In re Mims
| Decision Date | 10 May 2000 |
| Docket Number | No. 98-54698.,98-54698. |
| Citation | 249 BR 378 |
| Parties | In re Sally A. MIMS, Debtor. |
| Court | U.S. Bankruptcy Court — District of New Jersey |
William H. Oliver, Jr., Asbury Park, NJ, for Debtor.
Barry W. Frost, Teich, Groh, Frost & Zindler, Trenton, NJ, for Trustee.
This is the court's decision on the trustee's motions objecting to exemptions and for an extension of time to file an objection to discharge. The court has jurisdiction pursuant to 28 U.S.C. §§ 1334(b), 151, and 157(a). This is a core proceeding under 28 U.S.C. §§ 157(b)(2)(B) and 157(b)(2)(J). This shall constitute the court's findings of fact and conclusions of law.
On November 13, 1998, the debtor, Sally Mims, filed a voluntary petition for relief under chapter 7 of title 11 of the United States Code (hereinafter "the Bankruptcy Code" or "the Code"). Among the debtor's exemptions claimed in the originally filed Schedule C were "Harassment Law Suit" and "Workers Compensation Case." These related cases were based on alleged sexual harassment of the debtor. See Cert. of Stafford Thompson, Esq. filed 3/1/99. A settlement agreement was reached on or about October 26, 1998 to settle the harassment lawsuit for $105,000 and the workers compensation case for $25,000. See id. On Schedules B and C accompanying her bankruptcy petition filed two and a half weeks later, however, the debtor listed the value of these two assets as "Unknown." On November 14, 1998, the day after her bankruptcy petition was filed, the debtor signed a Settlement Agreement and General Release confirming the settlements. See Cert. of Theodore Liscinski, Jr., Esq. in Support of Motion Requiring Turnover of Assets filed 2/2/99, Exhibit A. The debtor's attorney in the harassment suit disbursed the proceeds of the settlement to and on behalf of the debtor on December 1, 1998. He has certified that he was totally unaware of the bankruptcy case at that time. See Thompson cert., supra.
On December 9, 1998, Schedule C — Property Claimed as Exempt was amended. The amended Schedule C claimed exemptions for the harassment suit and workers compensation case as follows:
Description Specify Law Value of Current
of Property Providing Claimed Market Value
Each Exemption Exemption of Property
Without
Deducting
Exemptions
Harassment 11 USC 522(d)(5) $ 750.00 Unknown
Law Suit
11 USC 522(d)(5) $ 8,075.00 Unknown
11 USC 522(d)(10)(C) 100% Unknown
11 USC 522(d)(11)(E) 100% Unknown
11 USC 522(d)(11)(D) $16,150.00 Unknown
Workers 11 USC 522(d)(10)(C) 100% Unknown
Compensation
Case
11 USC 522(d)(11)(E) 100% Unknown
In light of the agreement to settle those cases for $105,000 and $25,000, the statements by the debtor on Schedule B, the original Schedule C and the amended Schedule C as to the value of the lawsuits were false. The debtor's bankruptcy attorney has certified that he didn't learn of the settlement until the meeting of creditors under Code section 341 on December 22, 1998. See Cert. of William Oliver, Esq. in Support of Motion for Reconsideration filed 2/19/99. The debtor's bankruptcy attorney has further certified that he also learned for the first time at the meeting of creditors that the debtor had neglected to list as creditors her sister Cindy Mims, who "reviews all of the debtor's decisions," and the debtor's therapist, Dr. Nancy Sinet. Id. On February 22, 1999 the debtor filed an amendment to Schedule F listing Cindy Mims as holding a claim of $150,000 for a loan and Dr. Nancy Sinet as holding a claim of $17,000 for medical bills.
The debtor alleges that Theodore Liscinski, who was trustee in the original chapter 7 case, was informed of the settlement amounts at the meeting of creditors on December 22, 1998. Transcript of 3/13/00 at 24. The debtor also alleges that trustee Liscinski was sent a copy of the settlement agreement on January 15, 1999. Oliver cert., supra, at ¶ 14. On January 6, 1999 trustee Liscinski filed a timely motion objecting to an exemption claimed in the proceeds of the harassment lawsuit. The motion only objected, however, to the objection claimed under Code section 522(d)(11)(D) for $16,150. The other four scheduled exemptions in the proceeds of the harassment lawsuit were not challenged. That motion was uncontested and it was granted by order of February 9, 1999.
