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Summarizing by Amir Shachmurove

Nessan v. Lovald

Nessan v. Lovald, No. 12-1733 (8th Cir. Dec. 5, 2012)
In an unpublished opinion, the Eighth Circuit held that under applicable South Dakota law, the debtor's claimed exemptions in a truck, boat, and legal claim did not entitle the debtor to an absolute exemption of the property in its entirety.
Procedural context:
Appeal from the United States District Court for the District of South Dakota, which affirmed the bankruptcy court.
Curtis Nessan filed for Chapter 7 in November 2010. In his petition, the debtor listed a Chevy truck and Triton boat, both originally financed by BankWest. At the time of financing, the debtor fortuitously purchased a disability credit insurance policy from AIG, which came into effect after the debtor later became disabled. Seemingly unrelated to the bankruptcy filing, AIG ceased making payments on the insurance policy, and the debtor desired to commence a lawsuit for specific performance under the policy. This legal claim, together with the truck and boat, were the assets at issue in the case. At the time of filing, the value of the bank's security interest exceeded the value of the boat and truck, and the debtor assigned a one dollar ($1) exemption to both items. The debtor also utilized the one dollar exemption for the legal claim. The Chapter 7 trustee objected to the exemption on the legal claim, claiming that any insurance proceeds were property of the estate. The bankruptcy court agreed, and after the trustee paid the debtor $3 for all claimed exemptions, the debtor was directed to turn over the property. On appeal, the debtor argued that his one dollar exemptions in the three items exempted those items from the bankruptcy estate in their entirety. The district court disagreed, and affirmed the bankruptcy court. The Eighth Circuit began by establishing that South Dakota was an "opt-out" state, and thus only South Dakota exemptions are available to its residents. Then, the Court noted that two statues allowed "absolute exemptions" (i.e. fully exempt property regardless of value), but these were reserved for personal effects (family pictures, burial plots, and clothing) and the debtor's homestead. Finding that the truck, boat, and legal claim did not fall within these categories, the debtor could only exempt property up to certain statutory limits, and that the debtor chose his specific exemption amounts. Therefore, upon payment from the trustee of $3, the debtor was required to deliver the property to the trustee.
Per Curiam. Heard by RILEY, Circuit Judge, COLLOTON AND GRUENDER, Circuit Judges.

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