Kelly Lynn Rexine

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NORTH DAKOTA
In re: 	Bankruptcy No.: 26-30179
Kelly L. Rexine, 	Chapter 7
Debtor.
/
MEMORANDUM AND ORDER
On March 6, 2026, Debtor Kelly Rexine petitioned for bankruptcy relief under
Chapter 7 of the Bankruptcy Code. Debtor’s scheduled assets included $1,565.15 in a
single checking account (“Single Account”) and $2,309.83 in a joint checking account
Debtor owns with his wife (“Joint Account”). Debtor claimed $1,173.86 in wages
deposited in the Single Account and $1,732.37 deposited in the Joint Account exempt
under N.D.C.C. §§ 28-22-18, 32-09.1-03, the North Dakota wage exemption. Debtor
also claimed $6,627.50 in personal property exempt under N.D.C.C. § 28-22-03, the
North Dakota head of family exemption.
The Trustee filed an Objection to Debtor’s Claim of Exemptions and a
Memorandum in Support of Trustee’s Objections to Debtor’s Claim of Exemptions,
arguing the exemptions listed above should be disallowed. Debtor filed a timely
Response to Trustee’s Objection to Exemptions. The Court held an evidentiary hearing
on May 28, 2026, and oral argument on June 2, 2026. For the reasons provided below,
the Debtor’s exemptions are allowed in part and disallowed in part.
I. 	BACKGROUND
Debtor and his wife married in 2007 and have four children. While they remain
legally married, they have not lived together for about a year. Under their unique living
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arrangement, the children remain in the family home 100% of the time while Debtor and
his wife take turns staying in the family home. Debtor explained that he and his wife
rotate on a 2-day, 2-day, 3-day schedule where he is at the house for two days, away for
two days, and at the house again for three days before the cycle repeats. Each spouse
is responsible for 50% of the expenses for their children and 50% of the household bills.
They share a joint checking account from which they pay these expenses. Debtor
emphasized that, while both he and his wife live in the house and claim it as their
primary residence, they do not live there together. Debtor stays with his mother while
his wife is at the family home.
Consistent with this arrangement, Debtor and his wife filed a joint tax return in
2025 that indicated they both reside in the family home. Additionally, their homeowners’
policy lists both Debtor and his wife as insureds, with his wife serving as the primary
insured.
On January 7, 2026, Debtor’s wife filed a voluntary petition under Chapter 7 of
the Bankruptcy Code. Bankr. No. 26-30009. On her petition, she indicated that she
lives at the family home and checked the box that she was married and had not lived
anywhere else in the last three years. She scheduled the following personal property
exempt under N.D.C.C. § 22-28-03: “typical household goods and furnishings” valued
at $4,000; two TVs, one iPhone 17, two iPads, one smartwatch valued at $1,200; a
wedding ring valued at $2,000, and a dog valued at $1.
On Debtor’s bankruptcy petition, he also indicated that he lives at the family
home and that he is married and has not lived anywhere else in the last three years.
Debtor scheduled the following personal property exempt under N.D.C.C. § 22-28-03:
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“typical household goods and furnishings” valued at $2,500; three TVs, one iPhone, and
a family laptop valued at $600; firearms valued at $1,250; a wedding band valued at
$500; cash on hand totaling $200; funds in a joint checking account totaling $577.46;
funds in a single checking account totaling $391.29; funds in two BankNorth checking
accounts totaling $2; and earned but unpaid wages in the sum of $606.75.
Debtor holds two bank accounts that he uses regularly, the Single Account and
the Joint Account. Debtor uses his Single Account for day-to-day transactions, including
wages and other miscellaneous deposits and expenses. Deposits from BankNorth
represent Debtor’s wage payments while deposits bearing any other name are not
wages. At the hearing, the Court received the following evidence of Debtor’s financial
transactions:
• 	Single Account bank statement for the dates of January 31, 2026, to February
28, 2026, and a copy of Debtor’s transaction history from February 28, 2026,
to March 7, 2026.
• 	Joint Account bank statement for the dates of January 31, 2026, to February
28, 2026, and a copy of Debtor’s transaction history from February 28, 2026,
to March 7, 2026.
As of January 31, 2026, the Single Account statement reflected a beginning
balance of $7,949.94. On Debtor’s petition date, March 6, 2026, the Single Account
bank statement reflected a balance of $1,407.58. 1 From February 1, 2026, to the
Petition Date, Debtor made multiple deposits into and withdrawals from the Single
Account. Notably, Debtor received direct deposits from BankNorth for $2,426.95 on
1 This sum differs from the $1,565.15 included on Debtor’s schedules.
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February 11, 2026, and February 25, 2026. Debtor also received a deposit of
$15,156.36 from a 401k loan on February 17, 2026.
Similarly, Debtor initiated multiple transactions involving the Joint Account.
Debtor transferred money from the Single Account into the Joint Account and from the
Joint Account into the Single Account. At the hearing, Debtor testified that he and his
wife each own 50% of the Joint Account. Debtor and his wife use the Joint Account to
pay household bills and expenses for their children. Both Debtor and his wife transfer
money from their individually held accounts into the Joint Account. Debtor’s wage
payments from BankNorth are never deposited directly into the Joint Account.
