Opinion ID: 169233
Heading Depth: 2
Heading Rank: 3

Heading: The Bankruptcy Appellate Panel Proceedings

Text: Ford appealed to the Tenth Circuit Bankruptcy Appellate Panel (BAP). The BAP reversed, concluding the bankruptcy court's findings of bad faith were clearly erroneous and that its denial of the exemption was an abuse of discretion. Specifically, the BAP found there was insufficient evidence in the record to support a finding of bad faith and that Ford's delayed disclosure could just as easily be attributed to inadvertence as to intentional concealment. It reached this conclusion for three reasons: (1) Ford's minimal legal training could not be used to support an inference of bad faith; (2) the Trustee failed to articulate a motive for concealment in light of the fact that the settlement proceeds would be exempt anyway; and (3) there was an absence of a showing of prejudice to creditors arising from Ford's non-disclosure. BAP Decision at 5-6. Finally, while the BAP agreed that debtors have a duty to schedule exempt assets so that the trustee can investigate the legitimacy of the exemption, id. at 6, it nevertheless concluded a debtor ought not to be penalized for inadvertent or innocent non-disclosure. In the absence of evidence to support a finding of bad faith, illicit motive, or an intent to conceal an asset from the Trustee and the creditors, the BAP held that denying an exemption was an abuse of discretion and reversed the bankruptcy court. Id.