Starky v. Birdsell (In re Starky)

Case No. AZ-14-1106-DJuKi (9th Cir. BAP December 8, 2014)
In the published decision, the 9th Circuit BAP held that Stuart and Cheryl Starky (“Debtors”) failure to comply with their duties pursuant to 11 U.S.C. Sec. 521(a)(4) prevented the Trustee from conducting his investigation; therefore, Trustee complied with his duties pursuant to Federal Rule Bankruptcy Procedure Rule 7004. The bankruptcy court correctly concluded that Trustee was not required to commence an adversary proceeding based on the Debtors not being prejudiced. The Debtors did not contest the bankruptcy court’s authority to award attorneys’ fees and costs; therefore, the bankruptcy court did not abuse its discretion in awarding the same.
Procedural context:
The Debtors appeal the bankruptcy court’s order awarding reasonable attorneys’ fees and costs to the chapter 7 trustee after extended proceedings relating to the Debtors’ exemptions.
The Debtors voluntarily sought relief under Chapter 7 in 2012. The Debtors’ Schedules identify two 529 plans and two educational savings accounts; and, assert that they are exempt on Schedule C. Additionally, the Debtors owned eight bank accounts with J.P. Morgan Chase (“Chase”), but only two of the accounts were listed on the Debtors’ Schedules. Trustee objected to the exemption asserted in the 529 plans and educational savings accounts, and provided a twenty-one day negative notice bar date. The notice was served on the Debtors and Debtors’ counsel; however, no response or request for a hearing was sought regarding the opposition to the asserted exemptions. Trustee’s counsel made demand upon the Debtors to turnover the undisclosed accounts, any non-exempt funds from these accounts, and the value of the 529 plans and educational savings accounts. Having received no response to the demand, the Trustee filed a motion to compel turnover. Upon receipt of this motion, the Debtors responded to the motion and filed an amendment to Schedules B and C. The amended Schedule C re-asserted an exemption in 529 plans and educational savings accounts. The Debtors content that the educational savings accounts fall within the Uniform Transfer to Minor Act; therefore, the Debtors had no legal ownership. Moreover, the Debtors asserted that the 529 plan was created and no contributions were made during the two years pre-petition; therefore, the Estate was not entitled to the value of the same. After further briefing by the parties, the Debtors conceded that $1,000 was contributed to one of the 529 plans and would be turned over to the Trustee. Trustee contended that the Debtors were not entitled to the prior order sustaining the Trustee’s objection to exemption pursuant to Federal Rule of Civil Procedure, Rule 60(b). The Debtors further argued that the Trustee procedurally was required to pursue the “turnover” through the commencement of an adversary proceeding pursuant to Federal Rule of Bankruptcy Procedure, Rule 7001(2).
Hon. Dunn, Jury, and Kirscher

ABI Membership is required to access the full summary. Please Sign In using your ABI Member credentials. Not a Member yet? Join ABI now - it is absolutely worth it!

About us in numbers

3511 in the system

3392 Summarized

5 Being Processed