Dist. Ct. did not err in affirming Bankruptcy Ct. order that sustained Trustee’s objection to debtors’ claim for $30,000 exemption arising out of one debtor’s interest in Trust proceeds given to her after her parents had deceased. Language in Trust gave debtor vested right to one-third of trust residuum 60 days after her father’s death, which was prior to time debtors filed their Chapter 7 bankruptcy petition. As such, said Trust proceeds became part of bankruptcy estate subject to distribution to debtors’ creditors. Fact that instant issue was resolved via Trustee objection rather than as separate adversary proceeding did not require different result, since Trustee was merely responding to debtors’ own contention that proceeds were exempt from bankruptcy estate under section 522, as opposed to more accurate contention that Trust proceeds fell under section 541(c)(2) as property that was excluded from bankruptcy estate altogether.
Federal 7th Circuit Court
Civil Court
Bankruptcy