didn't even notice the names on the briefs if i'm not mistaken i am married to many years ago is that correct yes ok i mean you before and i prefer when you're married that's right yes there's a difference yes that's true that's true that may please the court i have eleven minutes and four minutes before rebuttal my name is john steinberger and representing the appellate in this matter a brief history of the facts in this case my client were represented in a chapter seven bankruptcy filed in the nov eighteenth twenty eleven and at that time she found she had a worker's compensation claim she disclosed that claim on her schedules and in men and exempted that under amount at that time because depend on how long she was disabled into the future also depend on what medical might be there so she didn't know what their claim was she could have benefits or is a one lump sum of settlement but my question is i understand how she would not have known really had no idea about the value of the claim but and i am not an expert on bankruptcy law but my understanding is that the exemption that she claimed would have had a maximum amount is that correct or not that is correct your honor and that is a point that their time was a little over ten thousand dollars and five hundred so could she have claimed other exemptions at the time that would have exceeded whatever the exemption is that she wanted to amend could she have claimed it at the time yes she could she could have claimed two other exemptions eleven u s c five twenty two d town and eleven one provides for disability which is what this claim was essentially and the one was basically more of a personal injury or loss of wages so she could have done that at that time it was an error not to do it at that time and it wasn't brought to our attention until much later in the case which wreck as far as i know no that's not correct the trustee only monitored the claim the trustee never was appointed never appointed the workers compensation or authorized him to to handle the claim he just contacted them and we weren't even aware of that he sent a letter to the worker's compensation attorney saying please keep us involved in this and they monitor the claim every three months they did not settle it because they would have had to ask for authorization from the court to have settled it and they never did that  within eight days of learning that our exemption wasn't didn't satisfy the amount of this claim which we had known at the beginning we immediately amended our claim to claim the ones that would allow for the  was opened at that time there were some exceptions to allowing amendments at the time that we did that under the lucius case and that was a debtor could amend at any time unless there was concealment or bad faith none of those issues existed at the time that we amended arc our case what other some other lower courts had also indicated that prejudice would be one of the reasons that would reliance on whatever claims we had made them out of this is probably a question for your well the house counsel but what steps allegedly have the creditors taken which prejudiced their interest to you and your knowledge that creditors weren't even aware that this claim was out there they took no steps as far as we know because they weren't even notified that there were assets available to be distributed so there was nothing their creditors could have taken or would have taken because they weren't even aware of the claims like we were arguing that there is no prejudice to the creditors yes you're in is there any indication that the trustee might of try to hold out from a larger settlement or anything like that no there's no indication of that and the reason there's no indication of it was a cruise trustee wasn't the one who was trying to settle the case it was just the workers compensation  attorney in the matter and my client who accepted the settlement wasn't that the trustee the trustee consented to the settlement the trustee didn't accept the settlement it was negotiated and that the attorney for the case couldn't have accepted that without my client saying this seems worthwhile to me i will take this at this point it was my client not the trustee ok and then you want to discuss we can say sometimes go ahead  boy i'm not sure that last statement though is it's completely accurate that under the bankruptcy statute because in a chapter seven the trustee i but i think that the statement as broadly as you expressed it is not entirely legally correct i think there firstly could have objected that but but the trustee didn't say you know do you disagree that the trade that the claim belonged to the estate when the state is enlarged as the trustees seeks to do here who profits from that the creditors obviously would get a somewhat bigger distribution depending on how much it is obviously right if that's in the estate does the trustee also profit from it enlarging the  yes the trustees compensation is based on the amount that is recovered there's a certain percentage is would have an interest incentive to increase the size of the estate yes well that reason as well system itself a based upon the size of the estate i don't i don't believe so and then in the case of the i think it's funded solely from the filing fee and not from the property that would decided just at the point that we had filed this appeal and at that point the supreme court ruled that courts do not have a new pair any inherent power to deny an exemption or an amendment to exemptions and the supreme court held that no matter what ever equitable powers remain with the bankruptcy court they can only be exercised within the confines of the bankruptcy code eleven us c five twenty two does not give discretion to grant or withhold exemptions based on whatever considerations a t t deem appropriate and the statute exhaust exhaust to fully specifies the criteria that asset however the siegel court said the supreme court said no you cannot deny exemptions based on debtors conduct or bad faith it can only be based on statute or no claim of bad faith or misconduct on the part of the the trustee or the debtor right now there was never any claim there it was or this claim seems to now and john prejudice good afternoon james talking appearing on behalf of the bankruptcy trustee cajun lim i want to just ask you a question at the outset tell me when one reads what was the rule one thousand nine and and reach the holding and law how do you not lose your honor we're taking the position that if this case were before the supreme court it wouldn't have been a nine to lien on property and you know committed filing a