As of January 31, 2026, the Joint Account statement reflects a beginning balance
of $1,691.49. On March 6, 2026, the date of Debtor’s bankruptcy petition, the Joint
Account bank statement reflects a balance of $4,619.66. From January 31, 2026, to the
petition date, Debtor transferred from his Single Account into the Joint Account totaling
$3,829.65. Also from January 31, 2026, to the petition date, Debtor transferred from the
Joint Account into his Single Account totaling $2,317.84. Numerous other transactions
occurred between the Joint Account and other unidentified accounts during this time
period.
II. 	ANALYSIS
Section 541(a)(1) of the Bankruptcy Code provides that, at the commencement
of a case, the bankruptcy estate is comprised of “all legal or equitable interests of the
debtor in property.” 11 U.S.C. § 541(a)(1). The Bankruptcy Code allows debtors to
exempt certain property from their bankruptcy estates. 11 U.S.C. § 522(b)(1). “Exempt
property is excluded from property of the estate available to satisfy debts.” Nessan v.
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Lovald, 494 Fed. App’x. 691, 693 (8th Cir. 2012) (quotation omitted). Section 522(b)(2)
authorizes states to opt out of the federal property exemptions enumerated in section
522(d). 11 U.S.C. § 522(b)(2). Exercising this grant of authority, the North Dakota
Legislature enacted a statute limiting its residents to claiming the state exemptions
rather than the federal exemptions. See N.D.C.C. § 28-22-17.
Exemptions are liberally construed in favor of the debtor. Moon v. Hurd (In re
Hurd), 441 B.R. 116, 119 (B.A.P. 8th Cir. 2010); Mattern v. Frank J. Mattern Est. ex rel.
Erickson, 864 N.W.2d 458, 462 (N.D. 2015). The Trustee, as the objecting party, bears
the burden of proof that Debtor’s exemptions are not properly claimed. Fed. R. Bankr.
P. 4003(c); see Walters v. Bank of the W. (In re Walters), 450 B.R. 109, 112 (B.A.P. 8th
Cir. 2011). “Once the objector meets its burden, the burden of production shifts to the
debtor to produce evidence that the claimed exemption is proper, though the burden of
persuasion remains with the objector.” In re Walters, 450 B.R. at 113; see also In re
Nascene, 2020 WL 6875946, at *4 (Bankr. D. Minn. Oct. 8, 2020) (the debtor bears the
burden to establish funds are traceable to an exempt source); In re Drescher, 2013 WL
4525232, at *3 (Bankr. D. Or. Aug. 27, 2013) (“the burden of production shifts to ‘to the
debtor to come forward with unequivocal evidence to demonstrate that the exemption is
proper.’” (quoting Carter v. Anderson (In re Carter), 182 F.3d 1027, 1029 n.3 (9th Cir.
1999)); Tydings v. Reed (In re Tydings), 2020 WL 5258457, at *2 (W.D. Mo. Sept. 3,
2020) (the trustee maintains the burden of persuasion, but “the burden of production
shifts to the debtor to show that the claimed exemption is proper.”).
To determine the intent of the North Dakota Legislature in promulgating
exemption statutes, the Court first looks to the specific statutory language. State v.
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Gaddie, 971 N.W.2d 811, 819 (N.D. 2022) (citing State v. McCreary, 967 N.W. 2d 447,
450–51 (N.D. 2021)). Statutes are interpreted to give “meaning and effect to every
word, phrase, and sentence, and [] not [to] adopt a construction which would render part
of the statute mere surplusage.” State v. Berkley, 24 N.W.3d 69, 71 (N.D. 2025)
(quoting State v. Enriquez, 10 N.W.3d 777, 782–83 (N.D. 2024)). Statutes are
construed “in a practical manner, giving consideration to the context of the statutes and
the purpose for which they were enacted.” Grand Prairie Agric., LLP v. Pelican Twp. Bd.
of Supervisors, 955 N.W.2d 87, 89 (N.D. 2021) (quoting Laufer v. Doe, 946 N.W.2d 707,
710 (N.D. 2020)). When two statutes are at issue, the Court, if possible, must interpret
them to be in harmony, not in conflict. Sample v. North Dakota Dep’t of Transp., 775
N.W.2d 707, 710 (N.D. 2009).
A. 	Head of a Family Exemption
Debtor claims several personal property items exempt under N.D.C.C. § 28-22-
03. This statute provides, in part:
[T]he head of a family, personally or by that person’s agent, may select from
that person’s other personal property, any goods, chattels, merchandise,
money, and other personal property not exceeding in value the sum of
seven 	thousand 	five 	hundred 	dollars, 	which 	also 	is 	exempt 	from 	all
attachment or mesne process, levy and sale upon execution, and any other
final process issued from any court.
Section 28-22-01.1 defines “head of a family” as:
1. 	The husband or wife when the claimant is a married person.
2. 	Every person who has residing on the premises with the person and
under the person's care and maintenance, any of the following:
a. 	That person’s child or the child of that person’s deceased spouse,
whether by birth or adoption.
b. 	A minor brother or sister or the minor child of a deceased brother or
sister.
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c. 	A father, mother, grandfather, or grandmother.
d. 	The father or mother or grandfather or grandmother of a deceased
husband or wife.
e. 	Any other of the relatives mentioned in this section who have attained
the age of majority and are unable to take care of or support
themselves.
3. 	Every person who provides support for unmarried minor children of a
previous marriage of the person, even though the children do not reside
on the premises with the person.
