UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF VIRGINIA

Alexandria Division

In re:

 Kim-Oanh Rife

 

Case Number 19-13910-KHK

Chapter 7

Debtor's Response to Trustee's

Objection to Exemption

Debtor Kim-Oanh Rife has no basis to oppose Trustee's 

Objection to Exemption.

Trustee Donald King states the obvious. The tenancy by 

entireties exemption of protects entireties property from non-joint 

creditors. That's true by its terms; Trustee's objection is in the nature

of seeking a comfort order.

Trustee King's objection, though, serves a very important 

purpose. It signals the intention of the trustee to pay through 

Ms. Rife's Chapter 7 case the joint tax liability of the Debtor and her 

husband, James Newton, which is already being paid through the 

husband's confirmed plan, in his Chapter 13 case. (Newton, James L 

C13 #18-13046-BFK.)

Debtor's Response, pg 1 of 6.

Case 19-13910-KHK Doc 20 Filed 03/09/20 Entered 03/09/20 21:00:52 Desc Main

Document Page 1 of 6
What is The Joint Tax Liability?

The IRS Proof of Claim in the Newton case shows $78,264.38 in

secured claims and $11,158.44 priority. Those are scheduled to be 

paid in full (the secured portion at 5% interest) through the Newton 

Chapter 13 case. As of 2/19/2020, Trustee Thomas Gorman's interim 

report shows just under $25,000 has been paid to the IRS so far. 

(Secured $24,261.20; priority $656.70.)

The IRS also scheduled $273.47 general unsecured. Chapter 13

Trustee Thomas Gorman has that scheduled to be paid $16.41.

Is There Cause for Relief from Stay?

At some point, Trustee King would come into the James 

Newton Chapter 13 as a joint owner of the estate property, seeking 

relief from stay in order to sell that estate property.

Is there cause for relief from the stay? 

Because the code has no definition of cause, relief from stay is 

at the discretion of the bankruptcy court, on a case by case basis. 

Usually the co-owner is granted relief, Especially when the debtor is 

depriving the co-owner of the benefit of the co-ownership.

Here Trustee King would be proposing to use his co-ownership 

to to pay the debts that Newton is already paying. While the Trustee 

is certainly acting appropriately to take actions that generate 

commissions, that benefit to the Trustee is not cause to sell. The 

Debtor's Response, pg 2 of 6.

Case 19-13910-KHK Doc 20 Filed 03/09/20 Entered 03/09/20 21:00:52 Desc Main

Document Page 2 of 6
Trustee is standing in the shoes of the real party at interest, the IRS. 

What's the benefit to the IRS?

The IRS, the real party at interest, is not deprived. The IRS is 

obtaining benefit right now from its secured interest in the the equity

in the real estate.

Because of the equity, and the recorded tax liens, the IRS claim 

of $78,000 is being paid 5% interest in the Newton Chapter 13.

The IRS would be paid more quickly at a Chapter 7 liquidation, 

But they are getting payments, with 5% interest, now. The IRS is not 

suffering irreparable harm as a result of their treatment in Newton's 

Chapter 13.

What is the Trustee's Fiduciary Duty?

Slightly different factors constrain the Trustee's course of 

action in the pending Chapter 7 case.

A chapter 7 trustee’s duties include “collect[ing] and reduc[ing] 

to money the property of the estate for which such trustee serves, and

close such estate as expeditiously as is compatible with the best 

interests of the parties in interest[.]” 11 U.S.C. § 704(a)(1) 

(emphasis added). Skubal v. McCarthy, Civil No. 1:17-cv-936 

(AJT/TCB), Docket No. 10, p. 11.

The central insight of the Skubal is that the debtor is one of the

parties at interest for whom the Trustee owes a duty. Of course in the

Skubal case the court ultimately held that paying a debt, even a nonDebtor's Response, pg 3 of 6.

Case 19-13910-KHK Doc 20 Filed 03/09/20 Entered 03/09/20 21:00:52 Desc Main

Document Page 3 of 6
dischargable debt, is a benefit to the debtor. 

Here, though, any benefit to the debtor is far more attenuated. 

The debt is non-dischargable. The debt is secured. The debt is being 

paid.

Here, at some point, the court will need to weigh that 

attenuated benefit against an enormous loss. Kim-Oanh Rife will 

suffer an enormous loss of exempt equity: legal fees in obtaining relief

from stay—if obtained—in the Newton case, real estate commissions, 

trustee commissions, and legal fees in the sale of the property. 

That loss—maybe $50,000—is balanced against the interest of 

the IRS in obtaining payment in late 2020, or early 2021, as opposed 

to being paid at interest, between now and 2023.

Finally, the interests of James Newton factor into the analysis 

for a second time. Similar to his interest in the relief from stay 

question, James Newton appears again as co-owner of property in a 

proposed sale under 11 USC § 363(b)(1). To prevail, Trustee King 

must show that the benefit to the estate outweighs the determent to 

Newton. The estate is the money needed to pay IRS claim which 

Newton is currently paying under the confirmed plan in his Chapter 

13—it's hard to see how the benefit to that estate outweighs the 

determent to James Newton, who is in fact paying.

Of Course Most Chapter 13's Fail

It is legitimate to ask what happens to the IRS if Newton's 

Debtor's Response, pg 4 of 6.

Case 19-13910-KHK Doc 20 Filed 03/09/20 Entered 03/09/20 21:00:52 Desc Main

Document Page 4 of 6
Chapter 13 plan fails. The IRS retains their security interest. The 

IRS debts remain non-discharged as to both Kim-Oanh Rife and 

James Newton. And the IRS is still able to look to the equity cushion 

in the real estate of over $130,000. 

A Helpful Analogy 

Married Debtors often come into Chapter 13, with entireties 

real estate equity and no joint unsecured debts. They might have a 

joint secured debt, such as a car. No one suggests the Chapter 7 

Trustee can sell the entireties real estate to pay off the car—even if 

the car is under-secured by three or five or ten thousand dollars. 

The duty of the Trustee to fair dealing with the debtors 

precludes that over-reaching. Essentially the same analysis applies 

here. 

Respectfully Submitted

KIM-OANH RIFE

 By /s / Ro b e r t R. W eed 

Law Offices of Robert R. Weed

 Robert R. Weed, VSB #24646

Attorney for Kim-Oanh Rife

13800 Coppermine Rd

Herndon VA 20176

Phone: 703-335-7793

robertweed@robertweed.com

Debtor's Response, pg 5 of 6.

Case 19-13910-KHK Doc 20 Filed 03/09/20 Entered 03/09/20 21:00:52 Desc Main

Document Page 5 of 6
Certificate of Service

I certify that I served a copy of the foregoing, by electronic means 

through the ECF system, on Donald F King, Trustee and on the Office of 

the US Trustee on March 6, 2020.

 By /s/ Rober t R. Weed 

Debtor's Response, pg 6 of 6.

Case 19-13910-KHK Doc 20 Filed 03/09/20 Entered 03/09/20 21:00:52 Desc Main

Document Page 6 of 6