In re Gillespie, 84 J 0559.
| Decision Date | 30 August 1984 |
| Docket Number | No. 84 J 0559.,84 J 0559. |
| Citation | 41 BR 810 |
| Parties | In re Warren George GILLESPIE, Debtor. Warren George GILLESPIE, Plaintiff, v. CHERRY CREEK NATIONAL BANK, Defendant. |
| Court | U.S. Bankruptcy Court — District of Colorado |
Edd C. Gillespie, Hawthorne & Meconi, Canon City, Colo., for plaintiff.
Ruth M. Schley, Cogswell & Wehrle, Denver, Colo., for defendant.
THIS MATTER came on for trial on the Plaintiff/Debtor's Amended Complaint to Avoid Preferential Transfer and to Return Exempt Funds to the Bankruptcy Estate.
On June 4, 1984, the Plaintiff ("the Debtor") filed a petition in bankruptcy under Chapter 13.
On December 7, 1982, the Debtor obtained a loan from the Defendant ("Bank") in the sum of $2,268.80, which was to be paid in twenty-four (24) monthly installments of $112.64 (See Defendant's Exhibit A) beginning January 15, 1983. On June 16, 1983, after the Debtor had missed the May and June, 1983, installments, the Bank deducted $112.64 from the Debtor's checking account for the May, 1983, installment. No prior notice of this "set-off" was given to the Debtor, but he was sent a debit slip the same day the set-off was accomplished. The Debtor never made any further direct payments on the loan, but the Bank did continue to deduct the sum of $112.64 on July 12th, August 15, September 9, October 5, and November 8, 1983, and on January 9, February 6, March 20, April 10, and May 7, 1984. (See Plaintiff's Exhibit 1). Apparently there was a similar set-off in January, 1984, although the exhibit does not show it.
At no time did the Bank give prior notice of its intent to off-set the Debtor's checking account, and likewise the Debtor, even though he was receiving the concurrent debit slips and his monthly checking account statements, never protested the procedure. This was so, even though such off-sets were, through the ignorance of the Debtor, causing several checks of the Debtor to bounce each month, for which the Bank charged a $15.00 service fee for each such check. (See Plaintiff's Exhibit 2).
The Debtor here seeks to have the setoffs made on March 7, April 5, and May 7, 1984, returned to the Debtor as preferential transfers.
The Bank challenges the Debtor's standing to bring this action unless this Court finds that the funds were exempt under 42 U.S.C. § 407. This is because the Debtor can only recover a set-off in accordance with 11 U.S.C. 522(h) which provides:
The exemption contained in 42 U.S.C. § 407 provides in part:
None of the monies paid . . . under this sub-chapter shall be subject to execution, levy, attachment, garnishment, or other legal process, or the operation of any bankruptcy or insolvency law.
The evidence showed that all of the deposits of the Debtor's checking account, with the exceptions noted infra, were direct deposits of his social security payments. A deposit on September 28, 1983, of $300.00 was a loan or gift from the Debtor's sister. The deposits of $150.00 and $806.25 on October 3, 1983 and October 17, 1983, respectively, were the proceeds of sales of some of the Debtor's household goods. Although not involved in this case, Debtor claimed these sale proceeds as exempt under § 13-54-102(1)(e), C.R.S. However, the proceeds from the sale of exempt property are not likewise exempt except in the case of a homestead exemption under § 38-41-201, C.R.S. Those proceeds are specifically exempt for one (1) year under § 38-41-207, C.R.S.
There is no doubt that, except for the three deposits discussed, supra, the funds in the Debtor's account were exempt under 42 U.S.C. § 407.
The next question is from what are these funds exempt? Section 407 specifies that they are exempt from "execution, levy, attachment,...
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