Hawk v. Engelhart (In Re Hawk)

Case: 16-20641 Document: 00514143347 Page: 1 Date Filed: 09/05/2017
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
No. 16-20641 FILED
September 5, 2017
Lyle W. Cayce
In the Matter of: GREGORY D. HAWK; MARCIE H. HAWK, Clerk
Debtors.
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GREGORY D. HAWK,
Appellant,
v.
EVA S. ENGELHART, Chapter 7 Trustee,
Appellee.
Appeal from the United States District Court
for the Southern District of Texas
ON PETITION FOR REHEARING
Before STEWART, Chief Judge, and WIENER and PRADO, Circuit Judges.
EDWARD C. PRADO, Circuit Judge:
Gregory and Marcie Hawk’s petition for panel rehearing is GRANTED,
and the opinion previously filed in this case is withdrawn. This opinion is
substituted therefor. The Hawks’ petition for rehearing en banc is DENIED.
After filing for Chapter 7 bankruptcy, the Hawks claimed an exemption
for funds held in an individual retirement account (“IRA”). They sought to
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exempt the funds from the bankruptcy estate because tax-exempt or tax-
deferred assets held in a qualifying retirement account are generally exempt
from creditors’ claims under Texas law. However, over the course of several
months, the Hawks withdrew the funds from the IRA. Texas law provides that
amounts distributed from a retirement account remain exempt only if rolled
over into another retirement account within sixty days. After withdrawing the
funds from the IRA, the Hawks did not roll them over into another qualifying
account. Thus, the bankruptcy court held that the funds had lost their exempt
status and ordered that the Hawks turn over the funds to the Trustee, Eva
Engelhart. The district court upheld the bankruptcy court’s decision on appeal.
We REVERSE and REMAND.
I. BACKGROUND
On December 15, 2013, the Hawks filed a voluntary bankruptcy petition
under Chapter 7 of the Bankruptcy Code. Approximately one month later, the
Hawks filed their schedule of assets, which claimed an exemption for funds
held in an IRA managed by NFP Securities, Inc. The Hawks claimed that the
IRA funds were exempt from creditors’ claims under Texas Property Code
§ 42.0021 and were therefore excluded from the property of the bankruptcy
estate under 11 U.S.C. § 522(b). The meeting of creditors was held on March
28, 2014, giving the parties in interest until April 28, 2014, to object to the
Hawks’ claimed exemptions. See FED. R. BANKR. P. 4003(b)(1). No party in
interest objected to the IRA exemption during that time. On April 3, 2014, the
Trustee filed a report declaring the estate had no assets available for
distribution to the Hawks’ creditors and proposing to abandon all nonexempt
assets. In May 2014, however, Res-TX One, one of the Hawks’ creditors, timely
filed an adversary proceeding objecting to the Hawks’ discharge.
Meanwhile, between December 11, 2013, and July 14, 2014, the Hawks
withdrew all of the funds from the IRA and used most of those funds to pay for
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living and other expenses. They never deposited the funds into another
retirement account. When Res-TX One deposed Mr. Hawk in November 2014,
he stated that approximately $30,000 of the liquidated IRA funds remained in
his possession and that the funds were “in a shoebox.” The Trustee first learned
about the liquidated IRA funds from Mr. Hawk’s deposition and subsequently
demanded that the Hawks give the funds to the estate. After the Hawks
refused, the Trustee filed a motion with the bankruptcy court seeking to compel
the Hawks to turn over the funds.
Following an evidentiary hearing, the bankruptcy court ordered the
Hawks to turn over the funds that were withdrawn from the IRA ($133,434.64
in total). The bankruptcy court concluded that the funds “lost their exempt
status” under Texas law because the Hawks “did not roll them over to another
individual retirement account within 60 days.” The Hawks appealed to the
district court, which affirmed the bankruptcy court’s decision. This appeal
followed.