petition with statements of financial affairs are incorrect you know you have to read the supreme court opinion and obviously the facts of this case are not the same as the facts of that case never are  correct but the precipice stated by the supreme court's going to be pretty clear well that the holding in the case is that the that the court doesn't have the authority under one hundred five of the bankruptcy code which is the general powers of the court that the bankruptcy court doesn't have the power to make a ruling that contravenes some other expressly written rule elsewhere in the bankruptcy code so the holding in law versus siegel is that property of the debtor that exempts cannot be used to pay the administrative the the amendment is to be allowed it any time before the case is closed as a matter of course ok so that's kind of the magic language there is as a matter of course this amendment is within that framework well square right because you don't contest that her amendments of the schedules came before the case was closed correct ok so you're going with me absent mark where soche correct your honor and so what you want to move on to the next section you want to go to point at which the debtor will no longer be permitted to file an amendment if if i were representing a trustee were to sell somebody's home presumably there would be a remedy for well we don't have any case where it's all happened already and everybody's got their money and now we have to go back and recover the rest of it you know i have a restitution that's not this case as i would that's not this case with what is this case is that the the bankruptcy court is in the position to determine when an exemption should no longer be permitted that it would have if you're a you say that three is the overlay that favors you i want to hear about that as a rule four thousand and three says that the when the trustee or we know when the debtor files an amendment to the trustees in any party in interest is given thirty days to file a response or objection and that objection can relate to you know any filing of an objection can't be the thing that saves it so tell me what it is about that your honor if the trustee were to administer property if the debtor can amend if we were to take rule one thousand and nine at its face and she can amend it any time th be in a position so the last argument you're making that some other facts that could have happened when they come to the courts will have to deal with that but that's not what we've got we've got a situation is perfectly within the rules  e i think what you're arguing is against an absolute rule that says that an amendment can be made at any time under any circumstances is that what you're saying frex we're we're absolutely fi mad as to be the court the bankruptcy court is empowered to make those determine ok so there are many types there are many types of amendments is that correct sure ok not all of them would implicate and a statutory mandatory exemption certainly you know the debtor could amend their address on the petition the debtor could perhaps add a creditor to schedule if so there are amendments that i don't think would necessarily impact administration the case but something where the where the trustee has got a statutory duty to do or in their amendments that would affect the administration of the case that would not involve in or exemption a clear exemption i don't believe sawyer so any amendment that would affect the administration of the case is this type of  amendment from what i'm thinking at this point i would say yes because the trustee is the trustees job is to look at what what what the value of the assets are and what's been exempted and not exempt it's all from the trustee standpoint you know that the trustee has to get in there and liquidate the nonexempt property so that's the most important thing as far as you know might i add it is get these i'm sorry what about adding debts well if if would that be an amendment i'm asking you i don't know if they were to add a schedule f general unsecured credit to the case you know that is certainly permitted the creditor in that case does receive an opportunity to object to the debtors discharge or you know certain certain of the the rule the deadlines expired for everybody else earlier in the case you know that creditors and subject to those but there are there are provisions in the coal where in amendments come through that aren't is don't have this kind of impact in this particular case at the time that the petition was filed the workers compensation attorney had already made an offer to the debtors employer taco bell he said give us twenty five thousand dollars and we'll get out of here so the offer for twenty five thousand dollars was pending at the time that the case was in infant anybody but if that's the twenty five thousand dollars the trustee took the position that hey twenty five thousand dollars is approximately fifteen thousand dollars more than she's exempted will take fifteen thousand dollars and use that to pay the schedule of creditors and so we  to that settlement so it isn't a situation where the trustee we didn't engage in negotiations they have that a finding of prejudice should have included of finding that the the the workers comp attorney could have gotten more i mean on what basis have you been prejudiced if she was entitled to this money to begin with well the case has been pending world before this appeal we had monitored the proceedings for approximately thirteen months you know we contact kept the case open we contacted the debtors workers compensation attorney you have reason to believe that you could have got more than twenty five thousand we believe the twenty five thousand was a good settlement in the case been how were you prejudiced well because we prejudice is whether or not the estate has been present in this case the the case law in that we were talking about previous siegel was the prejudice to the creditors or prejudice to the estate in this particular position in this particular case we've taken the position that having the the amendment this late in the bankruptcy court found no good reason why she didn't claim it at the beginning i know she made it was a mistake right and the district court agreed ok let me there's no question that she is an idle to this exemption this is not a case where you might have litigated her in title meant to that it's clear it's incontestable she was entitled to this exemption hopefully your honor at the time she filed the case she invoked a statute statutory exemption that had a maximum ok you as the trustee therefore assumed that