Demand from a Chapter 7 trustee for the Debtor to agree to turnover of understated bank account funds amounting to about 7,000. Debtor has significant unused exemptions that would cover this understatement. The TEE has indicated she will object to any amendments of exemptions as the discrepancy of what he indicated is significantly different that what he had at the time of filing. His Schedule B listed he had two bank accounts with Wells Fargo amounting to $3,900. In fact, he has three bank accounts with Wells Fargo amounting to $11,000. I asked the Debtor about this and he indicated he got confused and made a mistake. At the time we went over Schedule B assets, his funds were about the amount he stated. About three weeks later, at the time he reviewed and signed the petition, his balances had gone up. He really did not have a good explanation as to why he did not mention it. Following the Debtor’s 341, the Debtor was planning to move to the Philippines and attend nursing school. He has applied, been accepted, registered. He quit his employment and has shipped many of his personal belongings. Much of the funds were acquired via a tax refund, his mother’s support towards his educational expenses and his accrued vacation pay. These funds were to be used for his educational and living expenses. Is anyone aware of any case law that suggests if a Debtor understates an asset, which is later revealed by the trusTEE, he cannot amend his exemptions, but must turn that over. The trustee has also stated that she believes such an error has impacted his ability to obtain a discharge. All the Trustees are beating this drum now. I think you amend, let Trustee object and fight it out. It will come down to (a) what judge and (b) how credible your client’s explanation is. Most of these folks are just disorganized, not dishonest. They come in, you tell them to review. They think you have magic powers because you are a lawyer and what you put down must, magically, be correct. Only if Trustee relied on your schedules detrimentally and incurred attorney fees, costs, etc, is there any argument about not allowing the exemption. You have the right to amend, period. I’ve only seen judges disallow when there was a lot of time and a lot of detrimental reliance by Trustee. Check In re Goswami, 304. B.R. 386-not exactly on point but has a discussion of amending exemptions that may be helpful.
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