II. STANDARD OF REVIEW
As a “second review court,” “[o]ur review is properly focused on the
actions of the bankruptcy court.” In re Age Ref., Inc., 801 F.3d 530, 538 (5th
Cir. 2015) (quoting In re T–H New Orleans Ltd. P’ship, 116 F.3d 790, 796 (5th
Cir. 1997)). “We apply the same standard of review to the bankruptcy court’s
findings of fact and conclusions of law as applied by the district court.” In re
Pratt, 524 F.3d 580, 584 (5th Cir. 2008). The “[d]etermination [of] whether an
exemption from the bankruptcy estate exists is a question of law, which we
review de novo.” In re Zibman, 268 F.3d 298, 301 (5th Cir. 2001). “Although we
may ‘benefit from the district court’s analysis of the issues presented, the
amount of persuasive weight, if any, to be accorded the district court’s
conclusions is entirely subject to our discretion.’” In re Age Ref., 801 F.3d at
538 (quoting In re CPDC, Inc., 337 F.3d 436, 441 (5th Cir. 2003)).
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III. DISCUSSION
Under 11 U.S.C. § 541(a), the commencement of a bankruptcy case
creates a bankruptcy estate comprising, among other things, “all legal or
equitable interests of the debtor in property as of the commencement of the
case.” The debtor may then remove certain types of property from the estate
by electing to take advantage of the exemptions described in federal or state
law. 11 U.S.C. § 522(b). “An exemption is an interest withdrawn from the
estate (and hence from the creditors) for the benefit of the debtor.” Owen v.
Owen, 500 U.S. 305, 308 (1991). To claim exemptions, the debtor must file a
list of property claimed as exempt on the schedule of assets. 11 U.S.C. § 522(l);
FED. R. BANKR. P. 4003(a). A party in interest may then “file an objection to
the list of property claimed as exempt within 30 days after the meeting of
creditors . . . or within 30 days after any amendment to the list or supplemental
schedules is filed, whichever is later.” FED. R. BANKR. P. 4003(b)(1). “Unless a
party in interest objects, the property claimed as exempt on such list is
exempt.” 11 U.S.C. § 522(l). “Anything properly exempted passes through
bankruptcy; the rest goes to the creditors.” Payne v. Wood, 775 F.2d 202, 204
(7th Cir. 1985).
This court has not previously addressed whether a debtor who
withdraws funds from a retirement account and does not deposit the funds into
another retirement account within sixty days loses the exemption pursuant to
Texas law. However, the parties direct us to this court’s case law regarding
Texas homesteads. Indeed, there are clear parallels between the Texas
statutes governing retirement accounts and those governing homesteads.
Texas Property Code § 42.0021(a) states:
[A] person’s right to the assets held in . . . an individual retirement
account . . . is exempt from attachment, execution, and seizure for
the satisfaction of debts to the extent the . . . account is exempt
from federal income tax, or to the extent federal income tax on the
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person’s interest is deferred until actual payment of benefits to the
person . . . .
TEX. PROP. CODE § 42.0021(a). Section 42.0021(c) in turn provides that
amounts distributed from an exempt retirement account “are not subject to
seizure for a creditor’s claim for 60 days after the date of distribution if the
amounts qualify as a nontaxable rollover contribution.” TEX. PROP. CODE
§ 42.0021(c). Similarly, Texas Property Code § 41.001(a) indicates that a
homestead is “exempt from seizure for the claims of creditors except for
encumbrances properly fixed on homestead property.” TEX. PROP. CODE
§ 41.001(a). Section 41.001(c) explains that the “proceeds of a sale of a
homestead are not subject to seizure for a creditor’s claim for six months after
the date of sale.” TEX. PROP CODE § 41.001(c).
A. The Snapshot Rule
To understand this court’s case law on Texas homesteads, it is helpful to
first provide some background on the so-called snapshot rule. In White v.
Stump, a debtor filed for bankruptcy, and his wife later sought a homestead
exemption for the land where the debtor and his family resided. 266 U.S. 310,
310–11 (1924). The Supreme Court noted that “[t]he laws of the state of Idaho,
where the land is situate, provide for a homestead exemption, but only where
a declaration that the land is both occupied and claimed as a homestead is
made and filed.” Id. at 311. State law provided that until the landowner filed
such a declaration, “the land is subject to execution and attachment like other
land; and where a levy is affected while the land is in that condition the
subsequent making and filing of a declaration neither avoids the levy nor
prevents a sale under it.” Id. The Supreme Court explained that “the state laws
existing when the petition is filed [are] the measure of the right to exemptions.”
Id. at 312. Moreover, the date of filing is the point at which “the status and
rights of the bankrupt, the creditors and the trustee . . . are fixed.” Id. at 313.
