By order of the Bankruptcy Appellate Panel, the precedential effect

of this decision is limited to the case and parties pursuant to 6th

 Cir. BAP LBR 8013-1(b). See also 6th Cir. BAP LBR 8010-1(c).

File Name: 08b0002n.06

BANKRUPTCY APPELLATE PANEL OF THE SIXTH CIRCUIT

In re: WILLIAM DANIEL AZBILL,

Debtor.

WILLIAM DANIEL AZBILL,

Appellant,

v. No. 06-8074

L. CRAIG KENDRICK, Trustee,

Appellee.

Appeal from the United States Bankruptcy Court

for the Eastern District of Kentucky, Covington Division.

No. 98-21474.

Argued: November 14, 2007

Decided and Filed: March 11, 2008

Before: GREGG, PARSONS, and WHIPPLE, Bankruptcy Appellate Panel Judges.

____________________

COUNSEL

ARGUED: Cynthia L. Effinger, SEILLER WATERMAN, Louisville, Kentucky, for Appellant.

Brian M. Ellerman, ADAMS, STEPNER, WOLTERMANN & DUSING, Covington, Kentucky, for

Appellee. ON BRIEF: David M. Cantor, Amber E. Trbonja, SEILLER WATERMAN, Louisville,

Kentucky, for Appellant. Dennis R. Williams, ADAMS, STEPNER, WOLTERMANN & DUSING,

Covington, Kentucky, for Appellee. 
2

____________________

OPINION

____________________

MARCIA PHILLIPS PARSONS, Chief Bankruptcy Appellate Panel Judge. After William

Daniel Azbill (“Debtor”) received a discharge and his chapter 7 case was closed, he filed suit in state

court to collect the proceeds of a certificate of deposit that he had not disclosed as an asset in his

bankruptcy case. When the United States trustee learned of the suit, he had the Debtor’s bankruptcy

case reopened. The appointed chapter 7 trustee then reached a settlement with the defendant in the

state court action, a compromise that was approved by the bankruptcy court. The Debtor moved to

set aside the bankruptcy court’s order approving the settlement, but the court denied the motion. For

the reasons that follow, we AFFIRM the order of the bankruptcy court.

I. ISSUES ON APPEAL

Did the bankruptcy court commit reversible error in denying the Debtor’s motion to set aside

the order approving the compromise because: (1) the Debtor had insufficient notice of the chapter

7 trustee’s motion to approve compromise; (2) the certificate of deposit was not property of the

Debtor’s bankruptcy estate; or (3) the Debtor could have claimed the certificate of deposit as

exempt? 

II. JURISDICTION AND STANDARD OF REVIEW

The Bankruptcy Appellate Panel of the Sixth Circuit has jurisdiction to decide this appeal.

The United States District Court for the Eastern District of Kentucky has authorized appeals to the

Panel, and a final order of the bankruptcy court may be appealed as of right pursuant to 28 U.S.C.

§ 158(a)(1). The bankruptcy court’s order denying the Debtor’s motion to set aside order approving

compromise is a final, appealable order. See In re Cajun Elec. Power Coop., Inc., 119 F.3d 349, 354

(5th Cir. 1997); In re Moorhead Corp., 208 B.R. 87, 89 (B.A.P. 1st Cir. 1997), aff’d, 201 F.3d 428,

1998 WL 1267445 (1st Cir. Feb. 4, 1998) (unpublished table decision). 

Denial of a motion to alter or amend a judgment under Federal Rule of Civil Procedure 59(e),

made applicable to bankruptcy cases by Federal Rule of Bankruptcy Procedure 9023, is reviewed

only for abuse of discretion. Cockrel v. Shelby County Sch. Dist., 270 F.3d 1036, 1047 (6th Cir.

2001). Likewise, because a “bankruptcy court’s decision to approve or disapprove a settlement rests

in the sound discretion of the bankruptcy judge[,] [a] reviewing court will not disturb or set aside the
3

decision unless it achieves such an unjust result as to amount to an abuse of discretion.” Olson v.

