Brandon C. Turner

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
WILMINGTON DIVISION
IN RE:
BRANDON C. TURNER,
DEBTOR.
CASE NO. 12-03577-8-JRL
CHAPTER 7
ORDER
This matter came before the court on the chapter 7 trustee’s original and supplemental
objection to the debtor’s claim of exemptions and the debtor’s motion to amend Schedule C-1.
A hearing on the matters was held in Wilmington, North Carolina on September 19, 2012.
BACKGROUND
On May 10, 2012, Brandon C. Turner (hereinafter “debtor”) filed for relief under chapter
7 of the Bankruptcy Code, followed by amendments to Schedules B and C-1 filed on June 21,
2012. On his amended C-1, the debtor claimed exemptions for, inter alia, income earned during
the 60-day period prior to the petition date in the amount of $5,955.25, tools of the trade in the
amount of $945.00 and personal property under the wild card exemption provided by N.C.
Const. Art. X, § 1. On the petition date, the debtor maintained two accounts with State
Employee’s Credit Union (“SECU”) – a checking account with a balance of $1,927.47 and a
SO ORDERED.
SIGNED this 21 day of September, 2012.
________________________________________
J. Rich Leonard
United States Bankruptcy Judge
____________________________________________________________
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savings account with a balance of $4,027.78 (collectively “SECU accounts”) – which the debtor
claimed represented wages earned within the 60-day period prior to filing and necessary to
support his family. 	The debtor claimed this wage exemption despite the fact that his Schedule J,
filed along with the bankruptcy petition, stated that he was unemployed.
At the initial § 341 meeting of creditors on June 15, 2012, the trustee deemed the
descriptions of property in Schedules B and C-1 wholly insufficient and requested they be
amended to provide a more detailed listing of the debtor’s personal and exempt property.
During the § 341 meeting, the debtor disclosed that the funds in the SECU accounts were the
remnants of proceeds he received in connection with the sale of his vehicle in April 2010. On
June 21, 2012, the debtor complied with the trustee’s request and filed amended Schedules B and
C-1. On his amended Schedule C-1, the debtor continued to advocate that the proceeds from the
sale of his vehicle located in the SECU accounts fell within the wage exemption under N.C. Gen.
Stat. § 1-362.
On July 20, 2012, the trustee filed an objection to the debtor’s exemptions to the funds
contained in the SECU accounts on the grounds that they are not earnings necessary to support
the debtor’s family under N.C. Gen. Stat.§ 1-362 and sought turnover of the property in dispute.
On July 22, 2012, the debtor filed a motion seeking to amend Schedules C and C-1, over the
objection of the trustee. On August 14, 2012, the trustee filed a supplemental objection to the
debtor’s claim of exemption of certain personal property under the tools of the trade exemption
located in N.C. Gen. Stat. § 1C-1601(a)(5) because the debtor is unemployed and not engaged in
any trade. The trustee also objected to the property claimed by the debtor as exempt pursuant to
the wild card exemption in N.C. Const., Art. X, § 1.
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At hearing, the trustee withdrew his objection to the debtor’s exemptions as to tools of
the trade and his objection to the debtor’s motion to amend the basis of his wild card exemption
from constitutional to statutory on the amended Schedule C-1. 	Additionally, the trustee
established that the $5,955.25 present in the SECU accounts on the petition date were actually
the remaining proceeds from the sale of the debtor’s vehicle in April 2012. Thus, the remaining
issues before the court are whether the debtor is entitled to an exemption for wages earned
during the 60-day period prior to the petition date pursuant to N.C. Gen. Stat.§ 1-362 and
whether the debtor will be permitted to further amend his schedules.
DISCUSSION
Section 522(l) of the Bankruptcy Code requires debtors to file a list of property that the
debtors claim as exempt,11 U.S.C. § 522(1); however, any party in interest may file an objection
to the exemptions within thirty days after the meeting of creditors. Fed. R. Bankr. P. 4003(b).
