United States District Court, M.D. Pennsylvania
William G. SCHWAB, Chapter 7 Trustee, Appellant
James S. ROCKEL, Jr., and Rebecca A. Rockel, Appellees.
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Adam R. Weaver, Willam G. Schwab and Associates, Lehighton, PA, for Appellant.
David W. Tidd, Hellertown, PA, for Appellees.
JAMES M. MUNLEY, District Judge.
Before the court is William G. Schwab's appeal from Bankruptcy Judge Robert N. Opel, II's decision overruling his objections to James S. Rockel Jr. and Rebecca A. Rockel's amended bankruptcy schedules and denying his request for a surcharge. The matter has been fully briefed and is ripe for disposition. For the following reasons, the appeal will be denied.
Appellees James S. Rockel Jr. and Rebecca A. Rockel (hereinafter " debtors" ) filed a voluntary bankruptcy petition under Chapter 7 of the United States Bankruptcy Code on July 25, 2011, in the United States Bankruptcy Court for the Eastern District of Pennsylvania. (Doc. 2-2, Bankr. Pet. (hereinafter " Bankr. Pet." ) at 1-2; Doc. 2-6, Stipulation of Facts (hereinafter " SF" ) ¶ 1). Subsequent to the initial filing, the case was transferred to the United States Bankruptcy Court for the Middle District of Pennsylvania wherein Appellant William G. Schwab (hereinafter " Trustee" ) was appointed as the Chapter 7 Trustee. (Doc. 2-8, Bankr. Docket (hereinafter " Bankr. Docket" ) at 2-3).
On their initial bankruptcy petition, debtors did not list or claim an exemption in any 2011 federal income tax refund. (Bankr. Pet. at 12-15). Five (5) months later, however, while attending their first meeting of creditors (hereinafter " section 341 meeting" ), debtors indicated they were likely to receive a 2011 federal income tax refund but their case was still classified as a no asset case. (SF, Ex. A, Trustees Questionnaire at 1-5).
Shortly after the section 341 meeting, the Trustee filed a Tax Refund Intercept with the Internal Revenue Service. (SF ¶ 4). Subsequent to Trustee's intercept request, debtors filed their 2011 income tax return on April 14, 2012, seeking an income tax refund of $4,138.00. (SF ¶ 6). Debtors' income tax refund was intercepted by the Trustee on May 14, 2012. ( Id. ¶ 7). Accordingly, the Trustee filed a notice to change debtors' bankruptcy case from a no asset case to an asset case. (Bankr. Docket at 5).
Upon learning that the funds obtained by the Trustee were debtors' income tax refund, debtors promptly filed an amended Schedule B to list the tax refund as an asset. ( Id. ) Additionally, debtors filed an amended Schedule C to exempt the tax refund under 11 U.S.C. § 522(d)(5). The Trustee filed an objection to debtors' exemptions to which debtors filed a response. ( Id. ) In addition to objecting to the debtors' amended schedules, the Trustee requested a surcharge to compensate the Trustee for work performed to intercept debtors' 2011 income tax refund. (Doc. 2-1, Trustee Objections ¶¶ 23-24).
On October 10, 2012, the Honorable Robert N. Opel, II, United States Bankruptcy Judge held a hearing. (Doc. 3, Tr. Bankr. Hr'g (hereinafter " Tr. Bankr. Hr'g" ) at 1). After reviewing the parties' briefs and hearing oral argument, Judge Opel overruled the Trustee's objection to debtors' amended exemptions and denied Trustee's request for a surcharge. ( Id. at 7-8). Trustee filed a timely appeal on October ...