Opinion
No. 02-84576
February 27, 2003
OPINION
This matter is before the Court on the objection of the Chapter 7 Trustee, Gary T. Rafool ("TRUSTEE") to an exemption claimed by the Debtors, Steven R. Adams ("STEVEN") and Tamara L. Adams ("TAMARA") (jointly, the "DEBTORS"). The DEBTORS are claiming an exemption in a 1991 New Holland Skid Steer Loader valued at $3,000 (the "Loader"). The exemption claim is split between two subsections of the Illinois personal property exemption statute, 735 ILCS 5/12-1001. The sum of $1,360 is claimed exempt under Section 12-1001(d), limited to $750 per individual debtor, on the theory that the Loader is a tool of the trade of both STEVEN and TAMARA. The balance of $1,640 is claimed exempt under Section 12-1001(b), the wildcard provision that permits each individual debtor to exempt up to $2,000 in value in "any other property." The TRUSTEE admits that the Loader is a tool of STEVEN'S trade and that he is entitled to an exemption of $750 under Section 12-1001(d), but denies that TAMARA is entitled to the same exemption. The TRUSTEE also disputes the use of the wildcard provision to exempt property used for a business purpose.
An evidentiary hearing was held on December 16, 2002, and the Court now makes the following findings of fact. In or around 1995, the DEBTORS began doing business under the name "Quick Clean Construction," a sole proprietorship. They provided construction related services to contractors, including landscaping, delivery of sand, gravel and dirt, concrete tearout, and construction site cleanup. Both DEBTORS were active in and earned their livelihood from the business. The business card lists separate phone numbers for "Steve" and "Tami."
On or about August 6, 1997, the DEBTORS financed the purchase of the Loader with a loan from the First National Bank of Chillicothe. Both DEBTORS signed as comakers on the note. TAMARA testified that she regularly operated the Loader as part of her work for Quick Clean Construction.
When the DEBTORS filed their Chapter 7 case on October 8, 2002, they listed TAMARA'S occupation on Schedule I as "housekeeper," and her employer as Lutheran Home. She testified that she began that employment on September 16, 2002, less than one month prior to filing for bankruptcy relief. Until that date, her only employment had been for Quick Clean Construction. She explained that she only sought outside employment because the construction industry was in a slow period. Once business picks up, she intends to return to work for Quick Clean Construction.
The DEBTORS filed a brief arguing that the evidence supports the conclusion that TAMARA'S history of work for Quick Clean Construction and intent to return to that work once business picks up is sufficient to allow for the Loader to be characterized as a tool of her trade, as well as that of her husband. The standard for analysis of this issue is aptly addressed in In re Banke, 275 B.R. 317 (Bankr.N.D.Iowa 2002), where the debtors claimed a tool of the trade exemption in a fishing boat formerly used by the debtor-husband in his work as a fishing guide, which work he had abandoned twelve years before bankruptcy.
The court set forth the following factors to be used to determine whether a debtor who has temporarily abandoned a trade, is entitled to claim an exemption in a tool of that trade on the basis of an intent to resume it:
1. The intensity of the debtor's past business.
2. The amount of time elapsed since the debtor left the business.
3. The circumstances surrounding the temporary abandonment of the business.
4. The sincerity of the debtor's intention to continue the business.
5. The debtor's prospects for returning to the business.
See, also, Matter of Richardson, 47 B.R. 113, 119 (Bankr.W.D.Wis. 1985) (debtor must have reasonable prospects for re-engaging in the temporarily abandoned trade); Matter of Patterson, 825 F.2d 1140, 1144 (7th Cir. 1987) (in dictum, a serious or substantial intention of returning to farming is enough to preserve the federal tools of the trade exemption in farm tools).
Patterson holds that a farm tractor, an expensive piece of machinery and a capital asset, is not a tool of the trade of a farmer under the federal tool of the trade exemption now codified at 11 U.S.C. § 522(d)(6). The Court need not address whether a drivable piece of machinery like the Loader at issue here may be a tool of the trade under the Illinois personal property exemption law since the TRUSTEE concedes that it may.
Applying the Banke factors leads to the conclusion that TAMARA may claim a tool of the trade exemption in the Loader. She was regularly employed in the business from at least 1995 until September, 2002, and she regularly operated the Loader. Less than one month had elapsed since she took the job as a housekeeper prior to bankruptcy. She left the business only because of a slow down in the construction industry. Her testimony at trial of her intent to return to that business was sincere. It appears that TAMARA has reasonable prospects for returning to work for the same business in which STEVEN remains employed. Based on the record before the Court, TAMARA is entitled to claim an exemption in the Loader as a tool of the trade under Section 12-1001(d), limited to the amount of $750.
The Court next turns to the wildcard exemption. Citing no authority, the TRUSTEE objects on the ground that the wildcard exemption is not available to exempt the excess equity in a tool of the trade because tools are not for family use. The Illinois wildcard exemption states as follows:
The following personal property, owned by the debtor, is exempt from judgment, attachment, or distress for rent:
* * *
(b) The debtor's equity interest, not to exceed $2,000 in value, in any other property.
The statute also provides the following limiting condition:
The personal property exemptions set forth in this Section shall apply only to individuals and only to personal property that is used for personal rather than business purposes.
It is well settled that the wildcard exemption may be "stacked" or used to exempt excess equity in property already exempt under one of the other enumerated exemptions, Matter of Barker, 768 F.2d 191 (7th Cir. 1985), or exempt under any other applicable statute. In re Johnson, 57 B.R. 635 (Bankr.N.D.Ill. 1986). The TRUSTEE does not challenge the general rule permitting stacking. He suggests only that the wildcard exemption may not be used to exempt property used for business purposes, including tools of the trade, so that stacking the wildcard exemption on top of a tools of the trade exemption is prohibited. The TRUSTEE relies on the plain language of the statute, quoted above, and cites no case law.
The DEBTORS rely upon In re Allman, 58 B.R. 790 (Bankr.C.D.Ill. 1986) (Ginsberg, J.) and In re King, 153 B.R. 229 (Bankr.N.D.Ill. 1993) (DeGunther, J.). Those opinions hold that the wildcard exemption may be stacked with the tools of the trade exemption, construing the limiting condition to mean only that personal property that is used for business purposes is not exemptible unless it is an implement, professional book, or tool of the trade, in which case it is exemptible as such and, additionally, under the wildcard provision. Presented with no contrary authority or any arguments pointing out a flaw in the reasoning of Judges Ginsberg and DeGunther, the Court will follow those opinions and hold that the DEBTORS may use the wildcard provision to exempt the remaining equity in the Loader.
For these reasons, the TRUSTEE'S objection to the DEBTORS' claim of exemptions will be denied. This Opinion constitutes this Court's findings of fact and conclusions of law in accordance with Federal Rule of Bankruptcy Procedure 7052. A separate Order will be entered.
ORDER
For the reasons stated in an Opinion filed this day, IT IS HEREBY ORDERED that the TRUSTEE'S objection to the DEBTORS' claim of exemptions should be and hereby is DENIED.