Anderson (In re Anderson), 377 B.R. 865, 868 (B.A.P. 6th Cir. 2007). “Generally, a court ‘abuses

its discretion onlywhen it relies upon clearly erroneous findings of fact or when it improperly applies

the law or uses an erroneous legal standard.’” Id. (quoting Fleischut v. Nixon Detroit Diesel, Inc.,

859 F.2d 26, 30 (6th Cir. 1988)). A court also abuses its discretion “if the reviewing court has a

definite and firm conviction that the trial court committed a clear error of judgment in the conclusion

that it reached based on all of the appropriate factors.” Belfance v. Black River Petroleum, Inc. (In

re Hess), 209 B.R. 79, 80 (B.A.P. 6th Cir. 1997) (citing Bowling v. Pfizer, Inc., 102 F.3d 777 (6th

Cir. 1996)). 

Although the bankruptcy court’s order denying the Debtor’s motion to set aside the order

approving compromise is the only order on appeal in this case, the order addresses the substance of

the Debtor’s objections to the compromise. Accordingly, we must also review the bankruptcy

court’s findings of fact and conclusions of law relative to those objections. See GenCorp, Inc. v. Am.

Int’l Underwriters, 178 F.3d 804, 833 (6th Cir. 1999) (“[A]s a general matter, the appeal from the

denial of a Rule 59(e) motion is treated as an appeal from the underlying judgment itself.”). Further,

notwithstanding the fact that an order of this type would ordinarily be reviewed strictly for abuse of

discretion, because it encompasses the bankruptcy court’s only findings and conclusions on the

objections, we review it accordingly. See Cockrel, 270 F.3d at 1047 (order denying motion to alter

or amend summary judgment is reviewed de novo); In re Anderson, 377 B.R. at 868 (“Whether the

bankruptcy court’s discretionary decision is based upon an erroneous interpretation of the law is a

legal question that is reviewed de novo.”). 

The bankruptcy court’s findings of fact, including whether the Debtor had adequate notice

of the motion to compromise and whether the Debtor acted in bad faith, are reviewed under the

clearly erroneous standard. Fed. R. Bankr. P. 8013; see BP Care, Inc. v. Thompson, 398 F.3d 503,

514 n.8 (6th Cir. 2005). “A finding of fact is clearly erroneous ‘when although there is evidence to

support it, the reviewing court on the entire evidence is left with the definite and firm conviction that

a mistake has been committed.’” Riverview Trenton R.R. Co. v. DSC, Ltd. (In re DSC, Ltd.), 486

F.3d 940, 944 (6th Cir. 2007) (quoting Anderson v. City of Bessemer City, 470 U.S. 564, 573, 105

S. Ct. 1504 (1985)).

The bankruptcy court’s conclusions of law, including whether the certificate of deposit is

property of the estate and whether it can be claimed as exempt, are reviewed de novo. Id. “Under
4

a de novo standard of review, the reviewing court decides an issue independently of, and without

deference to, the trial court’s determination.” Menninger v. Accredited Home Lenders (In re

Morgeson), 371 B.R. 798, 800 (B.A.P. 6th Cir. 2007) (citing Treinish v. Norwest Bank Minn., N.A.

(In re Periandri), 266 B.R. 651, 653 (B.A.P. 6th Cir. 2001)).

III. FACTS

On December 2, 1996, the Debtor’s business, Jude Custom Systems, Inc. (“Jude”), filed a

petition for relief under chapter 11 of the Bankruptcy Code. The chapter 11 trustee who was

appointed by the court requested that the Debtor leave Jude’s business premises, but permitted him

to retrieve personal items. One of the items which the Debtor purportedly retrieved was a $100,000

certificate of deposit (“CD”) issued by Fifth Third Bank on June 19, 1989, in the name of “Jude

Custom Systems, Inc. Pension Plan.” The CD had a maturity date of December 8, 1989. 