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Thus, the debtor was not entitled to a homestead exemption because the land
“was subject to levy and sale” under state law when the debtor filed his
bankruptcy petition. Id. at 314. This approach of looking to the state law in
effect at the time of filing came to be known as the “snapshot” rule. See In re
Zibman, 268 F.3d at 303.
Two decades later, the Supreme Court expanded the snapshot rule in
Myers v. Matley, 318 U.S. 622, 628 (1943). The debtor in that case consented to
an involuntary bankruptcy petition filed against him. Id. at 623. A month later,
the debtor’s wife filed a declaration with a Nevada county recorder claiming a
tract of land listed in the debtor’s bankruptcy schedules as a homestead and
then filed a petition with the bankruptcy court claiming the land as exempt.
Id. at 623–24. In contrast to the Idaho state law applicable in White, however,
Nevada law provided that a debtor was entitled to an exemption so long as a
homestead declaration was filed “at any time before actual sale under
execution.” Id. at 626–27. The Supreme Court explained that “under the law
of Nevada, the right to make and record the necessary declaration of
homestead existed in the bankrupt at the date of filing the petition as it would
have existed in case a levy had been made upon the property.” Id. at 628. “The
assertion of that right before actual sale in accordance with State law did not
change the relative status of the claimant and the trustee subsequent to the
filing of the petition.” Id. Thus, the Supreme Court concluded that the debtor’s
spouse was entitled to the homestead exemption. Id.
B. Fifth Circuit Homestead Precedent
This court has applied the snapshot rule in two distinct types of
bankruptcy proceedings: Chapter 7 and Chapter 13 cases. See In re Zibman,
268 F.3d at 303–04 (Chapter 7 case); In re Frost, 744 F.3d 384, 386–89 (5th
Cir. 2014) (Chapter 13 case). “Chapter 7 allows a debtor to make a clean break
from his financial past, but at a steep price: prompt liquidation of the debtor’s
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assets. When a debtor files a Chapter 7 petition, his assets, with specified
exemptions, are immediately transferred to a bankruptcy estate.” Harris v.
Viegelahn, 135 S. Ct. 1829, 1835 (2015). The trustee then sells the property of
the estate and distributes the proceeds to the debtor’s creditors. 11 U.S.C. §§
704(a)(1), 726. “Crucially, however, a Chapter 7 estate does not include the
wages a debtor earns or the assets he acquires after the bankruptcy filing.”
Harris, 135 S. Ct. at 1835. Though “a Chapter 7 debtor must forfeit virtually
all his prepetition property, he is able to make a ‘fresh start’ by shielding from
creditors his postpetition earnings and acquisitions.” Id.
“Chapter 13 works differently. A wholly voluntary alternative to Chapter
7, Chapter 13 allows a debtor to retain his property if he proposes, and gains
court confirmation of, a plan to repay his debts over a three- to five-year
period.” Id.; see 11 U.S.C. §§ 1321, 1322, 1325. Pursuant to 11 U.S.C. § 1306(a),
“the Chapter 13 estate from which creditors may be paid includes both the
debtor’s property at the time of his bankruptcy petition, and any wages and
property acquired after filing.” Harris, 135 S. Ct. at 1835. We will discuss our
Chapter 7 and Chapter 13 precedents in order.
1. Chapter 7: In re Zibman
In Zibman, the debtors sold their Texas homestead roughly two months
before filing for Chapter 7 bankruptcy; they did not reinvest the sale proceeds
in another homestead within six months of the sale. 268 F.3d at 300–01. We
observed that under Myers and White, “the law and facts existing on the date
of filing the bankruptcy petition determine the existence of available
exemptions, but . . . it is the entire state law applicable on the filing date that
is determinative.” Id. at 304. Although the debtors filed the bankruptcy
petition before the six-month exemption period had ended, “‘freezing’ the
exemption for the proceeds simply because it was in effect at the date the
petition was filed, [would] effectively read the 6–month limitation out of the
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statute, and transform[] an explicitly limited exemption into a permanent one.”
Id. Furthermore, the intent of “the proceeds exemption statute was solely to
allow the claimant to invest the proceeds in another homestead, not to protect
the proceeds, in and of themselves.” Id. at 305 (quoting In re England, 975 F.2d
1168, 1174–75 (5th Cir. 1992)). Accordingly, we held that when the debtors
“failed to reinvest the proceeds in another Texas homestead within the
statutory time period, those proceeds lost their exemption, freeing the Trustee
to reach the proceeds as part of the bankruptcy estate.” Id. (footnote omitted).
