Dawndi Lee Duemey

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UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
In re 	: 	Case No. 05-67425
Dawndi Lee Duemey 	: 	Chapter 7
: 	Judge Preston
MEMORANDUM OPINION ON
OBJECTION TO DEBTOR’S EXEMPTION
This cause came on for evidentiary hearing on January 6, 2006, upon Trustee’s
Objection to Debtor’s Exemption (Doc. 8) and Debtor’s Response to Trustee’s Objection
to Exemption (Doc. 11). 	Present at the hearing were Christal Caudill as Chapter 7
Trustee (“Trustee”) and Michael Gunner representing Dawndi Lee Duemey (“Debtor”).
The Court has jurisdiction over this matter pursuant to 28 U.S.C. §1334 and the
General Order of Reference entered in this District. This is a core matter pursuant to 28
U.S.C §157 (b)(2)(A), (B) and (O).
This document has been electronically entered in the records of the United
States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
Dated: August 14, 2006
____________________________________________________________
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I. FACTUAL AND PROCEDURAL BACKGROUND
The facts relevant to this matter are without serious dispute and may be
summarized as follows: The Debtor filed a voluntary petition for relief under chapter 7
of the Bankruptcy Code on September 20, 2005. 	The Debtor disclosed her personal
property on Schedule B, which included, inter alia, a 2000 Ford Mustang (“Vehicle”)
having a value of $4800. 	The Debtor claimed the Vehicle exempt, utilizing four
exemption provisions of the Ohio Revised Code, as follows: 1) to the extent of $1,000,
pursuant to O.R.C. § 2329.66(A)(2), which authorizes exemption of one motor vehicle
not to exceed $1,000; 2) to the extent of $221, pursuant to O.R.C. § 2329.66(A)(4)(a),
which authorizes exemption of money or cash on hand in an amount not to exceed $400;
3) to the extent of $400, pursuant to §2329.66(A)(18), which authorizes exemption of any
property not to exceed $400 (often called the “wildcard exemption”); and 4) to the extent
of $3179, pursuant to O.R.C. § 2329.66(A)(11), which authorizes exemption the right to
receive spousal support, child support or other maintenance. The Trustee objected to the
Debtor claiming two exemptions in her Vehicle: 	1) her right to receive support; and 2)
money or cash on hand in an amount not to exceed $400.1
Prior to filing a voluntary petition under chapter 7, the Debtor was a party to a
domestic relations proceeding in state court involving the liquidation of child support
arrearages that were owed to her. 	The state court entered a Judgment Entry dated
February 3, 2005, wherein the court found that, pursuant to the agreement of the parties,
the Debtor’s former husband had liquidated his pre-existing child support arrearage by
1The Debtor acknowledges in her responsive pleading that Ohio Revised Code § 2329.66(A)(4)(a) pertaining to an
exemption of a person’s interest in cash on hand, money due and payable not to exceed $400 is inapplicable to the
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purchasing an automobile for Debtor, titled in her name. The subject Vehicle in which the
Debtor has claimed exemptions in this chapter 7 case is the same automobile the Debtor
received pursuant to the state court judgment entry acknowledging payment of the child
support arrearage claim.
II. DISCUSSION
Pursuant to Section 522(b) of the Bankruptcy Code, an individual debtor may
exempt specific property from the bankruptcy estate. 	In addition, individual states may
elect to “opt-out” or not authorize their citizens to assert the federal exemptions
delineated in Section 522(d) of the Bankruptcy Code. 	See 11 U.S.C. § 522(b)(1).
Pursuant to O.R.C. § 2329.662, the state of Ohio has elected to prohibit use of the federal
exemption scheme by Ohio residents. Accordingly, a debtor who is domiciled in the state
of Ohio is limited to electing exemptions enumerated in O.R.C. § 2329.66.
As stated previously, the Debtor in this case claimed in her Vehicle partially
exempt pursuant to O.R.C § 2329.66(A)(11). 	That section of the Ohio Revised Code
provides as follows:
(A) Every Person who is domiciled in this state may hold property exempt
from execution, garnishment, attachment, or sale to satisfy a judgment or
order, as follows:
(11) The person’s right to receive spousal support, child support, an
allowance, or other maintenance to the extent reasonably necessary for the
support of the person and any of the person’s dependents;
…
Ohio Rev. Code § 2329.66(A)(11). 	The Trustee argues that O.R.C. § 2329.66(A)(11)
pertaining to an exemption of a person’s right to receive child support, an allowance, or
subject Vehicle. Accordingly, the Court will only discuss whether Ohio Revised Code § 2329.66(A)(11) is a proper
exemption in this case.