On January 5, 1998, the Debtor, individually, filed a voluntary petition for relief under

chapter 7 of the Bankruptcy Code. He did not list the CD on his schedules. He received his

discharge on June 30, 1999, and the case was closed on July 21, 1999. 

Over two years later, on October 5, 2001, the Debtor filed a state court action against Fifth

Third Bank to collect the proceeds from the CD. The Debtor alleged in the action that because he

was the last remaining participant in the Jude Custom Systems Pension Fund, he was successor in

interest to the pension fund and thus entitled to redeem the CD. Fifth Third Bank denied the

existence of the CD.

On February 16, 2004, Fifth Third Bank took the deposition of the Debtor in the state court

action. The Debtor testified that he knew the CD existed prior to filing his personal bankruptcy case,

and that he had attempted to cash it. He also testified that he did not list the CD in his personal

bankruptcy case because “it was pension money” and he had been told to “leave it lay” or “it would

get confiscated.” (Appellee’s App. at 13.) 

The Jude Custom Systems, Inc. Pension Plan Agreement (the “Plan”), signed by the Debtor

on behalf of Jude as employer, shows that the Debtor was appointed trustee at the Plan’s inception

in 1986. Accrual of benefits under the Plan ceased on June 19, 1991. By amendment to the Plan

dated October 14, 1997, signed by the Debtor as trustee and on behalf of Jude, the Plan was

terminated as of December 31, 1997. The Plan provided for distribution of excess funds upon

termination as follows:
5

In the event of Termination of Plan, excess funds as determined under

Section 12.07, shall . . . be allocated on a pro-rata basis among the

Participants in the Plan as of the date of termination based on the

present value of the Accrued Benefit, subject to the IRC 415 limits of

the Plan as provided under Article VII.

(Appellee’s App. at 33). 

In his 2004 deposition, the Debtor testified that all other Plan participants had been paid.

When asked whether he had any paper work establishing that he was entitled to the CD, the Debtor

responded, “No. But if I’m the last one in, I bought it, I paid everybody out, it becomes mine. It’s

part of the settlement we settled out. I paid everybody what they had coming.” (Appellant’s App.

at 13.) 

Prior to trial in the state court action, the United States trustee learned of the suit, prompting

him to file in the bankruptcy court on January 6, 2006, an emergency motion to reopen the Debtor’s

chapter 7 case to administer the CD as an asset of the estate. The United States trustee stated in the

motion that although Fifth Third Bank had not admitted the existence of the CD, it was willing to

pay a portion of the face value to the bankruptcy estate to pay creditors if the case were reopened.

The motion also stated, based on the Debtor’s deposition testimony, that the Debtor intentionally

failed to list the CD in his bankruptcy case and that, therefore, he should not be allowed to benefit

from his fraudulent behavior. Before filing the motion, the United States trustee notified the

Debtor’s state court counsel of his intention to file the motion and mailed him a courtesy copy, as

reflected in the motion’s certificate of service. No objection was filed to the Trustee’s motion, and

on January 18, 2006, the bankruptcy court ordered that the case be reopened. L. Craig Kendrick was

then appointed chapter 7 trustee (“Trustee”).

On March 30, 2006, the Trustee filed a motion to approve a compromise of the state court

action with Fifth Third Bank. The motion stated that although Fifth Third Bank maintains that the

CD was paid out according to its terms, the bank was willing to settle the litigation for $17,500. The

Trustee asserted that it was a fair and reasonable settlement which would avoid expenditure of

substantial funds for attorney fees and litigation costs. Notice of the motion was served upon the

Debtor’s former bankruptcy counsel, the Debtor’s counsel in the state court action, and the Debtor

at his address listed with the clerk of the bankruptcy court. No objection to the motion was filed.

