Mrs. Walck paid $80,000 to the trustee, which exceeded the total claims of $58,824 listed in her schedules. Creditors were notified that they had until December 2, 2009, to file claims. On February 25, 2010, the debtor filed amended schedule C to claim the entire amount of the insurance proceeds as exempt pursuant to Section 522(d)(11)(C). On March 1, 2010, the U.S. Trustee indicated that it had reviewed the trustee's final report and had no objections, which triggered the notification of creditors that their claims would be paid in full. What happens to the difference between $58,824 and $80,000? The trustee gets paid for his time spent administering the case, and the trustee's lawyer gets paid from the difference. If there is any money left, it is given to Mrs. Walck. She would probably get $1 after all is said and done. But Mr. Walck was in heaven and talking to Jesus to help his wife out. On March 9, the trustee objected to the amendment, arguing that it came too late because creditors had been notified that they would be paid in full. "Amendments under Rule 1009 are permitted before case closure unless there is evidence of bad faith by the debtor or if creditors will suffer prejudice," the court said. Although the timing in the case was unfortunate, the court said the issuance of the notice to creditors was insufficient to establish bad faith. In addition, the creditors' unmet expectations of being paid in full did not amount to prejudice. The trustee also argued that the insurance proceeds were not reasonably necessary for the debtor's support, which we expected.

But the debtor was 67 years old, and worked as a housekeeper. Her monthly income was $50 less than her expenses. She planned to retire in 3 years, at which time her monthly income would decrease by about $1,100. Given the anticipated reduction in her income, the court found that the insurance proceeds were necessary for her support. But what if the insurance proceeds was $200,000; would the judgment be the same, probably.

Lawrence Bautista Yang is a graduate of Georgetown University Law Center and has been in law practice for thirty years. He specializes in bankruptcy, business and civil litigation and has handled more than five thousand successful bankruptcy cases in California. He speaks Mandarin and Fujien and looks forward to discussing your case with you personally. Please call (626) 284-1142 for an appointment at 1000 S Fremont Ave Bldg A-1 Suite 1125 Unit 58 Alhambra, CA 91803.