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other maintenance has no application to a motor vehicle. 	The Debtor, however, argues
that the exemption claimed pursuant to O.R.C. § 2329.66(A)(11) is permissible because
the Vehicle was purchased for her as liquidation of child support arrearages owed to her.
Neither the Trustee nor the Debtor provided the Court with any cases directly on point in
this matter.
Courts interpreting O.R.C. §2329.66(A)(11) have held that the phrase “right to
receive” encompasses not only the right to receive future payments, but also the right
to receive past due payments. In re Edwards, 225 B.R. 726, 728 (Bankr. S. D. Ohio
2000) (citing In re Harbour, 227 B.R. 131 (Bankr. S. D. Ohio 1998) and In re Davis, 167
B.R. 104, 106 (Bankr. S.D. Ohio 1994)). 	This exemption is limited by statute to the
amount “reasonably necessary” for support. See O.R.C. §2329.66(A)(11). As articulated
by the Davis court, the phrase “right to receive,” as contained in the Ohio statute, consists
of “payments previously ordered, but not yet due, as well as payments due, but unpaid as
of the date of the bankruptcy filing.” In re Davis, 167 B.R. 104, 106 (Bankr. S.D. Ohio
1994). The phrase clearly contemplates an unmet obligation.
In the case at bar, the exemption in the Vehicle claimed by the Debtor is not
proper because the Debtor the Vehicle does not constitute child support payments that are
ordered, but not yet due or unpaid. The Debtor has instead claimed an exemption for
child support in an automobile that was purchased for her as settlement of a child support
arrearage claim. However, the obligation to pay child support has been met. There is no
longer an unmet obligation; the Debtor no longer has a right to receive the child support
arrearages which were liquidated with the purchase and delivery of the Vehicle to the
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Debtor. The Judgment Entry issued by the state court encompassing the resolution of the
debt owed to the Debtor for child support arrearage specifically states as follows:
In consideration thereof, the Court finds that the Plaintiff [Dawndi Lee
Duemey] has agreed that the Defendant [Scott J. Hull] has completely
liquidated his child support obligation to her and she waives any further
right to collect same. . . . [T]he Defendant [Scott J. Hull] is deemed to
have fully paid his pre-existing child support arrearage and the Child
Support Enforcement Agency shall adjust its records to reflect that the
Defendant [Scott J. Hull] owes no additional child support in this case.
Doc. 11, Debtor’s Response to Trustee’s Objection, Ex. A. 	Thus, the child support
obligation owed to the Debtor was paid or satisfied prior to the date of her filing
bankruptcy. Accordingly, on the date the Debtor filed this bankruptcy case, she was not
entitled to child support payments previously ordered, but not yet due, or payments due,
but unpaid.
The Court was not able to find any Ohio cases addressing the issue of whether the
exemption for the right to receive child support extends to personal property purchased
by the child-support obligor for the child-support obligee in lieu of payments in the form
of money. 	Notwithstanding, the case of In re Russell, 163 B.R. 584 (Bankr. D. Idaho
1994), provides some helpful analysis. The Russell court discussed and analyzed the
breadth of the child support exemption as provided for by the State of Idaho.2 	Even
though the language contained in Idaho’s exemption statute is notably much broader than
Ohio’s, the court’s reasoning in Russell is still insightful. The Russell court determined
2 The Idaho exemption provides as follows:
(1) An individual is entitled to exemption of the following property to the extent reasonably
necessary for the support of him and his dependents:
(b) money or personal property received, and rights to receive money or personal property for
alimony, support, or separate maintenance;
. . . .
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that Chapter 7 debtors may not exempt real property transferred to the debtor in
satisfaction of past due child support under an Idaho statute exempting money or personal
property received for alimony, maintenance, or support. 	In Russell, the transfer of real
property was in satisfaction of past due child support, not present or future child support,
and was nothing more than reimbursement of funds already expended. 	Id. 	The court
ultimately determined that the real property was not exempt because it was not
reasonably necessary for the support of the debtor’s dependents. 	Id. at 585. 	The Idaho
statute defined “reasonably necessary” as being “‘property required to meet the present
and anticipated needs of the individual and his dependents.” 	Id. at 585 (quoting I.C.
§ 11-604(2)) (emphasis in original). Though the Russell case is distinguishable from the
instant case on numerous points, the reasoning of the court in concluding the exemption
was not allowable provides some guidance. The Russell court stated as follows:
This result is in accord with the equitable principles underlying
bankruptcy. A debtor with a limited income who is owed, but does not
receive, child support, has to apportion the income among various
obligations. One set of those obligations are the present, necessary needs
of the children. The debtor will either pay such creditors out of his or her
own pocket, or will obtain credit. If the debtor pays for such needs out of
his or her own funds, the debtor will not have those assets to satisfy other
creditors. Because the unpaid debts will be discharged in bankruptcy,
these creditors who receive less ultimately bear the burden of the missing
child support payments.
