The opinion of the court was delivered by: William W. Caldwell United States District Judge
This is a Chapter 7 bankruptcy case converted from Chapter 13. The debtors are Junious J. Wiggins and Lula Mae Wiggins, husband and wife. The Trustee has appealed the bankruptcy court's order of November 1, 2005, which denied his objections to certain exemptions Debtors claimed from the estate.
The main issue presented is whether Mrs. Wiggins's IRA account is exemptible under 11 U.S.C. § 522(d)(10)(E). In Rousey v. Jacoway, 544 U.S. 320, 125 S.Ct. 1561, 161 L.Ed.2d 563 (2005), the Supreme Court said that IRAs are exemptible under that provision, but some courts in the Third Circuit continue to adhere to In re Clark, 711 F.2d 21 (3d Cir. 1983), on the basis that Rousey did not address Clark's requirement that an IRA is exemptible only if the debtor was receiving payments under the IRA without penalty (or, based on a later Third Circuit case, if not receiving payments, at least eligible to receive them without penalty).*fn1
The Trustee raises two other issues: (1) even if the IRA were exempt under Rousey, it was not necessary for Mrs. Wiggins's support, and (2) the bankruptcy court erred in ruling that Debtors had not committed fraud in their original schedule of assets and that their fraud should be punished by refusing Debtors an exemption for Mrs. Wiggins's IRA.
II. Jurisdiction and Standard of Review
We have jurisdiction to hear the appeal pursuant to 28 U.S.C. § 158(a). We have plenary authority to review the bankruptcy court's legal rulings but cannot disturb its factual findings unless it committed clear error. See In re Schick, 418 F.3d 321, 323 (3d Cir. 2005).
In October 2002, Debtors filed a Chapter 13 Petition.
In pertinent part, on Debtors' original Schedule B, they listed certain of Mrs. Wiggins's assets and described them as follows:
(1) $14,000 in a "securities and money market fund - Prudential"; and (2) $79,297 in a "retirement fund."*fn2 Debtors also listed three other accounts as IRA accounts, one owned by Mrs. Wiggins and two by Mr. Wiggins. On Schedule C, Debtors claimed the retirement fund was exempt under section 522(d)(10)(E). In February 2004, Debtors converted their case to a Chapter 7 one.
The Chapter 7 Trustee filed objections to Schedule C, in part challenging the $79,297 retirement fund as exempt under section 522(d)(10)(E).*fn3 Debtors filed an amendment to Schedule B, listing for the first time Mrs. Wiggins's anticipated pension from the state of Pennsylvania and giving it an unknown current value.
They also filed an amendment to Schedule C, asserting that the pension was exempt from the estate under section 522(d)(10)(E).
In June 2005, the bankruptcy court held a hearing on the Trustee's objections. Debtors testified to certain inaccuracies for the other accounts listed as IRAs and to the nature and history of Mrs. Wiggins's $79,297 "retirement fund," now recognized to be an IRA. The account had a value of $93,873.17 at the time of the hearing.
On November 1, 2005, the bankruptcy court filed an opinion denying all of the Trustee's objections. The court ruled that Rousey had implicitly overruled Clark so that Debtors did not have show that they were eligible to withdraw from Mrs. Wiggins IRA account without penalty before claiming it exempt under section 522(d)(10)(E). The court then determined that the account was reasonably necessary for Debtors' support, as also required by section 522(d)(10)(E). The court also found that Debtors had not committed fraud in their original Schedule B listing of personal property. The court did, however, ...