Chapter 7 Debtor Can Lose Right To Amend Schedules

If the debtor and his attorney screw up the debtor's exemption on his bankruptcy schedules the attorney usually can fix the problem by amending schedules. A bankruptcy court found that the right to amend can expire at some point in the bankruptcy case where the debtor and his attorney wait too long to amend. The particular case involved a Chapter 7 bankruptcy in which the debtor claimed the $4,000 wildcard exemption as to his personal property. The problem was that the debtor's exemption schedule also listed his house as being exempt under the Constitutional homestead exemption. The debtor's property schedules claimed the house was upside down. If your house has no equity you do not usually need to claim a homestead exemption; you can't exempt 0 value. The problem was that debtor who list a homestead exemption cannot also claim a $4,000 wildcard exemption. The trustee is this case pounced on the debtor's error and filed a motion to compel the debtor to turn over personal property the debtor had claimed under the wildcard exemption because he had no right to a wildcard exemption having also claimed homestead exemption on his schedules. The debtor did not respond to the turnover motion, and the court entered the turnover order against the debtor. The debtor finally figured out the problem. He submitted amended bankruptcy schedules omitting the homestead exemption of the upside down house and reasserting the wildcard exemption. Too little, too late. The court said that while generally the courts have no discretion to deny a debtor's right to amend schedules at any time during a case, there are exceptions. One such exception is the doctrine of claim preclusion, or collateral estoppel. The court said that its turnover order was a final and non-appealable order. The debtor could have amended schedules in response to the trustee's motion for turnover, but the debtor did not take advantage of that opportunity. Once the court's turnover order became final the debtor could no longer amend and asset a defense even though the bankruptcy case had not been closed. The issue also could not be raised through motion for rehearing. 8:09-bk-29815.

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