On April 24, 2006, the bankruptcy court issued an order approving the compromise. On April 28,
 The Debtor did not appeal the order approving the compromise. 1

The Debtor did not allege any grounds for relief enumerated in Federal Rule of Civil 2

Procedure 60, such as mistake, newly discovered evidence, fraud or misrepresentation, made

applicable to bankruptcy proceedings by Federal Rule of Bankruptcy Procedure 9024.

6

2006, the Trustee mailed a copy of the order to the Debtor, again to the address listed with the court,

and to his former counsel. None of the mailings to the Debtor or to his counsel were returned.

On May 1, 2006, the Debtor’s state court counsel filed a notice of appearance in the

bankruptcy case as counsel of record for the Debtor. Also on May 1, 2006, the Debtor, through

counsel, filed a motion to set aside the order approving compromise, contending that: (1) he was

not properly served with the motion to approve compromise; (2) the CD was not an asset of his

bankruptcy estate; and (3) the CD was exempt because it was pension funds. After a hearing on

June 13, 2006, the bankruptcy court issued a memorandum of opinion and order on August 28, 2006,

denying the Debtor’s motion in all respects. The court held that the Debtor had sufficient notice of

the motion to approve compromise, the Debtor’s interest in the CD was property of the estate, and

because the Debtor intentionally omitted this interest from his bankruptcy schedules, he could not

claim the CD exempt. The Debtor timely appealed this order.1

IV. DISCUSSION

Procedural Issues

The Debtor’s motion to set aside the order approving the compromise did not specify the rule

of procedure on which the Debtor relied, and the bankruptcy court did not specify under what rule

it considered the motion. Because the motion sought a substantive change in the bankruptcy court’s

judgment and was filed within ten days of the entry of the judgment, we will treat it as a motion to

alter or amend the judgment pursuant to Federal Rule of Civil Procedure 59(e), made applicable to

bankruptcy proceedings by Federal Rule of Bankruptcy Procedure 9023. Cockrel v. Shelby County 2

Sch. Dist., 270 F.3d 1036, 1047 (6th Cir. 2001) (motion for reconsideration filed within ten days of

final judgment generally treated as motion to alter or amend); Barger v. Hayes County Non-Stock

Co-Op (In re Barger), 219 B.R. 238, 244 (B.A.P. 8th Cir. 1998) (“Courts have generally viewed any

motion which seeks a substantive change in a judgment as a Rule 59(e) motion if it is made within

ten days of the entry of the judgment challenged.”); In re No-Am Corp., 223 B.R. 512, 513 (Bankr.

W.D. Mich. 1998) (citing In re Barker-Fowler Elec. Co., 141 B.R. 929, 935 (Bankr. W.D. Mich.

1992) (motion for reconsideration of order directing turnover of tax refund treated as made under
7

Rule 59(e)). The Sixth Circuit Court of Appeals has held that motions to alter or amend “may be

granted if there is a clear error of law, newly discovered evidence, an intervening change in

controlling law, or to prevent manifest injustice.” GenCorp., Inc. v. Am. Int’l Underwriters Co., 178

F.3d 804, 834 (6th Cir. 1999) (citations omitted).

The Debtor argued in his motion to set aside that approval of the compromise order was

legally erroneous because the CD was not his property or property of his estate under 11 U.S.C.

§ 541 and, alternatively, was eligible for exemption. The Debtor also asserted that the compromise

order should be set aside because he received inadequate notice of the motion to approve the

compromise. In ruling on the Debtor’s motion, the bankruptcy court not only addressed the notice

issue, but also reevaluated its approval of the compromise in light of the Debtor’s property-of-theestate and exemption arguments. Because the bankruptcy court ruled on the Debtor’s underlying

substantive objections to the compromise, we will also review the bankruptcy court’s order rejecting

the Debtor’s objections to the compromise. See Gencorp, Inc., 178 F.3d at 833 (“[A]s a general

matter, the appeal from the denial of a Rule 59(e) motion is treated as an appeal from the underlying

judgment itself.”); Abbs v. Sullivan, 963 F.2d 918, 925 (7th Cir. 1992) (“The premise of [a Rule

59(e)] motion is that the judgment was wrong in some respect. This makes a challenge to the denial

of the motion a challenge to the judgment itself . . . .”); see also Munoz v. Small Bus. Admin., 644

F.2d 1361, 1364 (9th Cir. 1981) (appeal from final judgment “draws in question all earlier non-final

orders and all rulings which produced the judgment”).

