In Re King

508 B.R. 71 (2014)

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Nature of the Case

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Facts

On January 29, 2013, P filed with the IRS and claimed a tax refund of $8,548, consisting of: W-2 withholdings of $1,010, Earned Income Credit of $5,891, and Additional Child Tax Credit of $1,647. H&R Block filed the return. H&R Block received her refund check by deposit into the Refund Anticipation Check account created specifically for P. H&R Block withdrew the amount P owed them for preparing her taxes than direct deposited the remaining funds into P's 1st Midwest account. On February 8, 2013, the sum of $8,196.55 was deposited into the 1st Midwest account. On February 8, 2013, P withdrew the sum of $3,000. On February 13, 2013, the sum of $3,138.63 was debit memo (i.e. frozen) from the 1st Midwest Bank Account; this was the result of a garnishment by Credit Acceptance Corporation. Credit Acceptance Corporation filed a Motion to Release Hold on Bank Account on April 5, 2013, and notified 1st Midwest Bank, who released the frozen funds. P is in possession and control of the $3,138.63 released by 1st Midwest Bank. P filed for chapter 7 on March 22, 2013. On June 3, 2013, Manning (D), as Trustee of the Chapter 7 bankruptcy estate filed an objection to P's exemptions. D objected to P exempting $5,891.00 as an earned income credit pursuant to I.C. § 34-55-10-2(c)(11), on the basis that P as of the petition date was no longer in possession of these funds. There was a pre-petition garnishment on P's bank account at 1st Midwest Bank in the amount of $3,138.63. This garnishment was released post-petition by the judgment-creditor, Credit Acceptance Corporation. D took the position that the foregoing was not an exempt asset of the bankruptcy estate and could be fully administered. P asserted that this entire amount could be traced back as the earned income credit portion of a tax refund that was previously deposited into her bank account.