Additionally, Federal Rule of Bankruptcy Procedure 1007 provides that a debtor must file along
with the bankruptcy petition, or within fifteen days thereafter, schedules and statements
chronicling the debtor’s current assets and liabilities. Rule 1009 provides that a debtor may
amend a schedule as a matter of course at any time before the case is closed; however,
amendment is not permitted where the debtor has engaged in bad faith, misconduct or the
amendment would otherwise prejudice creditors. In re Yonikus, 996 F.2d 866, 871-873 (7th Cir.
1993) (denying an exemption based on debtor's fraudulent concealment of assets during
bankruptcy case). In determining whether bad faith exists to deny an amendment, courts look to
the totality of the circumstances. In re Clemmer, 184 B.R. 935, 942 (Bankr. E.D. Tenn. 1995).
As a general rule, amendment may be prohibited “if a debtor intentionally conceals an interest in
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property that is property of the estate from creditors by omitting it from the schedules. Under
those circumstances the courts may infer a fraudulent intent.” 9 Collier on Bankruptcy ¶ 1009.02
(Alan N. Resnick & Henry J. Sommer eds., 16th ed. 2011).
North Carolina law allows a debtor to claim an exemption for wages earned during the
60-day period prior to filing a bankruptcy petition if the income is necessary to support the
debtor’s family. N.C. Gen. Stat. § 1-362 (applying the wage exemption “when it appears, by the
debtor’s affidavit or otherwise, that these earnings are necessary for the use of a family
supported wholly or partly by his labor.”). The bare allegation that certain wages are necessary
to support the debtor’s family is insufficient to award the exemption available under N.C. Gen.
Stat. § 1-362. Sturgill v. Sturgill, 49 N.C. App. 580, 586, 272 S.E.2d 423, 428 (1980) (stating
that the debtor is "required under G.S. 1-362 to state sufficient facts . . . to allow the trial judge to
determine that the exemption was necessary.").
In this case, the court finds that the debtor is not entitled to claim an exemption under
N.C. Gen. Stat. § 1-362 in the $5,955.25 balance of the SECU accounts because the funds
represent proceeds remaining from the sale of the debtor’s vehicle in April 2010 and are not
wages earned by the debtor during the 60-day period prior to the bankruptcy filing. Thus, the
funds in the SECU accounts constitute non-exempt property, which is included in the bankruptcy
estate under 11 U.S.C. § 541. Moreover, the debtor’s motion to amend his Schedules C and C-1
is denied. The debtor continued to represent that the funds were exempt property following the
§ 341 meeting of creditors, despite being put on notice that his schedules were inadequate and
given the opportunity to amend them. Instead of taking the opportunity to amend his schedules
to reflect the proper categorization of the property, the debtor continued to assert that the funds
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in the SECU accounts were exempt under N.C. Gen. Stat. § 1-362. See In re Sowers, 97 B.R.
480, 487 (Bankr. N.D. Ind. 1989) (“A trustee is not required to play detective or to chase the
debtors into court to gain their cooperation.”). By failing to cooperate with the trustee and take
advantage of the opportunity to amend, the court determines that no further amendment will be
allowed. The court in no way wishes to deter creative advocacy, but discerns no colorable
argument that proceeds from the sale of assets while unemployed fit within the narrow wage
exemption in N.C. Gen. Stat. § 1-362.
CONCLUSION
Based on the foregoing, the trustee’s objection to the debtor’s exemption as to $5,955.25
in the SECU accounts is ALLOWED. The debtor is not entitled to retain and use the funds
originally claimed as exempt pursuant to N.C. Gen. Stat. § 1-362 and is hereby ordered to
turnover the sum of $5,955.25 to the trustee within ten (10) days from the entry of this order.
The debtor’s motion to further amend Schedules C and C-1 is DENIED.
END OF DOCUMENT
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