In re Olmstead, Bankruptcy No. 87-20174

• Court: United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Western District of New York
• Writing for the Court: EDWARD D. HAYES
• Citation: 82 BR 197
• Parties: In re Kathleen H. OLMSTEAD, Debtor. Louis A. RYEN, As Trustee in Bankruptcy for Kathleen H. Olmstead, Plaintiff, v. Kathleen H. OLMSTEAD, Defendant.
• Docket Number: 87-2063A.,Bankruptcy No. 87-20174
• Decision Date: 05 February 1988

82 B.R. 197 (1988)

In re Kathleen H. OLMSTEAD, Debtor.
Louis A. RYEN, As Trustee in Bankruptcy for Kathleen H. Olmstead, Plaintiff,
v.
Kathleen H. OLMSTEAD, Defendant.

Bankruptcy Nos. 87-20174, 87-2063A.

United States Bankruptcy Court, W.D. New York.

February 5, 1988.

Lacy, Katzen, Ryen & Mittleman by Louis A. Ryen, Rochester, N.Y., Trustee for debtor Olmstead.

Gough, Skipworth, Petralia, Summers, Eves & Trevett by William S. Wood, Rochester, N.Y., for debtor Olmstead.

MEMORANDUM AND DECISION

EDWARD D. HAYES, Bankruptcy Judge.

This Adversary Proceeding was commenced by the Trustee to recover property allegedly belonging to the bankruptcy estate. At issue is the circumstances under which a debtor may amend schedules to include exemptions, and whether the exemption claimed in this case was proper.

Kathleen Olmstead (the "Debtor") filed her petition for Chapter 7 relief on February 6, 1987. Although the Debtor listed her assets, she failed to declare any of them exempt. On March 24, 1987, a meeting of creditors was held pursuant to 11 U.S.C. § 341. The Debtor appeared at the meeting pro se and was examined by the Trustee. The Trustee discovered that, in addition to the property listed in her petition, the Debtor held interest in an $1,800.00 employee bonus earned for services that she provided during the year

82 BR 198

1986. The Trustee pressed the Debtor to reveal which of her property she intended to declare exempt. The Debtor indicated that she would declare exempt the equity in her homestead which totalled $1,016.00. Despite this representation, however, no formal action was taken to amend the Debtor's petition to include the homestead equity as exempt property

On May 20, 1987, the Debtor received a Chapter 7 discharge. The Trustee commenced this Adversary Proceeding on July 29, 1987 to compel the Debtor to turnover the employee bonus and other cash assets. Essentially, the Trustee argues that the Debtor forfeited exempting cash and her employee bonus by electing to exempt the equity in her homestead.

On September 14, 1987, the Debtor moved, on notice to creditors and the Trustee, to amend her petition. By the Motion she sought to declare exempt $474.00 in cash and her $1,800.00 employee bonus. On September 15, 1987, the Debtor filed another Motion, this time seeking abandonment by the Trustee of his interest in her homestead. The Trustee consented in writing to the abandonment. On October 15, 1987, a hearing was held relating to the proposed amendment. At that time, no objection was raised. Accordingly, Orders issued which directed the Trustee to abandon his interest in the Debtor's homestead and permitted the Debtor to amend her petition. Now, the Trustee argues that the amendment to the Debtor's Schedule of Exemptions should not have been permitted because of its prejudicial effect on creditors. Apparently, it disturbs the Trustee that he has both relinquished his interest in the Debtor's homestead property and lost his ability to realize any benefit from the cash assets which have been declared exempt. The Trustee argues alternatively that even if the amendment be allowed, exemption of the $1,800.00 employee bonus is not permitted under the applicable New York State exemption statute.

The amendment of schedules and petitions is regulated by Bankruptcy Rule 1009. The Rule states in pertinent part that,

A voluntary petition, list, schedule, statement of financial affairs, statement of executory contracts, or Chapter 13 Statement may be amended by the debtor as a matter of course at any time before the case is closed. The debtor shall give notice of the amendment to the trustee and to any entity affected thereby. . . .

Rule of Bankr.Proc. 1009.

The Advisory Committee note to the Rule instructs that a lenient eye should be cast on efforts to amend schedules and petitions.

This rule continues the permissive approach adopted by former Bankruptcy Rule 110 to amendments of voluntary petitions and accompanying papers. Notice of any amendment is required to be given to the trustee. This is particularly important with respect to

...