N.D.C.C. § 28-22-01.1.
The Trustee objects to Debtor’s claimed exemptions under section 28-22-03,
arguing that Debtor may not claim property exempt under this statute because Debtor is
married and his wife claimed the exemption in her earlier bankruptcy case. In the
Trustee’s view, allowing both Debtor and his wife to claim the exemption would result in
impermissible, duplicative, spouse-by-spouse exemption stacking—even though they
filed separate bankruptcy cases. The Trustee contends that Debtor should have
objected to his wife’s “head of a family” exemption during her bankruptcy case if Debtor
wanted to preserve the exemption for his bankruptcy case. Because he failed to object,
Debtor is barred from claiming it for the duration of their marriage, according to the
Trustee.
Additionally, the Trustee argues that the North Dakota Legislature wrote the
statute in the singular, meaning that only the husband or the wife may use the
exemption while they are married. “The statute does not provide for multiple heads of
family,” according to the Trustee. Although Debtor and his wife are separated, the
Trustee emphasizes that the critical question is whether they are married. The Trustee
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claims that if the Legislature intended for both a husband and wife to qualify for the
exemption, it would have included clarifying language.
Conversely, Debtor argues that the exemption statute must be liberally construed
in his favor, entitling him to claim the exemption. Focusing on the text of section 28-22-
03, Debtor emphasizes that “the head of a family” is entitled to use the exemption, not
“the head of the family.” While conceding he and his wife remain legally married, Debtor
argues that he and his wife are separated, and they no longer live together. More
importantly, he cares for his children, and he and his children comprise his family unit,
qualifying him for the exemption.
Both Debtor and the Trustee agree that, if Debtor and his wife were not legally
married, they would each qualify as the “head of a family” for purposes of claiming the
exemption under section 28-22-03.
Exemption rights are determined as of the petition date. See Armstrong v.
Peterson (In re Peterson), 897 F.2d 935, 937 (8th Cir. 1990). On the petition date,
Debtor qualified as “head of a family” under the definition in section 28-22-01.1 because
he resided with his children and provided care and maintenance for them. The question
is whether Debtor, who is separated from his spouse but remains married, may claim
the “head of a family” exemption under section 28-22-03 if his spouse claimed the
exemption in a prior bankruptcy proceeding. The answer is “yes.”
The primary objective in statutory interpretation is to ascertain the legislative
intent. State ex rel. Clayburgh v. Am. W. Cmty. Promotions, Inc., 645 N.W.2d 196, 205
(N.D. 2002) (citation omitted). As the North Dakota Supreme Court explained:
In ascertaining the Legislature’s intent, we first look to the plain language of
the statute and give each word of the statute its ordinary meaning. See
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Estate of Thompson, 1998 ND 226, ¶ 7, 586 N.W.2d 847. We construe the
statute as a whole and give effect to each of its provisions if possible. Id. If
the language of the statute is clear and unambiguous, we cannot ignore that
language under the pretext of pursuing its spirit because the legislative
intent is presumed clear from the face of the statute. Id.
Id.
Section 22-18-03 does not prohibit Debtor’s interpretation. It does not limit the
exemption to one per family or prohibit a claimant from claiming this exemption in more
than one proceeding. It does not say “only one spouse,” “unless the spouse has
previously claimed the exemption” or “one exemption per marriage.” The consequence
of a spouse previously claiming the exemption is not incorporated into the definition.
Instead, it defines the status by reference to “the claimant,” and the claimant qualifies if
the claimant is a husband or wife in a marriage and if that husband or wife cares for his
or her children, the child of a deceased spouse, siblings, parents, grandparents, or
unmarried minor children of a previous marriage. See N.D.C.C. § 28-22-01.1. To
interpret this exemption to allow one spouse to permanently exhaust the other’s
entitlement to claim this exemption in any future proceeding while the couple remains
married without clear limiting language is contrary to the premise that exemptions are
liberally construed in favor of a debtor.2 If the North Dakota Legislature intended to
2 Since the statute was designed to provide an exemption in the context of North
Dakota debt collection proceedings, the permanent marriage penalty advocated by the
Trustee appears particularly harsh and unworkable. It is possible that a creditor of
Spouse A may pursue debt collection proceedings early in the marriage and a different
creditor may pursue debt collection proceedings later in the marriage against the same
spouse. Assuming Spouse A cares for a family member, Spouse A could exempt
property under the “head of a family” exemption on both occasions and then claim the
exemption in a bankruptcy proceeding as well. Under the Trustee's interpretation, once
Spouse A claimed the exemption, Spouse B is barred from asserting it in any North
Dakota debt collection or bankruptcy proceeding for the duration of their marriage. This
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allow one spouse to claim the “head of a family” exemption at the expense of the
spouse who seeks to claim it later, the Legislature would have included limiting
language.
An example of the North Dakota Legislature’s deliberate decision to limit a
spouse’s exemption may be found in a different statute in Chapter 28-22. Specifically,
N.D.C.C. § 28-22-03.1(1), which grants an alternative exemption in lieu of the
homestead, expressly provides that the exemption is unavailable “if the resident
exemption claimant, the spouse of the resident exemption claimant, or other head of the
family of the resident exemption claimant has chosen the homestead exemption[.]”
