In
re Palidora (Bankr. D. Ariz. 2004)
Facts:
Debtors filed for Chapter 7 and had $2,194 in their bank accounts.
Trustee moved for turnover less the $300 exemption by Ariz law for
fund in a joint debtors’ bank account. The debtor’s objected on
the grounds that all the monies came from either husband’s wages or
from a $1,000 check for child support paid to the wife and deposited
in her account.
Issue:
Are these funds exempt?
Holding:
Arizona wage exemption ceases to apply upon the debtor’s receipt of
those wages. However, under §541, child support payments are held in
trust and are not property of the estate. Also, under Arizona law
payments for child support extend to the deposit so long as they are
traceable to the exempt source.
Analysis:
Arizona law exempts 75% of a debtor’s disposable earnings. They
are defined as compensation for his personal services. Includes only
what is payable or what has been paid or deposited into a debtor’s
account. State law determines the exemption. Arizona law does not
extend to monies disbursed to the debtor’s bank account. Arizona
law was modeled after the FCCPA and the garnishment exemptions under
that law do not extend to earnings disbursed to a debtor’s bank
account.
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