2. Chapter 13: In re Frost
This court later applied Zibman’s reasoning to a Chapter 13 case in
which a homestead was sold during the pendency of bankruptcy proceedings.
See In re Frost, 744 F.3d 384, 387 (5th Cir. 2014). The debtor in Frost sold his
Texas homestead after filing for Chapter 13 bankruptcy, but because he failed
to reinvest the sale proceeds in another homestead within six months of the
sale, we held that the proceeds were “removed from the protection of Texas
bankruptcy law and no longer exempt from the estate.” Id. at 385, 387.
Frost argued that Zibman was “distinguishable because it concerned
proceeds obtained prior to filing bankruptcy, whereas he sold his homestead
after petitioning for bankruptcy, at a time when the homestead had already
been declared exempt from the estate.” Id. at 387. Frost pointed out that 11
U.S.C. § 522(c) provides that “property exempted under this section is not
liable during or after the case for any debt of the debtor that arose . . . before
the commencement of the case.” Id. (quoting 11 U.S.C. § 522(c)). He also
suggested “that all bankruptcy exemptions are fixed at the time of the
bankruptcy petition and do not later lose their exempt status.” Id. at 386. Thus,
Frost argued that “while the proceeds in Zibman were already temporarily
exempted at the time of filing, the homestead was a permanent exemption and
placed forever outside the estate.” Id. at 388.
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Responding to Frost’s arguments, we emphasized that an “essential
element of the exemption must continue in effect even during the pendency of
the bankruptcy case.” Id. (quoting In re Zibman, 268 F.3d at 301). Therefore,
“a change in the character of the property that eliminates an element required
for the exemption voids the exemption, even if the bankruptcy proceedings
have already begun.” Id. We explained:
Adopting Frost’s argument would require rejecting this
court’s determination in Zibman that § 522(c) does not prevent
exempt property from losing its exempt status. If § 522(c) requires
strict enforcement of the “snapshot rule” such that property
exempted at the moment of filing can never be liable—regardless
of restrictions placed on that exemption by state law or a change
in the essential character of the property—then the proceeds from
the sale in Zibman would have been exempted indefinitely, despite
the six month limitation on that exception.
Id. at 389. When Frost sold his homestead, his “interest in his homestead
changed from an unconditionally exempted interest in the real property itself
to a conditionally exempted interest in the monetized proceeds from the sale of
that property.” Id. The “conditional exemption” that applied to the newly
acquired sale proceeds “expired” when Frost failed to reinvest them in another
homestead within six months. Id. Thus, we concluded that “Frost lost his right
to withhold the sale proceeds from the estate.” Id.
C. Frost’s Applicability to Chapter 7 Cases
Frost relied heavily on principles from Zibman, a Chapter 7 case.
Nevertheless, the Hawks contend that Frost does not apply to their Chapter 7
case because Frost was a Chapter 13 proceeding. The Hawks note that the
bankruptcy estate in a Chapter 13 case includes property “the debtor acquires
after the commencement of the case but before the case is closed, dismissed, or
converted.” 11 U.S.C. § 1306(a)(1). They contend that our decision in Frost
effectively brought “proceeds that became nonexempt after the expiration of
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the time-limited exemption back into the estate,” which was permissible under
§ 1306(a)(1) because the proceeds constituted a new property interest Frost
acquired after the commencement of the case. Because Chapter 7 does not
contain a provision like § 1306(a)(1), the Hawks reason that an unconditionally
exempted property interest that is subsequently transformed into a new
nonexempt property interest remains excluded from a Chapter 7 bankruptcy
estate. We agree.
As an initial matter, we note that the Trustee in this case did not object
to the Hawks’ IRA exemption until well after the time for objections passed.
This timing is significant in the Chapter 7 context. As noted above, 11 U.S.C.
§ 522(l) provides that “[u]nless a party in interest objects, the property claimed
as exempt on [the schedules] is exempt.” Federal Rule of Bankruptcy Procedure
4003(b) also indicates that parties in interest must generally object to claimed
exemptions within thirty days after the creditors’ meeting.