N.D.C.C. § 28-22-03.1(1) (emphasis added). In other words, when the Legislature
wanted one spouse’s exemption to affect the other spouse’s eligibility, it knew how to
say so.
Further, the Trustee’s interpretation that Debtor is prohibited from claiming the
exemption during the duration of his marriage because his spouse previously claimed it
reads more into the statute than exists. “When engaging in statutory interpretation, [the
North Dakota Supreme Court] has consistently recognized that it must be presumed the
legislature intended all that it said, said all that it intended to say, and meant what it has
plainly expressed.” Est. of Christeson v. Gilstad, 829 N.W.2d 453, 456 (N.D. 2013).
Under the clear and unambiguous language of N.D.C.C. § 28-22-01.1(1), the “head of a
family” is “[t]he husband or wife when the claimant is a married person.” While the
language plainly limits the “head of a family” to a husband or wife, it does not specify
outcome is harsh, difficult to police and not supported by the plain language of the
statute.
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any temporal application or proceeding limitation. In the absence of this limitation, the
Court will not read one into the statute. The Court presumes the North Dakota
Legislature said all that it intended to say.
Additionally, the Trustee’s proposed interpretation of section 28-22-03 would
impose a “marriage penalty,” which the North Dakota Supreme Court declined to
endorse in interpreting the homestead exemption under N.D.C.C. § 47-18-01. See
Anderson v. Kaler (In re Anderson), 932 N.W.2d 506, 509 (N.D. 2019). Referring to a
definition offered by a California court, the North Dakota Supreme Court explained that
“a marriage penalty occurs by limiting the exemption for married individuals when a
different result would occur if the property owners were not married.” Id.
If Debtor and his wife were not married, they would each qualify as the “head of a
family” for purposes of claiming the exemption under section 28-22-03 in separate
bankruptcy proceedings. If the Court declines to adopt the Trustee’s proposed
interpretation, Debtor is entitled to claim the “head of a family” exemption in this
bankruptcy proceeding and any bankruptcy proceeding he files individually in the future
whether he is married or not, provided he meets the other criteria of the statute. If the
Court adopts the Trustee’s proposed interpretation, Debtor is barred from claiming the
“head of a family” exemption for the duration of his marriage, imposing a marriage
penalty on him. For this reason and the other reasons provided above, the Court
rejects the Trustee’s interpretation and overrules his objection to Debtor’s claimed
exemption under section 28-22-03.
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B. 	Wage Exemption
1. 	Wages 	do 	not 	lose 	their 	exempt 	status 	under
N.D.C.C. 	§§ 	28-22-18 	and 	32-09.1-03 	when
deposited into a bank account if they can be traced
and identified.
Debtor claims $1,173.86 in the Single Account and $1,732.37 in the Joint
Account exempt under N.D.C.C. §§ 28-22-18 and 32-09.1-03. The Trustee objects to
this exemption, claiming these statutes do not provide Debtor with an avenue to exempt
wages after they are paid and deposited.
Under section 28-22-18, “The wages of a debtor are exempt from all process or
levy only to the extent provided in section 32-09.1-03.” N.D.C.C. § 28-22-18. Section
32-09.1-03 provides, in relevant part:
1. The maximum part of the aggregate disposable earnings of an individual
for any workweek which is subject to garnishment may not exceed the
lesser of:
a. 	Twenty-five percent of disposable earnings for that week.
b. 	The amount by which disposable earnings for that week exceed forty
times the federal minimum hourly wage prescribed by section 6(a)(1)
of the Fair Labor Standards Act of 1938, as amended [Pub. L. 95-
151; 91 Stat. 1245; 29 U.S.C. 206] or any equivalent multiple thereof
prescribed by regulation by the secretary of labor in case of earnings
for any pay period other than a week, in effect at the time the
earnings are payable.
N.D.C.C. § 32-09.1-03(1).
The Trustee argues that section 32-09.1-03 imposes a restriction on the sum of
disposable earnings 3 subject to garnishment. He observes that the plain language of
3 “Disposable earnings” is defined as “that part of the earnings of any individual
remaining after the deduction from those earnings of any amounts required by other law
to be withheld.” N.D.C.C. § 32-09.1-01(2).
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section 32-09.1-02 provides, “a garnishment action brought pursuant to this chapter is
the exclusive procedure which may be used to execute on earnings of a debtor while
those earnings are held by a third-party employer,” and suggests the exemption under
section 32-09.1-03 is limited to garnishment. See Doc. 19 (citing N.D.C.C. § 32-09.1-
02). He also emphasizes that section 32-09.1-03 specifically refers to “earnings.”
According to the Trustee, upon deposit in the wage earner’s bank account, the funds
lose their character as “earnings” and transition into “monies.”4 Since neither section
28-22-18 nor section 32-09.1-03 include language allowing a claimant to exempt
“monies” or “earnings after deposit,” the Trustee claims these funds are not protected by
the exemption. The Court is not persuaded.
“Wages” is not defined in Chapter 32-09.1. Consequently, the Court considers its
plain, ordinary and commonly understood meaning. State v. Reese, 31 N.W.3d 644,
647 (N.D. 2025); N.D.C.C. § 1-02-02. Black’s Law Dictionary defines “wage” as:
Payment for labor or services, usu. based on time worked or quantity
produced; specif., compensation of an employee based on time worked or
output of production.