you would get the excess ok now you saying that prejudice is defined as simply getting less there must there be some harm that came from the fact that she did not file this initially do you understand the question i'm asking you all are where you're going so answer the question first are you saying that prejudice simply means that these state gets less no ok so we have to find some prejudice that you were somehow harmed by the late filing of this amendment that she didn't put it in initially how were you harmed trustee kept the case open for one year and four months monitoring the case contacting the the you know staying on top of it with the worker's compensation attorney also the cost of and what was the consequence of that what happened well the consequence of that is that we were successful in getting the the case subtle for the twenty five thousand dollars when they accepted the twenty five i'm sorry i don't know what you mean by you were successful in getting it settled the worker's comp attorney handled that you made the offer you know he's part of it he's part of he would be part of  don't i understand that i'm asking you what was the prejudice how would it have been different for you and the creditors had the initial filing claimed the full amount we would have we would if with the with the knowledge that a twenty five thousand dollars offer was pending and was recommended by the council had they claimed all the exemptions we would have father no asset report and close the case two years ok now  how did that harm you what were the financial repercussions of doing that you state incurred the costs of the administration of this case attorney's counsel fighting the ok now how aren't you rick aren't you compensated for that did you lose that money or did it come off the top we have received nothing because right now he's amended and he's ok so what happens let's say the judge said well that's the prejudice and we're going to do something about it administrative expenses and how much is that i don't have a number in front of me at this point but did the judge do that not a not it at the bankruptcy court now ok so how do we know what those expenses are how do we less that the bridge well in this particular case the creditors are receiving nothing but we're going to get nothing anyway you just said the wealthy if if the amendment is disallowed and they don't and they're going to receive their distribution that's not prejudice you admitted that that is not prejudice well in this case it's has to hinge on the on the administrative expenses ok so forget about them so it's the administrative expenses and that's what judge merrick just asked you so you're saying that the lawyers and the trustee aren't going to get their money bet so she doesn't is that what happens that i don't get as much pay we're going to receive not all nothing's sad is that the way it works that if the if the exemption if there are no because opposing counsel indicated you know that we've got this great financial gain the trustees compensation is based on what is paid to general unsecured creditors and my compensation is counsel for the trustee is based on what gets paid in the general unsecured creditors so we don't amend right well other other than the fact that we routinely object on these late this isn't the first time this issues come up and we know we go to court and we went on that and then we administer the assets so at the time that we filed that to having suffered some sort of a work in injury why it why is it more equitable that she have to pay you as opposed to just you know what there was a mistake well in this case you know she received amount so she didn't receive nothing out of the claim she received like ten thousand i believe was ten thousand five fifty which was just anybody would get even somebody who had been injured at work well it's a little more complicated than that because she would the d five is a wild card exemption and so if she had a lot of money in the bank maybe she would have received as much the bigger zip code under defy basically says that the time this case was father believe the number was eleven thousand nine hundred seventy five so that she would be permitted to keep that much in total assets based on the other things that she had she was and she was eligible to apply like ten thousand five fifty to this particular claim but it would be different for a debtor with a large checking account or some other asset that needed to use that exemption right or time's up thank you truck if we had been aware of it we would have definitely amended we had no interest in you know in all in letting this mistake continue but if you had been aware of it we want to we're of it we weren't aware of it until he contacted us on march nineteenth who wasn't aware i was not aware aware of what aware that i mean you know the exemption that we took was not  sufficient to cover the amount of the entire claim there was the incorrect you know it wasn't all the exemptions that we should have taken at that time that we had filed the case ok but that's that's my point did you know that you know that there was a worker's comp claim yes and apparently there had been an offer to accept twenty five thousand we did not know that ok did you speak to the lawyer to find out the value of the asset at all and we asked our client and she said it was pending and she had no idea  what the amount was ok would anything have prevented you from just claiming in exemptions for that settlement no we should without that was the error in the case we should the ten and eleven from the outset and we want to wear that we hadn't claimed the ten and eleven until we got the call from the from the trustees saying you made a mistake you know you're saying this was more of a clerical mistake you intended to claim it and you didn't correct courts cannot deny an exemption well what happens then i mean if this is an absolute rule that you can't didn't i sort of a late amendment that adds an exemption what happens to a case that's been basically totally it ministered except for that last order well i think it depends on the facts of those cases in the supreme court said that there are remedies under under the law for those types of situations for denial of discharge for bad paid conduct for the inherent powers of the court to do certain things but denying an exemption is basic basically that's the that's the powers the courts have for potentially cause for unnecessary litigation but for nothing else the single case sort of reforms the principle that specifically stated in the code there's no reason to deny an exemption thank you both