Similarly, if the debtor obtains necessities for the children through an
extension of credit, the creditor does not receive payment. The debt will be
discharged in bankruptcy, and those creditors who extended credit will
again bear the ultimate burden of the missing child support payments.
Any other result would create the opportunity for fraud. A debtor
I.C. § 11-604(1)(b). The exemption statute in Idaho specifically provides for the exemption of the right to receive
and/or the receipt of personal property, whereas the exemption statute in Ohio simply exempts the right to receive child
support and does not indicate the form (i.e., money or personal property).
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receiving child support could immediately deposit each monthly payment
in a segregated savings account, and pay for the children's needs out of his
or her own pocket. On filing a petition for relief under the Bankruptcy
laws, the debtor could claim the entire savings account as exempt,
regardless of its size. The debtor would have been permitted to exchange
his or her non exempt assets for assets subject to an unlimited exemption,
at the expense of the creditors. From an economic perspective, this is no
different from the present situation of the debtors.
Id. 	This analysis is significant in the fact that the Russell court acknowledged that
allowing the debtors to claim the exemption in the real property would likely create
fertile ground for possible fraudulent activity.
If the Debtor’s argument in the case at bar is carried to its logical end, a debtor in
bankruptcy could ultimately create exemptions that otherwise are not contemplated by
the exemption statute. For example, pursuant to the Ohio Revised Code, an individual is
entitled to a $5,000 exemption in his or her residence. 	See O.R.C. § 2329.66(A)(1)(b).
What then would happen if a debtor received a lump-sum settlement for a child support
arrearage claim in an amount of $6,000 and used the same as a down payment to
purchase a residential home? 	Would the debtor then be entitled to an additional $6,000
exemption in his or her residence? 	This Court thinks not. 	If the Ohio Legislature had
intended for Ohio Revised Code Section 2329.66(A)(11) to make any property purchased
with support payments exempt from creditors, it would have so provided. 	The Ohio
Legislature could have easily inserted language in the statute that would provide for the
extension of the exemption to property purchased with the support payments or in lieu of
making support payments, but it chose to not do so. 	The Debtor, in this case, essentially
is arguing that if, at some point, certain funds qualify for an exemption, then any property
purchased with those funds is also entitled to the exemption regardless of the form to
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which the funds have been converted. This Court, however, has determined that at some
point the child support exemption cannot be extended to other property, especially if the
support payments have changed significantly in character and form so as to constitute a
completely different type of asset.
The United States Supreme Court enunciated a “qualities of moneys” test in
Porter v. Aetna Casualty & Surety Co., 370 U.S. 159 (1962) for determining the exempt
status of disability benefits. 	In Porter, disability benefits were paid to an incompetent
veteran and the same were deposited into a savings and loan account for his benefit. 	A
judgment creditor attached the veteran’s financial accounts, one of which was the savings
and loan account containing the disability benefits. The Court had to determine the issue
of whether benefits paid by the United States Veterans’ Administration retain their
exempt status after being deposited in a savings account. The Court held as follows:
The Congress, we believe, intended that veterans in the safekeeping of
their benefits should be able to utilize those normal modes adopted by the
community for that purpose — provided the benefit funds, regardless of
the technicalities of title and other formalities, are readily available as
needed for support and maintenance, actually retain the qualities of
moneys, and have not been converted into permanent investments.
Id. at 162 (emphasis added). Though the Porter case did not involve a debtor claiming an
exemption in a bankruptcy proceeding, the Supreme Court’s process for determining
when and if exempt funds lose their exempt status is particularly instructive in the instant
case because the child support payment received by the Debtor (i.e., a vehicle) did not
retain the qualities of moneys so as to entitle the Debtor to claim an exemption in it.
Once the child-support obligor converted the funds or monies owed to Debtor into a
permanent investment, the Vehicle, the child support exemption no longer applied. 	As
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stated earlier, to hold differently would open the door for exemptions being claimed
beyond the scope of the statute as enacted or contemplated by the Ohio Legislature.
Based on the foregoing, the Court finds that the Court finds that the exemption
claimed by Debtor in the Vehicle is not proper. 	The Trustee’s objection to claim of
exemptions must be sustained. 	A separate order will be entered consistent with the
foregoing.
IT IS SO ORDERED.
Copies to:
Dawndi Lee Duemey, 2-A Clinton Road, Mount Vernon, OH 43050
Michael T. Gunner, Attorney for Debtor (Electronic Service)
Christal L. Caudill, Chapter 7 Trustee (Electronic Service)
Office of U.S. Trustee (Electronic Service)
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