Notice to the Debtor

Federal Rules of Bankruptcy Procedure 9019(a) and 2002(a)(3) govern the notice that must

be given in connection with a motion to approve a compromise. Rule 9019(a) provides that: “On

motion by the trustee and after notice and a hearing, the court may approve a compromise or

settlement. Notice shall be given to creditors, the United States trustee, the debtor, and indenture

trustees as provided in Rule 2002 and to any other entity as the court may direct.” Rule 2002(a)(3)

provides for 20 days notice by mail of a hearing on approval of a compromise or settlement of a

controversy.

In this case, the Debtor does not deny that notice of the motion to approve the compromise

was given to him. He contends, however, that notice was ineffective because he was not properly

served with notice. The Debtor notes that the certificate of service for the motion listed an outdated
 The motion was mailed to the Debtor at the address the Debtor had previously listed with 3

the court clerk in connection with his bankruptcy case. If this address was no longer accurate at the

time his case was reopened, the debtor had the affirmative duty to file a statement with the court

clerk regarding any change to his address. See Fed. R. Bankr. P. 4002. In this regard, the Debtor

has never maintained that he did not have notice that his bankruptcy case was reopened. 

The Debtor indicates that the motion to approve compromise should have been sent to his

current address, the one given by him at his February 16, 2004 deposition. In this deposition, the

Debtor stated that he was currently staying with his ex-wife, at 11 Overlook Circle, Wilder,

Kentucky, and had been there for a period of three months. The record reflects that the Debtor’s exwife, Carolyn Azbill, was listed as a creditor on the mailing matrix and was served with the motion

to approve compromise, as well as all other filings, at the Wilder, Kentucky address. 

8

address for him, and argues that service on his former bankruptcy counsel cannot constitute service

3

because he was no longer counsel of record. As to service on his state court counsel, the Debtor

admits that the Trustee noticed counsel, but maintains that counsel never received a copy of the

motion and that service on this counsel is irrelevant because he was not counsel of record in his

bankruptcy case at the time the motion was filed.

The bankruptcy court found that the Debtor had actual notice of the motion to approve

compromise by virtue of his state court counsel’s receipt of the motion. The bankruptcy court

observed that the Debtor’s state court counsel had filed an appearance in the bankruptcy case and

the motion to set aside on May 1, 2006, three days after the trustee had mailed the order approving

the compromise, suggesting that the Debtor and his counsel had sufficient notice to take action. 

Notice is adequate when although a party did not receive formal notice, actual notice was

received. See Creditors Comm. of Park Nursing Ctr., Inc. v. Samuels (In re Park Nursing Ctr., Inc.),

766 F.2d 261, 263 (6th Cir. 1985) (citing Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306,

70 S. Ct. 652 (1950) (holding that a rule of notice in bankruptcy is adequate, and affords due process,

if it is reasonably calculated to achieve actual notice and a procedure to set aside the order is

available for one who fails to receive notice)); see also Bayoud v. Med. Ctr. Hosp. of Garland, Inc.

(In re Am. Dev. Int’l Corp.), 188 B.R. 925, 934 (N.D. Tex. 1995) (holding that third party non-debtor

who asserted he did not receive formal notice of settlement agreement prior to hearing had actual

notice because he knew of settlement before the motion was filed and had opportunity to object); In

re Glinz, 66 B.R. 88, 91 (D.N.D. 1986) (holding that unsecured creditors committee was not entitled

to relief despite lack of formal notice of hearing on settlement where attorney representing

committee was present, and no showing was made that he could have made any argument with 20
Also, as set forth in footnote 3 supra, the Debtor was living with his ex-wife at the time and 4

the record indicates that she received notice of the motion to approve compromise. 

