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13.3.4 Procedure for Claiming Exemptions

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13.3.4 Procedure for Claiming Exemptions

States differ in the procedures they specify for asserting exemptions. Some states require debtors to assert the protections provided by the exemption statutes affirmatively,89 and may even require strict compliance with these procedures.90 This requirement is not universal, however,91 and there is a strong argument that depriving a debtor of a federal exemption because of failure to meet a state procedural requirement violates federal law.92 A Treasury Department rule, effective in 2011, moots this issue to a large extent in cases involving Social Security and certain other exempt federal benefits by placing the burden on depository institutions to identify and protect approximately two months of exempt benefits.93 New York has a similarly self-executing exemption for a certain basic amount in a bank account, regardless of its source.94 In 2019, California enacted a similar provision, effective September 1, 2020.95

Whether a homestead exemption must be claimed in advance through a filing with the recorder of deeds is discussed in § 15.2.8, infra. Many states allow an exemption for personal property—or both personal and real property—to be asserted at the time of levy.96

Whether state exemption procedures meet due process requirements is discussed in § 13.5, infra.

Footnotes

  • 89 See Branch Banking & Tr. Co. v. Carrerou, 730 Fed. Appx. 869 (11th Cir. 2018) (debtor lost exemption for retirement accounts when he missed deadlines for filing exemption claim and motion to dissolve garnishment); Johns Hopkins Hosp. v. Post, 321 Fed. Appx. 259 (4th Cir. 2009) (Md. law) (burden on debtor to assert and prove exemption; when there was no non-speculative way to allocate lump-sum personal injury settlement between exempt pain and suffering and loss of future wages and non-exempt past wages and property loss, entire fund was non-exempt); Mayer v. Quy Van Nguyen, 211 F.3d 105 (4th Cir. 2000) (Va. law); Moore v. Branch Banking & Tr. Co., 2010 WL 4962909 (W.D. Ky. Dec. 1, 2010) (burden on debtor to claim exemptions; pro se debtor’s letter to garnishee bank insufficient); Chanel, Inc. v. Adamson, 2008 WL 249157 (W.D. Ark. Jan. 29, 2008) (method of claiming exemptions determined by state law; denying exemptions for failure to follow Arkansas procedure); In re Khanh Viet Nguyen, 2011 WL 3889714 (Bankr. E.D. Va. Sept. 2, 2011) (procedural requirements of Virginia exemption statutes are strict; court has no power to excuse compliance with five-day deadline); In re Lamb, 409 B.R. 534 (Bankr. N.D. Fla. 2009) (burden is on debtor to claim exemptions; letter to creditor stating that she is “a single mother with kids” insufficient to claim head of household exemption; wrongful garnishment and FDCPA claims fail); Zivitz v. Zivitz, 16 So. 3d 841 (Fla. Dist. Ct. App. 2009) (exemption for proceeds of homestead was irretrievably lost by failure to claim it within twenty days of garnishment notice); Belden v. Belden, 389 S.W.3d 717 (Mo. Ct. App. 2012) (homestead exemption lost by failure to timely claim it); Citibank (S.D.) v. Masters, 2008 WL 754873 (Ohio Ct. App. Mar. 24, 2008) (burden is on debtor to show that funds exempt; denying exemption when debtor testified that bank account contained earnings but failed to produce financial records). See also Dish Network, L.L.C. v. Sonicview U.S.A., Inc., 2012 WL 4848954 (S.D. Cal. Oct. 11, 2012) (allowing judgment debtor to claim veterans benefits in bank account as exempt even though he missed deadline for filing exemption claim, as creditor failed to cite any authority allowing waiver of this exemption, but other exemptions are waived by untimely filing); In re Neilson, 427 B.R. 581 (Bankr. W.D. Va. 2010) (letter from creditor describing creditor remedies, including garnishment, but not mentioning exemptions is not deceptive because Florida law places burden on debtor to claim exemptions); Lang v. Dorosh, 2010 WL 5292607 (Minn. Ct. App. Dec. 28, 2010) (procedure to claim exemption for account in financial institution is “very meticulous”; denying exemption for IRA because account statement not timely disclosed); CBI, Inc. v. McCrea, 285 P.3d 429 (Mont. 2012) (upholding denial of pro se debtor’s request for hearing on claim that bank account contains exempt funds, for failure to make “particularized factual and legal showing” in her request for hearing). But see In re Crespo, 2017 WL 2437240 (Bankr. S.D. Fla. June 5, 2017) (applying principle of liberal construction to hold that failure to claim head of household wage exemption in state proceeding did not waive the exception; noting that because voluntary waiver is forbidden by Florida law, it is unlikely that legislature authorized unintentional waiver). See generally §§ 13.3.6, 13.3.7, infra (wild card exemptions).

