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Seifert v. Carlson (In re Seifert)

Seifert v. Carlson (In re Seifert), _ B.R. _, 2015 WL 3404317 (8th Cir. BAP May 22, 2015)
As the dispute over a chapter 12 debtor's exemption claim as to crop proceeds was not rendered moot by payment of those proceeds to a secured lender, the matter was reversed and remanded for further proceedings.
Procedural context:
Chapter 12 debtor had claimed sale proceeds from current crop as "farm earnings" which were exempt under Minnesota law. A creditor and the Chapter 12 trustee objected to the exemption. The parties entered into a stipulation regarding the treatment of the exemption issue which was subsequently incorporated into an amended plan. When the crop proceeds were subsequently paid to a secured creditor, the bankruptcy court ruled that the debtor's exemption claim was now moot. The debtor appealed. The BAP reversed.
When the debtor filed his chapter 12 petition, he listed the sale proceeds from his current year's crop as "farm earnings" in the approximate amount of $130,000. A secured creditor claimed an interest in a portion of the crop proceeds. The debtor sought to exempt the rest. Another creditor and the Chapter 12 trustee objected to the exemption and contended that the debtor needed to pay the value of the remaining crop proceeds into the plan for the benefit of creditors. The parties then entered into an agreement regarding the plan objection which provided that the debtor would pay a portion of the allegedly exempt proceeds into the plan and retain the rest pending final determination of the exemption dispute. These terms were incorporated into an amended plan. However, prior to confirmation of that proposed plan, the checks from the crop sale were turned over to the secured creditor, and the objecting parties contended that the exemption dispute was now moot because the debtor retained no interest in the funds. The bankruptcy court agreed and found that the exemption dispute was now moot. The debtor appealed. On appeal, the Eighth Circuit BAP ruled that the parties' stipulation reserved the issue of the exemption dispute for later determination, and payment to the secured creditor did not override the stipulation or constitute a determination of the amount to be paid to unsecured creditors. Reversed and remanded for further proceedings.
Federman, Nail, and Shodeen

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