9

days notice by mail that he could not have made with actual notice received at hearing). “In

bankruptcy, a procedural rule requiring notice is adequatelycomplied with when a party does receive

actual notice and has some available remedy to set aside the judgment, whether or not the party has

received formal notice.” In re B.I.B. Co., 165 B.R. 293, 295 (M.D. Fla. 1994) (citing In re Park

Nursing Ctr., Inc., 766 F.2d at 263)).

Based on the record before us, we are unable to conclude that the bankruptcy court’s finding

that the Debtor had actual notice of the motion to approve compromise is clearly erroneous. At no

point, either before the bankruptcy court or during this appeal, has the Debtor asserted that he did

not have actual knowledge of the motion to approve compromise. The certificate of service on the

motion reflects that the Debtor, his former bankruptcy counsel, and his state court counsel who

subsequently became his bankruptcy counsel were served, and none of these mailings were returned

as undeliverable. And, while not determinative, the promptness of state court counsel’s filing of 4

his notice of appearance and motion to set aside supports the bankruptcy court’s finding that the

Debtor had actual notice. 

Also importantly, there has been no assertion that the Debtor was prejudiced by the alleged

failure to properly notice him since the bankruptcy court considered his substantive objections to the

compromise in connection with his motion to set aside. See In re Park Nursing Ctr., Inc., 766 F.2d

at 263. Accordingly, the bankruptcy court did not abuse its discretion in refusing to alter, amend or

set aside its order approving the compromise on the basis that the Debtor did not have adequate

notice. 

Asset of the Estate

The Debtor asserts that the CD was never property of his bankruptcy estate because it was

in the name of the Jude Custom Systems, Inc. Pension Plan. He contends that his belief that he was

successor in interest to the Plan as the only remaining beneficiary does not constitute ownership for

purposes of his bankruptcy petition, and that at best it can be argued that the CD represented an asset

that could become his property post-petition.

The Debtor’s bankruptcy estate consists of his legal and equitable interests in all property.

See 11 U.S.C. § 541(a)(1). “Legislative history indicates section 541 is intended to be given a broad
10

definition to include ‘all kinds of property, including tangible or intangible property, causes of action

. . . , and all other forms of property specified in section 70a of the Bankruptcy Act . . . . [I]t includes

as property of the estate all property of the debtor, even that needed for a fresh start.” In re Johnston,

209 F.3d 611, 613 (6th Cir. 2000) (quoting H.R. Rep. No. 95-595, at 367 (1977)). This broad

definition of the estate includes “all legally recognizable interests although they may be contingent

and not subject to possession until some future time.” In re Ryerson, 739 F.2d 1423, 1425 (9th Cir.

1984). The United States SupremeCourt has stated, “[T]he term ‘property’ has been construed most

generously and an interest is not outside its reach because it is novel or contingent or because

enjoyment must be postponed.” Segal v. Rochelle, 382 U.S. 375, 379, 86 S. Ct. 511, 515 (1966).

“In fact, every conceivable interest of the debtor, future, nonpossessory, contingent, speculative, and

derivative, is within the reach of § 541.” In re Yonikus, 996 F.2d 866, 869 (7th Cir. 1993). 

Pursuant to the Plan, upon termination which occurred in 1997 prior to the Debtor’s

bankruptcy filing, excess funds were to be distributed on a pro-rata basis among the remaining

participants. With the Plan terminated, the Debtor was entitled to at least a pro-rata share of the CD

with all other participants of the Plan. If the Debtor was indeed the only remaining participant in the

Plan, he is entitled to the entire CD. Contrary to the Debtor’s argument, the definition of estate is

broader than ownership. Whether he was entitled to a share or to the whole CD, he had a legal

interest in the CD at the time of his bankruptcy filing and this interest was property of his bankruptcy

estate. 

