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In re Howe

August 18, 2010

IN RE: TIMOTHY HOWE AND REGINA HOWE, DEBTORS.
TIMOTHY HOWE AND REGINA HOWE, APPELLANTS,
v.
CHRISTIAN H. DRIBUSCH, CHAPTER 7 TRUSTEE, APPELLEE.



The opinion of the court was delivered by: David N. Hurd United States District Judge

MEMORANDUM-DECISION and ORDER

I. INTRODUCTION

Debtors-appellants Timothy and Regina Howe ("debtors" or "the Howes") appeal from a Memorandum-Decision and Order dated June 26, 2009, in which the Hon. Robert E. Littlefield, Jr., Chief United States Bankruptcy Judge, sustained the objection of Chapter 7 Trustee Christian H. Dribusch, Esq. ("Dribusch" or "the Trustee") to debtors' claim of a cash exemption totaling $2109.9 (consisting of $502.00 debtors had on hand at the time they filed the petition and $1607.90 they later received in tax refund and stimulus payments). The effect of this ruling was to permit the Trustee to administer the $2109.90. The Howes appealed the June 26, 2009, decision. Dribusch filed appellant's brief some two months after the due date. Therefore, the appellant's brief was stricken as untimely.*fn1 The appeal was taken on submission without oral argument.

II. BACKGROUND

The Howes filed a petition for Chapter 7 bankruptcy relief on February 29, 2008. They claimed a $100,000 homestead exemption for their home at 2029 State Route 22, Cambridge, New York 12816. They listed the home as having a value of $106,972.00, with a secured claim against it of $51,084.00, indicating that they had more than $55,000 of equity in the home. Furthermore, they submitted a letter of intent to surrender their home. They did not claim a cash exemption, but listed $2.00 in cash and $500.00 in credit union accounts.

On April 3, 2008, the holder of the mortgage on the Howes' home filed a Motion for Relief from the Stay in order to proceed with foreclosure proceedings. Debtors did not oppose the motion and it was granted by default.

Debtors provided Dribusch with their 2006 tax return. Based upon the 2006 tax return, it appeared that the Howes would be entitled to a tax refund for the 2007 tax year.

Thus, on March 5, 2008, the Trustee sent a Turnover Application to the Internal Revenue Service ("IRS") directing that debtors' refund be turned over to him.

A hearing pursuant to 11 U.S.C. § 341 was held on April 7, 2008. Dribusch questioned the Howes about their 2007 tax return. They responded that they were currently in the process of completing their tax forms. Although the home was briefly discussed, there was no mention of the pending lift stay motion. The Howes timely filed their 2007 tax return on April 12, 2008.

The lift stay was granted on April 24, 2008, allowing the home to go into foreclosure.

On May 8, 2008, the time for the Trustee to object to debtors' scheduled exemptions expired. No objections to the scheduled exemptions had been made as of the expiration of time to do so. Debtors were granted a discharge on June 9, 2008.

Debtors received a tax refund of $399.46 for the 2007 tax year and also received a stimulus check in the amount of $1200.00.*fn2 In August 2008, Dribusch requested debtors' 2007 tax return. The Howes' attorney responded that if the Trustee was going to attempt to administer the tax refunds, they would amend schedule C to take a cash exemption and remove the homestead exemption.

Debtors provided their 2007 tax return to the Trustee. Dribusch filed a Motion for Turnover of non-exempt cash on October 20, 2008. On November 13, 2008, the Howes amended their schedules to include $1607.90 additional cash assets, disclaim their homestead exemption, and claim a cash exemption of the $2109.90. The Howes also stipulated that the Trustee could object to their amended scheduled exemptions. On November 18, 2008, the Trustee filed an Objection to Exemption. On January 20, 2009, the Howes offered to transfer their interest in their former home by quit-claim deed, by way of their Supplemental Memorandum of Law in Opposition to the Trustee's Objection. Bankr. Case No. 08-10551 Doc. No. 37.

By Memorandum-Decision and Order dated June 26, 2009, the Bankruptcy Court sustained the Trustee's Objection to Exemption and restored his Motion for ...


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