Trustee Liscinski filed a separate motion on February 2, 1999 for turnover of the settlement proceeds, returnable March 8, 1999. On February 19, 1999, the debtor filed a motion for reconsideration of the order denying the exemption under Code section 522(d)(11)(D). Before those motions were heard, the debtor received a discharge by order of March 1, 1999. On March 1, 1999, the debtor also filed an application to convert the case to chapter 13, and an order converting the case was issued on the same date. The conversion, of course, terminated the appointment of the chapter 7 trustee.
On April 13, 1999, the court denied the chapter 7 trustee's motion for turnover of the lawsuit proceeds on the grounds that the case had been converted to chapter 13. The court granted a crossmotion by Stafford Thompson, Esq. for allowance of his fees and expenses for the harassment lawsuit. The court also denied the debtor's motion for reconsideration of the order denying the debtor's exemption under Code section 522(d)(11)(D) on the grounds that there was no proof that the debtor had sustained personal bodily injury within the meaning of that exemption. Although the debtor's motion for reconsideration had raised arguments in support of the validity of the other claimed exemptions in the proceeds of the harassment lawsuit, the court declined to consider those arguments on the grounds that the chapter 7 trustee had not challenged any claimed exemption except for section 522(d)(11)(D).
On March 31, 1999, the debtor filed a chapter 13 plan proposing to pay unsecured creditors a total of $4,750 over 54 months. Total scheduled unsecured claims including those added by amendment are $241,869. The plan stated that the debtor intended to invest the proceeds of the lawsuits to fund that payment to creditors and to pay the debtor's living expenses, which were stated to be approximately $1,802 per month more than her income in Schedule I and J. Schedule I and J show total monthly income of $600 from social security disability insurance and total monthly expenses of $2,402. On August 30, 1999, Robert M. Wood, the chapter 13 trustee, filed an objection to confirmation of this plan on two grounds: first, that the debtor had not proposed the plan in good faith because she is unemployed and does not have sufficient income to fund the plan. And second, that the debtor's claimed exemptions of the proceeds of the harassment lawsuit under Code sections 522(d)(10)(C), 522(d)(11)(D) and 522(d)(11)(E) were improper. At the calendar call for the hearing on confirmation of the plan on September 22, 1999, the debtor voluntarily converted the case back to chapter 7 without explanation. The court, therefore, did not rule on the chapter 13 trustee's objections because it was unnecessary to do so.
An order was entered on September 24, 1999 converting the case back to chapter 7. Andrea Dobin was appointed as the new chapter 7 trustee. A notice of the conversion of the case to chapter 7 was served by the court on all parties on September 30, 1999. The notice scheduled a new meeting of creditors for October 27, 1999. This notice, like the original notice of the commencement of the case and the notice of the conversion to chapter 13, stated that any objection to the debtor's exemptions must be filed not later than 30 days after the conclusion of the meeting of creditors. The new notice also stated that any complaint objecting to the debtor's discharge had to be filed by December 27, 1999. The meeting of creditors in the reconverted chapter 7 case was held on November 30, 1999. On December 20, 1999, trustee Dobin filed a motion to extend time to object to discharge and a motion to compel turnover of the proceeds of the harassment lawsuit. On December 30, 1999, trustee Dobin filed a motion objecting to the debtor's claimed exemptions of the proceeds of the harassment lawsuit under Code section 522(d)(10)(C) and 522(d)(11)(E). Trustee Dobin also objects to the claimed exemptions for the proceeds of the workers compensation case under Code sections 522(d)(10)(C) and 522(d)(11)(E).
The motion for turnover of the lawsuit proceeds and for an accounting of the use of those proceeds was uncontested and was granted by order of January 5, 2000. As of March 13, 2000 the debtor had not complied with that order. The debtor did file opposition to trustee Dobin's motions objecting to exemptions and to extend time to object to discharge. The motion objecting to exemptions argues that there is no evidence to support the debtor's entitlement to the subject exemptions. The motion to extend time to object to discharge states an intention to file such an objection if the debtor does not turn over any nonexempt lawsuit proceeds. The debtor filed opposition to the motion objecting to exemptions on the ground that because the time period for objecting to exemptions in the original chapter 7 phase of the case expired without any objections having been filed to the subject exemptions, the new chapter 7 trustee has no ability to raise new objections now. The debtor also argues that the exemptions are valid based on the facts as to the harm which was the subject of the lawsuits and the debtor's...
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