Exempt Nature of CD as Pension Funds

Finally, the Debtor asserts that if the CD is property of the bankruptcy estate, it is exempt

pursuant to Kentucky Revised Statute § 427.150 and 11 U.S.C. § 522(b) because it is part of a

pension plan. Debtors are permitted to exempt certain property from the bankruptcy estate. “An

exemption withdraws an interest from the bankruptcy estate, and consequently from the creditors,

for the benefit of the debtors.” In re Alam, 359 B.R. 142, 146-47 (B.A.P. 6th Cir. 2006) (citing

Wicheff v. Baumgart (In re Wicheff), 215 B.R. 839, 842 (B.A.P. 6th Cir. 1998)). A state can choose

whether its residents may use the available federal exemptions set forth in 11 U.S.C. § 522, or use

its own state exemptions. See 11 U.S.C. § 522(b). Kentucky has elected to opt-out of the federal

exemptions, and debtors are only entitled to claim any exemptions allowable under state law and

under non-bankruptcy federal law. See Ky. Rev. Stat. Ann. § 427.170; In re Beltz, 263 B.R. 525,

527-28 (Bankr. W.D. Ky. 2001). Pension funds may be exempt under Kentucky Revised Statute
 Although not addressed by the bankruptcy court, the Panel questions whether the CD would 5

have even qualified for an exemption under Kentucky Revised Statute § 427.150(f) in light of the

termination of the pension plan prior to the Debtor’s bankruptcy filing. 

11

§ 427.150 to the extent necessary for the support of the Debtor and his dependents. In re Peklenk,

106 B.R. 119, 121 (Bankr. W.D. Ky. 1989). 

5

 The Debtor had an affirmative duty to disclose all of his assets to the bankruptcy court. 11

U.S.C. § 521(1); Browning v. Levy, 283 F.3d 761, 775 (6th Cir. 2002). Even those assets which are

believed to be worthless or unavailable to the bankruptcy estate must be reported. In re Yonikus, 974

F.2d 901, 904 (7th Cir. 1992). If a debtor is uncertain as to his interest in any property, the asset

should be scheduled with an appropriate explanation. Am. State Bank v. Montgomery (In re

Montgomery), 86 B.R. 948, 959 (Bankr. N.D. Ind. 1988), abrogated on other grounds by United

States v. Walters (In re Walters), 176 B.R. 835, 875 (Bankr. N.D. Ind. 1994). “The bankruptcy

process provides that the debtor must first list such property and claim such exemptions. Next, the

trustee has an opportunity to review the claim for exemptions. Then, upon the trustee’s objections,

the bankruptcy court determines the legitimacy of the claim or, if the trustee has no objections, the

exemption is then granted.” In re Yonikus, 974 F.2d at 905 n.9. The Debtor upset this process when

he failed to list his interest in the CD as an asset on his schedules.

Prior to his bankruptcy filing, the Debtor knew about the CD as he had retrieved it from the

records of Jude and had even attempted to cash it. Also prior to his bankruptcy filing, the Debtor

knew that the Plan had been terminated, and presumably as settlor, trustee, and signator to the Plan,

he knew of the Plan’s provisions that entitled him at a minimum to a pro-rata share of the CD.

Therefore, despite any possible uncertainty of the Debtor as to the extent of his interest in the CD,

it should have been listed as an asset on his schedules. 

By his own admission, the Debtor intentionally did not list the CD as an asset in his

bankruptcy case. He testified that “they told me to leave it go until all the bankruptcy is all over in

case there was some problems come up with it. The money might be put in some fund that could

be taken out of or it would get confiscated. I was told to leave it lay.” (Appellee’s App. at 13.)