4 Citing to In re Palidora, 310 B.R. 164, 167 (Bankr. D. Ariz. 2004), the Trustee
urges the Court to find that the wage exemption protections cease when a debtor
receives his or her compensation. In re Palidora is distinguishable. While the court
held that “the Arizona wage exemption ceases to apply upon the debtor’s receipt of
those wages,” it relied on an opinion by the Arizona Court of Appeals which recognized
that under Arizona law “earnings” transform into “monies,” and that “monies” are not
protected by the Arizona exemption laws. Id. at 166–67. Arizona Revised Statute § 12-
1598.01(A), provides that, “earnings become monies … upon their disbursement by the
employer…” “Monies” is defined as including “cash, credit and accounts, but does not
include earnings as defined in § 12-1598, paragraph 4.” Ariz. Rev. Stat. § 12-1570(6).
The Trustee has not cited, nor has the Court identified, any North Dakota law that
similarly provides that wages transform into “monies” or fall outside the confines of
North Dakota exemption statutes upon receipt or deposit. Consequently, the Court
rejects the Trustee’s invitation to adopt the In re Palidora holding.
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• Wages include every form of remuneration payable for a given period to
an 	individual 	for 	personal 	services, 	including 	salaries, 	commissions,
vacation 	pay, 	bonuses, 	and 	the 	reasonable 	value 	of 	board, 	lodging,
payments in kind, tips, and any similar advantage received from the
employer. An employer usu. must withhold income taxes from wages.
Wage, Black’s Law Dictionary (12th ed. 2024). It also describes wages as “the
compensation paid or to be paid for services, whether computed by the day, week, or
month, or by the piece or job.” Id. (quoting Lindley Daniel Clark, The Law of the
Employment of Labor 45–46 (1911)).
Debtor’s compensation from his employer falls within the commonly understood
meaning of wages because he received payment for personal services. Under section
28-22-18, Debtor’s wages are exempt to the extent provided in section 32-09.1-03. See
N.D.C.C. 28-22-18. Section 32-09.1-03 allows Debtor to exempt 25% of his disposable
wages because wages are a specific form of earnings. In fact, wages are included
within the definition of “earnings” provided under Chapter 32-09. See N.D.C.C. § 32-
09.1-01(3).5
The Trustee’s claim that Debtor’s wages or earnings no longer qualify for
protection upon delivery to Debtor is likewise rejected. “Earnings,” by definition, include
money that has been paid to Debtor. See N.D.C.C. § 32-09.1-01(3). Similarly, the
commonly understood meaning of “wages” includes “compensation paid or to be paid
for services.” See Wage, Black’s Law Dictionary (12th ed. 2024).
Further, as this Court has held on several occasions, depositing wages in an
account with other fund sources, without more, does not change the wages’ exempt
5 “‘Earnings’ means compensation paid or payable for personal services, whether
denominated as wages, salary, commission, bonus, or otherwise, and includes periodic
payments pursuant to a pension or retirement program.” N.D.C.C. § 32-09.1-01(3).
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status. See e.g., In re Fandrich, 2008 WL 4610030, at *4 (Bankr. D.N.D. Oct. 16, 2008)
(emphasizing that “statutorily exempt funds—whether wages or otherwise—do not lose
their exempt status solely by virtue of deposit into a personal bank account.”) (citing
cases from six jurisdictions in support); see also In re Colling, 2003 WL 25273710, at *3
(Bankr. D. Idaho Feb. 20, 2003) (“it appears the Idaho courts would allow an exemption
in wages even where those earnings have been paid to the debtor and deposited in a
bank account, so long as the debtor is able to trace the source of the exempt funds
back to her wages.”); In re Norris, 203 B.R. 463, 466 (Bankr. D. Nev. 1996) (“A deposit
of the earnings, whether by the debtor or directly by the employer, should not cause the
statutorily exempt wages to lose their exempt status as long as the proceeds of the
account are traceable to those earnings.”; In re Platt, 270 B.R. 773, 776 (Bankr. D. Or.
2001) (under Oregon law, wages deposited remain exempt even after deposit).
While wages do not lose their exempt status immediately upon deposit,
commingling may result in exemption disallowance if tracing is no longer possible due to
an inability to identify the wages. In other words, “determination of whether wages
remain wages after they are deposited into an account hinges on whether the wages
can be traced and identified within the accounts.” In re Fandrich, 2008 WL 4610030, at
*4.
Debtor argues that the funds in the Single Account are derived from his earnings.
In support of this claim, Debtor testified that deposits bearing the name BankNorth are
wage deposits. While it is true that there are deposits from BankNorth into the Single
Account, the Court received evidence that the wage deposits are commingled with
funds from nonexempt sources in the Single Account. For example, Debtor testified that
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he received a 401k loan deposit on February 17, 2026, for $15,156.36. Additionally,
Debtor’s Single Account bank statement shows deposits from other nonexempt sources
such as Paypal, Venmo and a mobile check deposit. The Trustee met his burden of
showing that Debtor deposited his wages in the Single Account with other fund sources
of sums sufficient to raise a question regarding whether wages may be identified. This
evidence is sufficient to shift the burden of production to Debtor, who carries the burden
of tracing and identifying the source of all or part of the Single Account sum he seeks to
exempt.
