warranty

Ins. Risk Retention Group, 384 F.3d 959, 962 (8th Cir. 2004). “An abuse of discretion
occurs when a relevant factor that should have been given significant weight is not
considered, when an irrelevant or improper factor is considered and given significant
weight, or when all proper and no improper factors are considered, but the court in
weighing those factors commits a clear error of judgment.” Id. (citation omitted). “A
court’s decision will not be disturbed as long as it is within the range of discretion
afforded to a given determination and is not influenced by a mistake of law.” Id.
(internal quotation and citation omitted).
III.

Discussion

Under the provisions of the federal Bankruptcy Code, when a debtor files for
bankruptcy, an estate is created. 11 U.S.C. § 541(a). A debtor’s anticipated tax
refund -- including the earned income tax credit -- is part of the bankruptcy estate.
In re Benn, 491 F.3d 811, 813 (8th Cir. 2007) (portion of anticipated tax refund
attributable to events occurring prior to filing of bankruptcy petition is part of estate);
In re Corbett, No. 13-60042, 2013 WL 1344717, at *1 (Bankr. W.D. Mo. Apr. 2, 2013)

-3-

(portion of tax refund attributable to EIC is property of estate); see also In re Demars,
279 B.R. 548, 550 (Bankr. W.D. Mo. 2002) (discussing legal authority for finding the
EIC is a tax refund).
The bankruptcy code provides an exemption scheme in section 522(d) through
which debtors may exempt enumerated property from the estate. In re McCollum, 287
B.R. 750, 752 (Bankr. E.D. Mo. 2002). The code also authorizes states to “opt out” of
the federal exemptions. § 522(b)(2). Missouri has done so and allows debtors to
exempt from the estate any property that is exempt from attachment and execution
under Missouri state law. § 523.417, Mo.Rev.Stat.5 “Missouri’s exemption statutes are
liberally construed.” In re Goertz, 202 B.R. 614, 618 (Bankr. W.D. Mo. 1996) (quoting
Murray v. Zuke, 408 F.2d 483 (8th Cir. 1969)). Nonetheless, a court must be careful
not to depart substantially from the express language of the exemption statute or to
extend the legislative grant as expressed by Congress or state legislatures. In re
Collett, 253 B.R. 452, 454 (Bankr. W.D. Mo. 2000) (disallowing exemption under
Missouri statute).
At issue in this appeal is the exemption set forth at § 513.430.1 (10)(a), which
exempts a “person’s right to receive . . . [a] Social Security benefit, unemployment

5

Section 523. 417 provides:

Every person by or against whom an order is sought for relief under Title
11, United States Code, shall be permitted to exempt from property of
the estate any property that is exempt from attachment and execution
under the law of the state of Missouri or under federal law, other than
Title 11, United States Code, Section 522(d), and no such person is
authorized to claim as exempt the property that is specified under Title
11, United States Code, Section 522(d).
-4-

compensation or a public assistance benefit.”6 (emphasis added). “The key provision
. . . is the ‘right to receive’ a benefit. In re McCollum, 287 B.R. at 753. Under both
Missouri and federal law, the “right to receive” a benefit is “deemed to have been
extinguished” when the benefit has already been received by the debtor before the
bankruptcy case was filed. Id. Thus, a debtor who cashed out her retirement accounts
before filing her petition was not entitled to exempt those funds under §
513.430.1(10)(e), which exempts a person’s “right to receive . . . any payment under
a . . . . pension plan.” Id. Similarly, a debtor is not entitled to exempt lump-sum
payments of disability or worker’s compensation benefits received before bankruptcy
under the federal exemption for the “right to receive” benefits.

In re Chapman, 177

B.R. 161, 162 (Bankr. D. Conn. 1994) (disability benefits received pre-petition not
eligible for exemption under 11 U.S.C. § 522(d)(10)(C)); In re Michael, 262 B.R. 296,
298 (Bankr. M.D. Penn. 2001) (pre-petition workers’ compensation benefits not eligible
for exemption). Because she received the EIC before she filed her petition, under the
plain language of § 513.430.1(10), debtor did not have a “right to receive . . . a public
benefit.” See In re Austin, No. 14-70299, 2014 WL 3695370, at *3 (Bankr. C.D. Ill.
July 24, 2014) (Illinois state exemption for right to receive public assistance benefits
does not apply to EIC received before petition filed).
Debtor argues that the court must consider the totality of the legislation in
determining whether her right to an exemption was extinguished merely because she

6

Prior to August 28, 2012, § 513.430.1(10)(a) permitted debtors to exempt a
right to receive “A Social Security benefit, unemployment compensation or a local
public assistance benefit.” (emphasis added). Because the EIC was not a “local” public
assistance benefit, debtors were not entitled to claim an exemption under this section.
Demars, 279 B.R. at 552. The Missouri legislature has since amended the statute to
remove the word “local.” Corbett, 2013 WL 1344717, at *1.
-5-

received the EIC before she filed her petition. Section 513.430.1(10) exempts a “right
to receive” benefits, while § 513.430.1(11), exempts a “right to receive, or property
that is traceable to” certain payments. (emphasis added).

Because the Missouri

legislature drafted “distinct exemption provisions for different types of assets, it must
be presumed that the legislature acted intentionally and meant what it said.” In re
Austin, 2014 WL 3695370, at *3 (discussing parallel Illinois exemptions); see also In
re McCollum, 287 B.R. at 754 (differences between exemptions for “right to receive”
and “right to receive, or property that is traceable to” show that Missouri legislature
intended not to exempt benefits received before the petition was filed). Thus, debtor’s
arguments regarding legislative intent and public policy are not well-founded.
The plain language of § 513.430.1(10)(a) establishes that debtor is not entitled
to the exemption she seeks.
IV.

Conclusion

Based upon the foregoing, the Court concludes that United States Bankruptcy
Court for the Eastern District of Missouri correctly ruled that debtor is not entitled to
an exemption under § 513.430.1(10)(a) for the earned income credit received before
she filed her petition. Therefore, the order will be affirmed.

___________________________
CAROL E. JACKSON
UNITED STATES DISTRICT JUDGE
Dated this 7th day of January, 2015.

-6-