Earl Winfield Tewksbury and Amy Marie Ferlo-Tewksbury

1 The parties agreed at the hearing that the debtors really have only about $10 in equity in
the property.
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE:
EARL WINFIELD TEWKSBURY
AMY MARIE FERLO-TEWKSBURY
DEBTORS
CASE NO.
08-03602-8-ATS
ORDER DENYING OBJECTION TO EXEMPTIONS
The matter before the court is the chapter 13 trustee's objection to the debtors' exemptions.
A hearing took place in Raleigh, North Carolina on October 7, 2008.
Earl Winfield Tewksbury and Amy Marie Ferlo-Tewksbury filed a joint petition for relief
under chapter 13 of the Bankruptcy Code on May 29, 2008. On their Local Form Two, Schedule
C-1, Claim of Exemptions, the debtors showed that they have only $100 in equity in the property,
and they claimed $100 of value in their residence as exempt.1 Below the exemption, the debtors
included the following language:
Debtors exempt their entire interest in this asset despite the lack of equity. Should
the trustee or any other party in interest believe that the property can be sold in such
a a fashion to generate any funds for unsecured creditors, that party should timely
object to the valuation of the property and the right to exempt the property from the
estate within 30 days of the conclusion of the 341 creditors meeting.
SO ORDERED.
SIGNED this 09 day of October, 2008.
________________________________________
A. Thomas Small
United States Bankruptcy Judge
____________________________________________________________
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The trustee objects to this language, contending that he should not be bound by the debtors'
declaration that they are exempting their entire interest in the property. The trustee maintains that
the debtors should be limited to the statutory maximum allowable exemption, so that if it is later
determined that the property has a far greater value, that value can be utilized for the benefit of the
estate.
The debtors rely on this court's opinion in In re Thennes, Case No. 03-04271-5-ATS (Bankr.
E.D.N.C. Oct. 7, 2004), in which the court allowed the debtor's exemption in his residence where
the debtor had no equity and listed the "value of the real estate claimed as exempt" as $0.00. In that
case, after the time to object to exemptions had passed, the chapter 7 trustee questioned the value
of the property and sought to sell the residence. The court held that "in circumstances in which there
is no equity in a particular piece of property, the appropriate value of an exemption in that property
is $0.00." Had the debtor "listed the value of property claimed as exempt as anything other than
$0.00, he would have been exempting equity that did not exist," to the possible detriment of other
available exemptions. The court found that the debtor had claimed an exemption in his interest in
the residence, a particular piece of property, the value of which did not exceed the value of the
encumbrances on the property, and, in the circumstances of that case, the trustee was required to
object to the value of the residence (which also dictated the dollar amount of the value of the
exemption) prior to the expiration of the time to object to exemptions.
The chapter 13 trustee contends that the result should be different in chapter 13, because
exemptions are used in chapter 13 to determine whether the debtors have satisfied the liquidation
test. The chapter 13 trustee does not wish to be precluded from seeking a greater plan payment
should the debtors later sell their residence for more than the scheduled value and recoup more than
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the amount allowed under the applicable exemption law. The debtors, on the other hand, maintain
that during the course of a chapter 13 case, debtors will pay down the balance of the mortgage, and
property may appreciate in value. The debtors contend that they are entitled to certainty as to what
their chapter 13 plan requires.
Exemptions are to be determined as of the petition date, and unless the trustee objects to the
debtors' value before the time expires, the exemption claim is allowed and will not be affected by
mortgage payments or an appreciation in value.
The court agrees with the debtors. As in Thennes, the debtors claimed an exemption in a
piece of property, their residence, in which the value of the property did not exceed the
encumbrances by more than $10-$100. 	If the trustee believes that there is more equity in the
property such that the debtors would be required to pay more into their chapter 13 plan to satisfy the
liquidation test, then the trustee should object to the exemption within the time allotted by the Code
and Rules.
The trustee also objected to an exemption claimed for tools of the trade, but at the hearing
he acknowledged that Ms. Ferlo-Tewksbury is entitled to the exemption.
Based on the foregoing, the trustee's objection is DENIED.
SO ORDERED.
END OF DOCUMENT
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