The Trustee established that Debtor made no wage deposits directly into the
Joint Account. Rather, the evidence shows that Debtor transferred funds from the
Single Account to the Joint Account. Given that the Joint Account includes funds from
nonexempt sources, Debtor carries the burden of tracing and identifying the source of
all or part of the Joint Account balance he seeks to exempt.
2. 	Debtor met his burden of tracing $1,176.20 to wages in
the Single Account and $0 to wages in the Joint Account.
Bankruptcy courts typically employ one of three tracing methods: the lowest
intermediate balance test (“LIBT”), the percentage approach, and first-in first-out
(“FIFO”). The bankruptcy court in In re Tydings explained the methods:
The LIBT is typically applied where a debtor commingles his own funds with
funds he is holding in trust for another. If the account balance drops to zero,
the trust funds are lost and subsequent deposits are considered non-trust
funds. If the account drops to a balance less than the amount of trust funds,
but greater than zero, the trust funds are limited to the lowest intermediate
balance in the account. Thus, this test is based on the fiction that the debtor
would withdraw the non-trust funds first, retaining as much as possible of
the trust funds in the account. In re Marve, 484 B.R. 735, 738 (Bankr. N.D.
Ind. 2013)
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The percentage approach requires the determination of the exempt
funds to the account total when the deposit is made. That percentage is
then applied to the disputed funds (i.e., the balance in the account on the
petition date) to determine the portion of exempt funds and non-exempt
funds in the account. In re Ross, 2012 WL 3817792 (Bankr. S.D. Ind. Sept.
4, 2012). This method assumes that no intermediate deposits are made
between the initial deposit of the exempt funds and the petition date.
FIFO is a standard accounting method. The initial fact which must be
established is the balance in the account immediately preceding the deposit
of the exempt funds. In re Marve, 484 B.R. at 741. From there, FIFO
assumes that the first funds deposited in a commingled account are also
the first funds withdrawn from that account. Christensen v. Pack (In re
Christensen), 149 P. 3d 40, 50 (Nev. 2006).
In re Tydings, 2020 WL 1510025, at *3 (Bankr. W.D. Mo. Mar. 27, 2020), aff’d sub nom.,
Tydings v. Reed (In re Tydings), 2020 WL 5258457 (W.D. Mo. Sept. 3, 2020) (internal
citations altered).
Sections 28-22-18 and 32-09.1-03 do not provide a lookback period for the
exemption nor do they provide a specific tracing method. In such instances, courts
have discretion to “select the [tracing] method best suited to achieve a fair and equitable
result on the facts before them.” In re Bentley, 622 B.R. 296, 309 (Bankr. W.D. Okla.
2020) (quoting U.S. v. Henshaw, 388 F.3d 738, 741 (10th Cir. 2004)). The determination
is made on a case-by-case basis. In re Tydings, 2020 WL 1510025, at *2; In re Minc,
673 B.R. 206, 213–14 (Bankr. E.D. Mich. 2025) (“The Court agrees that of the various
possible tracing methods, the FIFO approach is appropriate in this case.”).
The Trustee and Debtor stipulated that the FIFO analysis should be applied in
this case. The Court agrees and finds that the FIFO tracing method ensures a fair and
equitable result for the parties based on the facts.
“The FIFO method allocates payments first to the unpaid amount of the oldest
purchase and then sequentially to the remaining debts in the order in which they were
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incurred[.]” In re McAllister, 267 B.R. 614, 624 (Bankr. N.D. Iowa 2001). This requires
an accounting of the order that the funds were deposited, the status of those funds as
they were deposited (wages or nonwages) and an attribution of withdrawals to the
deposited funds, with the first/oldest deposit reduced first. Id.
Neither the Trustee nor Debtor provided the Court with a tracing analysis.
Instead, they rely on the bank statements received into evidence. Consequently, the
Court prepared the attached Appendix, showing its analysis. See In re Minc, 673 B.R.
at 214 (conducted the court’s own analysis after determining it was “not satisfied with
either side’s FIFO tracing analysis.”).
1. 	Single Account
Debtor’s Single Account bank statement shows a beginning balance of $7,949.94
on January 31, 2026. Debtor failed to meet his burden of producing evidence that the
source of these funds was wages. Consequently, the Court begins with the premise
that the beginning balance is from sources other than wages. The Court also assumes
that all deposits from sources other than BankNorth are from nonexempt sources
because Debtor testified that deposits from BankNorth encompass all his wages.
As the Appendix shows, the Court deducted withdrawals from the beginning
balance until these funds were exhausted by a $2,400 withdrawal on February 18,
2026. It then deducted withdrawals from the wages deposited on February 11, 2026.
When these funds were exhausted on February 19, 2026, the Court began deducting
withdrawals from sources other than wages deposited between the first wage deposit
on February 11, 2026, and the second wage deposit on February 25, 2026. 	It took until
March 5, 2026, to exhaust these funds. On March 5, 2026, Debtor withdrew $2,159.58
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to pay for an expense at Window World. This transaction depleted the nonwage funds,
compelling the Court to look to the second wage deposit to fund part of this withdrawal.6
Consequently, the Court deducted $1,250.75 from wages deposited on February 25,
2026, leaving $1,176.20 in wages and a total account balance of $1,407.58. The wages
qualify as disposable earnings under section 32-09.1-03. After subtracting 25% from
$1,176.20 in disposable earnings under section 32-09.1-03(1)(a), Debtor is entitled to
exempt $882.15 under section 28-22-18.
