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Thelma McCoy v. USA

Summarizing by Craig Geno

Mehlhaff v. Allred (In re Mehlhaff)

Mehlhaff v. Allred, No. 13-6012 (June 4, 2013)
The BAP affirmed the decision of the bankruptcy court that the debtor's prepetition alimony award was property of her bankruptcy estate, subject to any exemptions the debtor may have under South Dakota law.
Procedural context:
Debtort appealed from bankruptcy court's decision granting summary judgment in favor of the chapter 7 trustee.
At the time the debtor filed her chapter 7 petition, the debtor's former spouse was obligated under a prepetition divorce decree to pay her alimony in the amount of $200 per month until their minor child turned eighteen years old in December 2014. The debtor included the alimony on her schedules as both an asset on Schedule B and income on Schedule I, and did not claim any portion of the alimony exempt. The trustee sought turnover of the alimony award. The BAP agreed with the debtor's arguments that the asset must be viewed in the context of state law (in this instance, South Dakota law) and that her alimony award is not property of the estate by virtue of Section 541(a)(5)(B) (citing Kelly v. Jeter). However, the Court held that the debtor's alimony award is property of the estate under the expansive category of "all legal or equitable interests of the debtor in property as of commencement of the case" under Section 541(a)(1). Critically, the court noted, the debtor's right to alimony did not vest after the bankruptcy, but before, when the judgment awarding alimony to the debtor was entered. Consequently, the Court found that section 541(a)(5)(B) and Kelly v. Jeter were not relevant. The Court concluded that Section 541(a)(1) is unambiguously broad enough to include alimony awards, provided that such an award is considered to be an "interest in property" under applicable state law. The Court noted a decision of the South Dakota Supreme Court finding that alimony was not exempt from the attachment of a lien under South Dakota law, and thus indicating that, under South Dakota law, alimony is a type of attachable property right. Finally, the BAP noted that Congress has provided a specific exemption for future alimony payments, based on the obvious presumption that such right would be treated as an asset of the estate. A similar exemption does not exist under South Dakota law.
Federman, Schermer, and Shodeen

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