When asked who gave him that information, he stated, “Probably my attorneys or my investments

[sic] or somebody.” (Appellee’s App. at 13.) In completing his schedules, the Debtor was not free

to unilaterally decide to omit the CD from his assets based on his belief that it should not be made
12

available to satisfy the claims of creditors. See In re Robinson, 292 B.R. 599, 611 (Bankr. S.D. Ohio

2003). 

Federal Rule of Bankruptcy Procedure 1009(a) provides that debtors may amend their

schedules as a matter of course at any time before the case is closed. This case was closed long

before the Debtor’s attempt to claim the CD as exempt. Technically, therefore, the claim of

exemption was late and should not be allowed on that basis. However, despite the fact that Rule

1009(a) specifically refers to amending schedules before a case is closed, some courts have held that

there is no difference between a case which has not been closed and a reopened case with respect to

amended exemption claims. See In re Goswami, 304 B.R. 386, 392-93 (B.A.P. 9th Cir. 2003);

Towers v. Boyd (In re Boyd), 243 B.R. 756, 766 (N.D. Cal. 2000) (“[F]or the purposes of filing

amendments, there is no difference between an open case and a reopened case, and [a debtor in a

reopened case does] not need the court’s permission to amend.”). Even though a debtor in a

reopened case can amend his exemption schedule, he does not have an absolute right to have the

exemption allowed. Courts may “refuse to allow an amendment where the debtor has acted in bad

faith or where property has been concealed.” Lucius v. McLemore, 741 F.2d 125, 127 (6th Cir. 1984)

(citing Doan v. Hudgins (In re Doan), 672 F.2d 831, 833 (11th Cir. 1982)); In re Lundy, 216 B.R.

609, 610 (Bankr. E.D. Mich. 1998).

The bankruptcy court explicitly found that the Debtor could not justify his failure to list the

CD as an asset. The court reasoned that “intentional concealment of assets bars the debtor’s

exemption claim . . .” (Appellant’s App. at 87.) From this reasoning, we infer that the bankruptcy

court believed the Debtor’s non-disclosure of the CD to be intentional and in bad faith. We review

this finding for clear error. In re John Richards Homes Bldg. Co., 439 F.3d 248, 254 (6th Cir. 2006).

Bad faith may be found when a debtor attempts to conceal an asset. In re Kaelin, 308 F.3d 885, 890

(8th Cir. 2002); In re Arnold, 252 B.R. 778, 785 (B.A.P. 9th Cir. 2000); Gold v. Guttman (In re

Guttman), 237 B.R. 643, 651 (Bankr. E.D. Mich. 1999). Concealment of an asset will bar exemption

of that asset. In re Kaelin, 308 F.3d at 890 (citing In re Doan, 672 F.2d at 833); see also In re

Robinson, 292 B.R. at 609.

 The Debtor admitted to intentionally omitting the CD because he was told it may be

confiscated. Also, at another point in his deposition when asked whether he listed the CD as an asset

in his bankruptcy case, the Debtor replied, “No, because it was pension money. Let me tell you

about personal bankruptcy. I did that through bad advice. I didn’t owe the money I found out.
13

Everybody was paid. I just got a bad strike for nothing.” (Appellee’s App. at 12.) According to the

bankruptcy court, “the cumulative effect of this testimony is that the Debtor obviously considered

the C.D. to be his personal property, an asset that he should be able to retain because he had been

ill-advised in filing his bankruptcy. The Debtor considered the C.D. to be his, treated it as his, and

attempted to cash it.” (Appellant’s App. at 86.) 

The bankruptcy court’s finding that the Debtor intentionally concealed the CD in bad faith

is supported by the Debtor’s deposition testimony and is, therefore, not clearly erroneous. Moreover,

the court’s refusal to permit the exemption is not legally erroneous. As such, we find no abuse of

discretion in the bankruptcy court’s refusal to alter or set aside its prior order. 

V. CONCLUSION

For the foregoing reasons, the bankruptcy court’s order is AFFIRMED.