2. 	Joint Account
Debtor’s Joint Account statement reflects a beginning balance of $1,691.49 as of
January 31, 2026. As with the Single Account, Debtor failed to carry his burden of
producing evidence that the beginning balance is derived from wages. Consequently,
the Court assumes the beginning balance is from sources of funds other than Debtor’s
wages.
From January 31, 2026, to March 6, 2026 (the petition date), Debtor and his wife
deposited $4,617.01 into the Joint Account from sources other than Debtor’s Single
Account. Debtor testified that his wages are only deposited into the Single Account.
Therefore, the Court finds that these deposits came from nonexempt sources.
From January 31, 2026, to the petition date, Debtor transferred a total of
$3,829.65 from the Single Account to the Joint Account. Under FIFO principles
applicable to both the Single Account and Joint Account, the Court finds Debtor failed to
meet his burden of showing that the funds transferred from his Single Account into the
Joint Account are traceable to wages. As the highlighted figures on the Appendix show,
6 For the purposes of this analysis, the Court did not consider transactions that
occurred on or after March 6, 2026, the petition date.
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20
each transfer from the Single Account to the Joint Account reduced the balance of
nonwage fund sources under the FIFO analysis. In other words, Debtor transferred no
wages to the Joint Account during the relevant time period. Debtor offered no evidence
to the contrary. The Trustee’s objection to Debtor’s exemption of funds held in the Joint
Account is sustained. Debtor’s $1,732.37 exemption under sections 28-22-18 and 32-
09.1-03 is disallowed.
III. 	CONCLUSION
For the reasons provided above, IT IS ORDERED that:
1. 	The Trustee’s objection to Debtor’s “head of a family” exemption is overruled.
Debtor’s $6,627.50 exemption in personal property under N.D.C.C. § 28-22-
03 is allowed.
2. 	The Trustee’s objection to Debtor’s exemption of $1,173.86 in wages
deposited in the Single Account is sustained in part and overruled in part.
Debtor is allowed an $882.15 exemption under N.D.C.C. §§ 28-22-18, 32-
09.1-03.
3. 	The Trustee’s objection to Debtor’s exemption of $1,732.37 in wages
deposited in the Joint Account is sustained. Debtor’s exemption of these
funds under N.D.C.C. §§ 28-22-18, 32-09.1-03 is disallowed.
Dated: October 9, 2026.
Shon Hastings, Judge
United States Bankruptcy Court
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Date Starting
Balance
Nonwage
Deposits
Wage
Deposits Withdrawals 1 - Nonwages 2 - Wages 3 - Nonwages 4 - Wages 5 - Nonwages
7,949.94	$ 7,949.94	$
1/31/2026 1,044.87	$ 6,905.07	$
2/1/2026 100.00	$ 6,805.07	$
2/2/2026 1,008.00	$ 7,813.07	$
2/2/2026 40.00	$ 7,853.07	$
2/2/2026 1,478.11	$ 6,374.96	$
2/2/2026 46.71	$ 6,328.25	$
2/3/2026 128.99	$ 6,199.26	$
2/4/2026 722.07	$ 5,477.19	$
2/4/2026 200.00	$ 5,277.19	$
2/5/2026 100.00	$ 5,377.19	$
2/5/2026 75.06	$ 5,302.13	$
2/5/2026 370.00	$ 4,932.13	$
2/6/2026 12.17	$ 4,919.96	$
2/6/2026 70.00	$ 4,849.96	$
2/8/2026 146.22	$ 4,996.18	$
2/9/2026 657.36	$ 4,338.82	$
2/9/2026 1,004.00	$ 5,342.82	$
2/9/2026 408.00	$ 4,934.82	$
2/9/2026 8.00	$ 4,942.82	$
2/9/2026 100.00	$ 5,042.82	$
2/10/2026 277.87	$ 4,764.95	$
2/10/2026 6.42	$ 4,758.53	$
2/10/2026 135.33	$ 4,623.20	$
2/11/2026 50.20	$ 4,673.40	$
2/11/2026 250.00	$ 4,423.40	$
2/11/2026 159.12	$ 4,264.28	$
2/11/2026 500.00	$ 3,764.28	$
2/11/2026 2,426.95	$ 2,426.95	$
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Date Starting
Balance
Nonwage
Deposits
Wage
Deposits Withdrawals 1 - Nonwages 2 - Wages 3 - Nonwages 4 - Wages 5 - Nonwages
