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In re Hanson

United States Bankruptcy Appellate Panel for the Eighth Circuit

January 6, 2017

In re: Sheri Lynn Hanson, formerly known as Sheri Lynn Alger Debtor
v.
Randall L. Seaver Trustee - Appellee Sheri Lynn Hanson Debtor - Appellant

          Submitted: December 8, 2016

         Appeal from United States Bankruptcy Court for the District of Minnesota - Minneapolis

          Before FEDERMAN, Chief Judge, SALADINO and NAIL, Bankruptcy Judges.

          SALADINO, Bankruptcy Judge

         The debtor appeals from an order of the bankruptcy court[1] sustaining the trustee's objection to an exemption claimed by the debtor. Specifically, the bankruptcy court held that a Minnesota property tax refund under Minn. Stat. Ann. § 290A.04 (West) is not exempt under Section 550.37 (Subd. 14) of the Minnesota statutes as "government assistance based on need, " following this panel's decision in Manty v. Johnson (In re Johnson), 509 B.R. 213 (B.A.P. 8th Cir. 2014). The debtor appeals, asserting that Johnson was implicitly overruled by a subsequent decision of the Eighth Circuit Court of Appeals in In re Hardy, 787 F.3d 1189 (8th Cir. 2015).

         For the reasons set forth below, we affirm.

         STANDARD OF REVIEW

         The panel reviews the bankruptcy court's findings of fact for clear error and conclusions of law de novo. Manty v. Johnson (In re Johnson), 509 B.R. 213, 214 (B.A.P. 8th Cir. 2014) (citing Addison v. Seaver (In re Seaver), 540 F.3d 805, 809 (8th Cir. 2008)). The bankruptcy court's statutory interpretation is a question of law that is subject to de novo review. Id. at 214-15 (citing Graven v. Fink (In re Graven), 936 F.2d 378, 384-85 (8th Cir. 1991)). Likewise, the allowance or disallowance of an exemption is subject to de novo review. Id. at 215 (citing Drenttel v. Jensen-Carter (In re Drenttel), 309 B.R. 320, 322 (B.A.P. 8th Cir. 2004)).

         BACKGROUND

         Bankruptcy debtors in Minnesota may choose either the federal exemptions or the exemptions provided under Minnesota and other federal law. Johnson, 509 B.R. at 215 (citing Martin v. Bucher (In re Martin), 297 B.R. 750, 751-52 (B.A.P. 8th Cir. 2003)). The debtor in this case opted to protect her assets under the Minnesota exemption provisions and claimed an exemption in a portion of a $1, 500.00 property tax refund as government assistance based on need. The bankruptcy court sustained the Chapter 7 trustee's objection to the exemption, stating that the precedent of Johnson and In re Padilla, 513 B.R. 116 (D. Minn. 2014), precluded a contrary ruling.

         Section 550.37 of the Minnesota statutes sets forth a list of property that may be claimed as exempt. Subdivision 14 of that statute in effect as of the petition date exempts public assistance, as follows:

Subd. 14. Public assistance. All government assistance based on need, and the earnings or salary of a person who is a recipient of government assistance based on need, shall be exempt from all claims of creditors including any contractual setoff or security interest asserted by a financial institution. For the purposes of this chapter, government assistance based on need includes but is not limited to Minnesota family investment program, general assistance medical care, Supplemental Security Income, medical assistance, MinnesotaCare, payment of Medicare part B premiums or receipt of part D extra help, MFIP diversionary work program, work participation cash benefit, Minnesota supplemental assistance, emergency Minnesota supplemental assistance, general assistance, emergency general assistance, emergency assistance or county crisis funds, energy or fuel assistance, and food support. The salary or earnings of any debtor who is or has been an eligible recipient of government assistance based on need, or an inmate of a correctional institution shall, upon the debtor's return to private employment or farming after having been an eligible recipient of government assistance based on need, or an inmate of a correctional institution, be exempt from attachment, garnishment, or levy of execution for a period of six months after the debtor's return to employment or farming and after all public assistance for which eligibility existed has been terminated. The exemption provisions contained in this subdivision also apply for 60 days after deposit in any financial institution, whether in a single or joint account. In tracing the funds, the first-in first-out method of accounting shall be used. The burden of establishing that funds are exempt rests upon the debtor. Agencies distributing government assistance and the correctional institutions shall, at the request of creditors, inform them whether or not any debtor has been an eligible recipient of government assistance based on need, or an inmate of a correctional institution, within the preceding six months.

Minn. Stat. Ann. § 550.37 (West).

         The asset that the debtor claimed as exempt under that statute was a property tax refund the debtor received under the State of Minnesota Property Tax Refund Act, Minn. Stat. Ann. § 290A.01, et. seq. (West). The stated purpose of the Act is "to provide property tax relief to certain ...


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