In Taylor v. Freeland & Kronz, the Supreme Court held that a party in
interest in a Chapter 7 case cannot “contest the validity of an exemption after
the 30-day period,” even if “the debtor had no colorable basis for claiming the
exemption.” 503 U.S. 638, 639, 643–44 (1992); see also In re Davis, 170 F.3d
475, 478 (5th Cir. 1999) (“If the exemptions are not objected to, the property
becomes exempt and unavailable to be levied on by pre-petition creditors or
managed by the trustee.”). The trustee in Taylor argued that such a strict
interpretation of § 522(l) and Rule 4003(b) would “lead debtors to claim
property exempt on the chance that the trustee and creditors, for whatever
reason, will fail to object to the claimed exemption on time.” 503 U.S. at 644.
Yet the Supreme Court noted that “[d]ebtors and their attorneys face penalties
under various provisions for engaging in improper conduct in bankruptcy
proceedings. These provisions may limit bad-faith claims of exemptions by
debtors.” Id. (citations omitted).
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In light of the Supreme Court’s decision in Taylor, it is somewhat
difficult to understand how proceeds from the sale of the homestead in Frost
could be brought into the bankruptcy estate “at a time when the homestead
had already been declared exempt from the estate.” Frost, 744 F.3d at 387.
However, as the Hawks suggest, Frost makes sense in the context of a Chapter
13 case. We stressed that it was “the land itself—not its monetary value—that
[was] protected under Texas law and ‘exempted under [§ 522].’” Id. at 391
(quoting 11 U.S.C. § 522(c)). “Frost’s homestead was exempted from the
estate . . . by virtue of its character as a homestead.” Id. at 387. But when Frost
sold the homestead, his property interest “changed from an unconditionally
exempted interest in the real property itself to a conditionally exempted
interest in the monetized proceeds from the sale of that property.” Id. at 389.
In other words, Frost obtained a new conditionally exempted property interest
(the proceeds) when he sold his homestead. And in a Chapter 13 case, a new
property interest “the debtor acquires after the commencement of the case”
becomes part of the estate under § 1306(a)(1).
Notably, in Frost, the bankruptcy court ordered the proceeds to be
returned to the estate pursuant to § 1306(a)(1). The bankruptcy court noted
that new property the debtor acquires after filing for Chapter 13 bankruptcy
“comes in during the pendency of the case and becomes property of the estate.”
Transcript of Confirmation Hearing at 9, In re Frost, No. 09-54674 (Bankr.
W.D. Tex. Jan. 27, 2011). The bankruptcy court went on to explain:
A [Chapter 7 case] would be a different situation. In a [Chapter 7
case], the property is the debtor’s, it’s exempted, it’s gone, and if
he decides to sell it after that, it’s subject to only his postpetition
creditors. But in a [Chapter 13 case], it’s different. And, so, I think
it’s still subject to the Chapter 13 estate, if it’s not reinvested.
Id. at 10–11. This reasoning is consistent with this court’s assessment that
Frost’s property interest changed from an unconditionally exempted interest
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in the real property to a conditionally exempted interest in the proceeds from
the sale of his homestead. When Frost acquired the sale proceeds and did not
reinvest them in another homestead within six months, this newly acquired
property interest became part of the bankruptcy estate under § 1306(a)(1).
The situation is different in the Chapter 7 context. Section 1306(a)(1) is
applicable only in Chapter 13 cases; no similar provision applies to Chapter 7
cases. Here, the Hawks filed for Chapter 7 bankruptcy and subsequently
claimed an exemption for funds held in an IRA. No party in interest objected.
The funds were unconditionally exempted because of their essential character
as “assets held in . . . an individual retirement account.” TEX. PROP. CODE
§ 42.0021(a); see 11 U.S.C. § 522(l). Moreover, the Trustee could not “contest
the validity of [that] exemption after the 30-day period.” Taylor, 503 U.S. at
639, 643–44. When the Hawks withdrew funds from the IRA, the Hawks’
property interest changed from an interest in assets held in a retirement
account to an interest in “[a]mounts distributed from a [retirement] account.”
See TEX. PROP. CODE § 42.0021(c). But because § 1306(a)(1) applies only in
Chapter 13 cases and no similar provision applies in a Chapter 7 case, there
was no means by which the Hawks’ newly acquired property interest could
become part of the Chapter 7 estate.
Lower courts have debated whether Frost applies in Chapter 7 cases.