2/12/2026 104.54	$ 3,659.74	$
2/12/2026 189.99	$ 3,469.75	$
2/13/2026 83.62	$ 3,386.13	$
2/13/2026 1,000.00	$ 2,386.13	$
2/13/2026 500.00	$ 1,886.13	$
2/16/2026 351.80	$ 351.80	$
2/16/2026 45.00	$ 1,841.13	$
2/16/2026 12.32	$ 1,828.81	$
2/16/2026 78.00	$ 1,750.81	$
2/17/2026 131.42	$ 483.22	$
2/17/2026 424.77	$ 1,326.04	$
2/17/2026 100.00	$ 1,226.04	$
2/17/2026 154.15	$ 1,071.89	$
2/17/2026 19.54	$ 1,052.35	$
2/17/2026 854.00	$ 1,337.22	$
2/17/2026 15,156.36	$ 16,493.58	$
2/18/2026 64.19	$ 988.16	$
2/18/2026 9.66	$ 978.50	$
2/18/2026 964.00	$ 17,457.58	$
2/18/2026 49.48	$ 929.02	$
2/18/2026 2,400.00	$ (1,470.98)	$ 955.97	$
2/19/2026 40.67	$ 915.30	$
2/19/2026 8,775.00	$ (7,859.70)	$ 9,597.88	$
2/20/2026 14.00	$ 9,583.88	$
2/20/2026 3,260.00	$ 6,323.88	$
2/20/2026 25.92	$ 6,297.96	$
2/20/2026 39.60	$ 6,258.36	$
2/20/2026 35.46	$ 6,293.82	$
2/20/2026 16.43	$ 6,277.39	$
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Date Starting
Balance
Nonwage
Deposits
Wage
Deposits Withdrawals 1 - Nonwages 2 - Wages 3 - Nonwages 4 - Wages 5 - Nonwages
2/21/2026 39.00	$ 6,316.39	$
2/21/2026 13.95	$ 6,302.44	$
2/21/2026 128.95	$ 6,173.49	$
2/21/2026 25.00	$ 6,148.49	$
2/22/2026 34.38	$ 6,114.11	$
2/22/2026 73.28	$ 6,040.83	$
2/22/2026 21.20	$ 6,019.63	$
2/22/2026 3.23	$ 6,016.40	$
2/22/2026 9.00	$ 6,007.40	$
2/22/2026 14.67	$ 5,992.73	$
2/22/2026 6.30	$ 5,986.43	$
2/22/2026 25.00	$ 5,961.43	$
2/23/2026 17.22	$ 5,944.21	$
2/23/2026 36.95	$ 5,907.26	$
2/23/2026 18.46	$ 5,888.80	$
2/23/2026 176.45	$ 5,712.35	$
2/23/2026 7.96	$ 5,704.39	$
2/23/2026 103.44	$ 5,600.95	$
2/23/2026 148.00	$ 5,748.95	$
2/23/2026 146.22	$ 5,895.17	$
2/23/2026 145.00	$ 6,040.17	$
2/23/2026 53.94	$ 5,986.23	$
2/23/2026 417.00	$ 5,569.23	$
2/24/2026 11.31	$ 5,557.92	$
2/24/2026 210.00	$ 5,767.92	$
2/25/2026 16.95	$ 5,750.97	$
2/25/2026 3.36	$ 5,754.33	$
2/25/2026 9.92	$ 5,744.41	$
2/25/2026 2,426.95	$ 2,426.95	$
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Date Starting
Balance
Nonwage
Deposits
Wage
Deposits Withdrawals 1 - Nonwages 2 - Wages 3 - Nonwages 4 - Wages 5 - Nonwages
2/25/2026 87.38	$ 5,657.03	$
2/25/2026 56.25	$ 5,600.78	$
2/26/2026 12.94	$ 5,587.84	$
2/26/2026 710.00	$ 4,877.84	$
2/26/2026 1,179.46	$ 3,698.38	$
2/26/2026 11.05	$ 3,687.33	$
2/27/2026 12.08	$ 3,675.25	$
2/27/2026 14.99	$ 3,660.26	$
2/27/2026 19.50	$ 3,640.76	$
2/27/2026 57.12	$ 3,583.64	$
2/27/2026 0.15	$ 0.15	$
2/27/2026 207.40	$ 207.55	$
2/27/2026 6.62	$ 3,577.02	$
2/27/2026 20.50	$ 3,556.52	$
2/28/2026 16.31	$ 3,540.21	$
2/28/2026 91.57	$ 3,448.64	$
2/28/2026 23.21	$ 3,425.43	$
2/28/2026 48.74	$ 3,376.69	$
2/28/2026 364.18	$ 3,012.51	$
3/1/2026 1,500.00	$ 1,512.51	$
3/1/2026 19.99	$ 1,492.52	$
3/1/2026 34.55	$ 1,457.97	$
3/1/2026 10.00	$ 1,447.97	$
3/2/2026 23.83	$ 231.38	$
3/2/2026 20.35	$ 1,427.62	$
3/2/2026 65.09	$ 1,362.53	$
3/3/2026 296.11	$ 1,066.42	$
3/3/2026 26.95	$ 1,039.47	$
3/4/2026 18.04	$ 1,021.43	$
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Date Starting
Balance
Nonwage
Deposits
Wage
Deposits Withdrawals 1 - Nonwages 2 - Wages 3 - Nonwages 4 - Wages 5 - Nonwages
3/4/2026 50.00	$ 971.43	$
3/5/2026 10.74	$ 960.69	$
3/5/2026 51.84	$ 908.85	$
3/5/2026 2,159.60	$ (1,250.75)	$ 1,176.20	$
0 0 0 1,176.20	$ 231.38	$
1,407.58	$
1,176.20	$
882.15	$
Ending Balances:
Total Ending Balance, as of 3/5/2026
Traceable To Wages
75% of Wages, Exempt
The figures highlighted represent Debtor's transfers to the Joint
Account.
There is also a deposit of $145 from Bank North on February 23 titled
"Expense Report." For purposes of this analysis, the Court did not
consider the deposit wages because all other wage deposits bear the
title "Payroll."
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