  • 90 See, e.g., Branch Banking & Tr. Co. v. Park Circle, L.L.C., 2014 WL 4059937 (M.D. Fla. Aug. 15, 2014) (exemption for disability benefits in bank account lost because, after debtor timely filled out and signed required form, lawyer missed deadline for filing it); Hendricks & Lewis, P.L.L.C. v. Clinton, 2011 WL 4861855 (N.D. Fla. Aug. 9, 2011) (Mag.) (strictly construing procedural requirements for objecting to garnishment; exemption for bank account containing Social Security funds lost by failure to meet time limits of Florida statute; note that case arose before effective date of Treasury Rule discussed in § 14.5.4, infra, which protects two months of directly deposited Social Security benefits without need for debtor to assert exemption claim), adopted by 2011 WL 4861844 (N.D. Fla. Oct. 13, 2011); In re Stoney, 445 B.R. 543, 546–547 (Bankr. E.D. Va. 2011); Lang v. Dorosh, 2010 WL 5292607 (Minn. Ct. App. Dec. 28, 2010) (debtor must strictly comply with procedure for claiming exemptions; denying exemption for retirement account because debtor failed to enclose required account statements). But cf. In re Chesler, 2016 WL 5305827 (Bankr. E.D. Va. Sept. 27, 2016) (requirements for time and place of filing of homestead deed are strictly construed, but contents of properly filed deed are construed in favor of debtor; allowing leave to amend timely filed deed that failed to include certain required information).

  • 91 See, e.g., Novas v. Russ Dean Ford, Inc., 2009 WL 721549 (D. Idaho Mar. 17, 2009) (when annuity was clearly exempt debtor did not have to file an exemption claim, and insurer cannot be held in contempt for failing to turn over exempt portion of annuity in response to writ of execution); In re Mootosammy, 387 B.R. 291 (Bankr. M.D. Fla. 2008) (exemptions not waived by failure to follow Florida procedure for claiming exemptions within fifteen days after levy); Osborne v. Dumoulin, 55 So. 3d 577, 583, 587 (Fla. 2011) (homestead exemption is self-executing; debtor need not interpose exemption claim at time of levy); DiGiorgio v. DiGiorgio, 48 So. 3d 968 (Fla. Dist. Ct. App. 2010) (actual residence, not filing of declaration, determines whether property is homestead); Detroit Metro. Credit Union v. Schore, 2014 WL 4347456 (Mich. Ct. App. May 29, 2014) (abuse of discretion to refuse to consider untimely exemption claim, since garnishment of Social Security benefits violates both state and federal law); Balanof v. Niosi, 791 N.Y.S.2d 553 (N.Y. App. Div. 2005) (requirement that debtor assert exemptions does not apply when property is “easily identifiable” as exempt); Sears Roebuck & Co. v. Cosey, 44 P.3d 582 (Okla. Civ. App. 2002) (strict compliance with procedure for claiming exemption not required, especially for unrepresented debtor). See also Dumka v. Erickson, 70 N.E.3d 828 (Ind. Ct. App. 2017) (upholding denial of garnishment; when debtor is unrepresented there is an exception to rule that debtor has burden of claiming exemptions); Hillcrest Med. Ctr. v. Monroy, 38 P.3d 931 (Okla. Civ. App. 2001) (hardship exemption not lost by failure to timely claim it; allowing untimely claim and ordering return of previously garnished funds). Cf. Cal. Civ. Proc. Code § 704.080(e) (West) (first $1225 to $3650 of account into which Social Security or public benefits are directly deposited is exempt without making a claim; to execute upon excess over this amount, judgment creditor must make claim that it does not consist of exempt funds); Navistar Fin. Corp. v. Hrobuchak, 2009 WL 483123 (M.D. Pa. Feb. 25, 2009) (when garnishee responds and provides documentation that funds are exempt—here, an IRA—the burden is on creditor to show any exception, for example, that debtor contributed more than permissible amount).

  • 92 See § 14.5.4.1, infra.

  • 93 See § 14.5.4.1, infra.

  • 94 N.Y. C.P.L.R. 5222(i) (McKinney).

  • 95 2019 Cal. Legis. Serv. Ch. 552 (S.B. 616) (West) (eff. Sept. 1, 2020) (enacting Cal. Civ. Proc. Code § 704.220 (West), which provides that $1724 in a bank account is exempt without the debtor having to make a claim; the $1724 figure is adjusted annually to reflect changes in the cost of living).

  • 96 See, e.g., Haw. Rev. Stat. §§ 651-61, 651-93, 651-94 (real and personal property exemptions may be claimed at time of levy); Kan. Stat. Ann. §§ 60-2302, 60-2420 (exemptions may be claimed at time of levy); Ky. Rev. Stat. Ann. §§ 427.020, 427.080 (West) (exemptions may be claimed at time of levy); Mich. Comp. Laws §§ 600.6026, 600.6027 (exemptions may be claimed at time of levy); Minn. Stat. §§ 510.08 (if homestead has not previously been set apart, it may be claimed at time of levy), 550.41 (personal property may be selected at time of levy); Tex. Prop. Code Ann. §§ 41.005, 42.003 (West) (exemptions may be designated at time of levy); Va. Code Ann. §§ 34-6, 34-14, 34-17 (homestead declaration, which covers both real and personal property, may be filed at any time before property is sold or turned over to creditor; in bankruptcy, declaration must be filed on or before the fifth day after the section 341 meeting).