One bankruptcy court held that “Frost’s core holding is based on factually
distinguishable underpinnings and, as such, is distinguishable in a chapter 7
where, such as here, the debtor sells a properly exempted homestead post-
petition.” In re Montemayor, 547 B.R. 684, 713 (Bankr. S.D. Tex. 2016). Other
courts have held that Frost controls when a Chapter 7 debtor sells a homestead
after filing for bankruptcy. Lowe v. DeBerry, No: 5:15-cv-1135, slip op. at 19
(W.D. Tex. Mar. 10, 2017); In re Smith, 514 B.R. 838, 850 (Bankr. S.D. Tex.
2014). In one such case, a district court noted that allowing a Chapter 7 debtor
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to retain proceeds from a postpetition homestead sale that were not reinvested
within six months would “produce inequitable results, particularly when
Chapter 13 debtors in identical situations are not permitted to retain such
proceeds.” DeBerry, slip op. at 19.
But Chapter 7 cases and Chapter 13 cases are not meant to always yield
the same results. Chapter 13 is a “wholly voluntary alternative to Chapter 7,”
which permits a debtor “to retain his property if he proposes, and gains court
confirmation of, a plan to repay his debts.” Harris, 135 S. Ct. at 1835. By filing
under Chapter 13, the debtor agrees that the property he acquires after filing
for bankruptcy will become property of the bankruptcy estate under
§ 1306(a)(1). Id. On the other hand, “Chapter 7 allows a debtor to make a clean
break from his financial past.” Harris, 135 S. Ct. at 1835. A Chapter 7 debtor
“is able to make a ‘fresh start’ by shielding from creditors his postpetition
earnings and acquisitions.” Id. It follows logically that a new property interest
the debtor acquires after filing for bankruptcy becomes part of the estate in a
Chapter 13 case but does not become part of the estate in a Chapter 7 case,
even if the debtor acquires the new property interest by transforming a
previously exempted asset into a nonexempt one.
Lower courts have also suggested that the approach we take today will
“effectively read the [time] limitation out of the statute in Chapter 7 cases.”
DeBerry, slip op. at 19. But limitations on exemptions still apply to property
interests debtors hold when they file for Chapter 7 bankruptcy. See Zibman,
268 F.3d at 304. For example, in Zibman, we noted that “‘freezing’ the
exemption for the proceeds simply because it was in effect at the date the
petition was filed, [would] effectively read the 6–month limitation out of the
statute.” Id. Therefore, we held that when the debtors “failed to reinvest the
proceeds in another Texas homestead within the statutory time period, those
proceeds lost their exemption.” Id. at 305. Yet in that case, the debtors already
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held proceeds when they filed for bankruptcy, and state law provided only a
conditional exemption for those proceeds. If the debtors had still owned the
homestead at the time of filing, their homestead would have been subject to an
unconditional exemption under Texas law.
Likewise, if the Hawks held amounts recently distributed from their
retirement account when they filed for bankruptcy, those funds would be
subject to the applicable sixty-day limitation on the exemption. See TEX. PROP.
CODE § 42.0021(c). The Trustee could have objected to the exemption if the
liquidated funds were not rolled over into another retirement account within
sixty days. 1 But the Trustee did not timely object to the claimed exemption,
and under Taylor, the Trustee could not contest the exemption’s validity after
the time for objecting passed. 503 U.S. at 643–44. The property interest was
“withdrawn from the estate” when the exemptions were allowed, Owen, 500
U.S. at 308, and there was no provision under which the Hawks’ subsequently
acquired interests in amounts distributed from the IRA could become part of
the estate. Accordingly, we hold that the bankruptcy court erred in ordering
the Hawks to turn over the liquidated funds to the Trustee. 2
IV. CONCLUSION
For the foregoing reasons, we REVERSE the bankruptcy court’s order
requiring the Hawks to turn over the liquidated funds to the Trustee, and
REMAND the case for further proceedings consistent with this opinion.
1 In fact, it seems that at least some of the funds were withdrawn from the IRA before
the Hawks filed for bankruptcy (as early as December 11, 2013).
2 The Hawks also argue that the funds were permanently exempted because the
Trustee first objected to the exemption after filing a report declaring that there were no assets
for distribution and proposing to abandon all nonexempt assets. However, because we hold
that the amounts distributed from the IRA could not become part of the bankruptcy estate
after the exemptions had been allowed, we need not address the abandonment issue.
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