United States District Court, C.D. Illinois, Springfield Division
In re: RONALD W. NOTHDURFT and NANCY A. NATTERMAN-NOTHDURFT, Debtors, MARIANN POGGE, Trustee, Appellant,
RONALD W. NOTHDURFT and NANCY A. NATTERMAN-NOTHDURFT, Debtors, Appellees
Appeal from: Bankruptcy Case No. 14-71307.
Mariann Pogge, Appellant, Pro se, Springfield, IL.
For Ronald Nothdurft, Natterman-Nothdurft, Appellees: Michael J Logan, LEAD ATTORNEY, MICHAEL J LOGAN LTD, Springfield, IL.
SUE E. MYERSCOUGH, UNITED STATE DISTRICT JUDGE. Honorable Mary P. Gorman.
SUE E. MYERSCOUGH, U.S. District Judge:
The Debtors/Appellees, Ronald W. Nothdurft and Nancy A. Natterman-Nothdurft, claimed an exemption to funds held in a bank account that were traceable to State of Illinois pension payments. Appellant, Mariann Pogge, Trustee, filed an objection to the exemption. Mary P. Gorman, the United States Chief Bankruptcy Judge, denied the objection and allowed the exemption. The Trustee filed an appeal. Because the relevant statutory provision exempts a debtor's interest in a pension payment received and held for use of the funds for support, the decision of the Bankruptcy Court is AFFIRMED.
On July 17, 2014, the Debtors filed Chapter 7 bankruptcy. Docket Sheet, R. 1; Voluntary Petition, R. 5. When the Debtors filed the bankruptcy petition, a Credit Union 1 account held $8,000. Schedule B-Personal Property, R. 19. The account consisted of accumulated deposits from State of Illinois pension payments (which were paid in the amount of $2,707.27 per month) and Social Security payments (which were paid in the amount of $1,994.90 per month). R. 57.
The Debtors claimed several exemptions on Schedule C. Schedule C--Property
Claimed as Exempt, R. 22. Among other exemptions, the Debtors claimed an exemption to $4,000 in the Credit Union 1 account pursuant to 735 ILCS 5/12-1006, which provides an exemption for retirement plans. The Debtors also claimed a $4,000 exemption to funds in the Credit Union 1 account pursuant to 735 ILCS 5/12-1001(g)(1),(2),(3), which provides for an exemption for a debtor's right to receive a Social Security benefit. See R. 22.
On July 23, 2014, the Trustee filed objections to these two claimed exemptions. Objection to Claims of Exemption, R. 51. The Trustee argued that § 12-1006 applied only to assets held in a pension or retirement plan and not to funds already received. Id. The Trustee also argued that § 12-1001(g) applied only to a debtor's right to receive the Social Security benefit and not to funds already received. Id.; see also Trustee's Mem., R. 64 (noting that while proceeds traceable to social security benefits are exempt under 42 U.S.C. § 407, the Debtors had not claimed an exemption under that statute).
Following a hearing and briefing of the issues by the parties, the Bankruptcy Court issued an Opinion denying the Trustee's objection to the Debtors' claim of exemption in the pension funds but allowing the Trustee's objection to the Debtor's claim of exemption in the Social Security benefits. Opinion, R. 71-80; Order, R. 81-82. With regard to the Social Security benefits, the Bankruptcy Court found that " the exemptions provided by § 12-1001(g) are limited by the language in the statute providing that the exemption applies only to the 'right to receive' the listed benefits." Opinion, R. 73 (citing cases). Therefore, Social Security payments received pre-petition and held in a bank account were not exempt under § 12-1001(g). Id. at 79 (noting that the " Debtors may well be able to claim the [Social Security] benefits exempt under federal law, but it is up to them to affirmatively do so" ).
With regard to the pension payments, the Bankruptcy Court primarily relied upon Auto Owners Insurance v. Berkshire,225 Ill.App.3d 695, 588 N.E.2d 1230, 167 Ill.Dec. 1100 (Ill.App.Ct. 1992), which held that § 12-1006 exempts pension payments already received, so long as the funds ...