WisBar News: Bankruptcy, Insolvency and Creditors Rights Section Seeks Input on Amicus Request:

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  • WisBar News
    February
    08
    2013

    Bankruptcy, Insolvency and Creditors Rights Section Seeks Input on Amicus Request


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    ​Feb. 8, 2013 - The State Bar of Wisconsin’s Bankruptcy, Insolvency and Creditors Rights (BICR) Section has submitted a request to file an amicus curiae brief in a matter currently pending before the U.S. Court of Appeals for the Seventh Circuit.

    The section is seeking authority from the State Bar’s Board of Governors pursuant to State Bar bylaw Article VII, section 2 to submit the brief in the case of Bronk v. Cirilli, Nos. 12-3859 and 13-1123. The section also seeks input, comments, or questions from members about the request to file the amicus brief.

    Facts of the Case 

    The facts are set forth in Bronk v. Cirilli, 444 B.R. 902 (Bankr. W.D. Wis. 2011), aff’d in part, vacated in part, ___ B.R. ___ (W.D. Wis. 2012), appeals pending

    Leonard Bronk was an elderly widower left with very large unexpected medical bills after his wife’s death. Within a few months before filing bankruptcy, he took funds that were otherwise not exempt from execution and used them to purchase an annuity for himself and to fund college savings plans, also known as EdVest accounts or § 529 plans, for his grandchildren. 

    The trustee in Bronk’s Chapter 7 case, John Cirilli, objected to Bronk’s discharge and to the exemptions Bronk claimed in his annuity and the EdVest accounts. The bankruptcy judge, the Hon. Thomas Utschig, overruled the trustee’s objection to Bronk’s discharge and the trustee’s objection to Bronk’s claim of exemption in his annuity. However, he found that Wis. Stat. section 815.18(3)(p), which creates an exemption for “an interest in a college savings account under s. 16.641 [formerly s. 14.64],” was ambiguous. 

    He held that it only protects the beneficiary’s potential right to receive qualified distributions from the account, and that the account owner may not claim the account owner’s interest in the account as exempt. 

    Accordingly, Judge Utschig sustained the trustee’s objection to the exemption to the EdVest accounts. On appeal to the district court, Judge William Conley affirmed Judge Utschig as to the granting of the discharge and the denial of the exemption in the EdVest accounts, and remanded for further analysis as to whether the annuity was exempt. On remand, Judge Utschig again sustained the claim of exemption in the annuity. Both parties have appealed directly to the Seventh Circuit, which is expected to issue a briefing schedule this week, presumably with briefs due promptly. 

    Under Fed. R. App. P. 29(e), briefs of amici curiae are due within seven days of the due date of the principal brief of the party the amicus supports.

    Issues on Appeal 

    Bronk’s and Cirilli’s appeals raise two issues: Bronk’s entitlement to exempt his annuity and his entitlement to exempt the EdVest accounts.

    The sole issue the BICR Section seeks to address is the exemptibility of EdVest accounts. With respect, the BICR Section believes Judge Utschig was wrong. 

    The plain language of § 815.18(3)(p) exempts “an interest in a college savings account under s. 16.641.” The account owner’s interest is the principal and perhaps the only property interest in a college savings account. The statutory language is clear and unambiguous.

    BICR Position 

    The position the BICR Section seeks to advocate is that the account owner’s interest in a college savings account, as well as the beneficiary’s right to qualified distributions, are both exempt under § 815.18(3)(p), subject only to the restriction set forth in § 815.18(10) that “[a]ny or all of the exemptions granted by this section may be denied if, in the discretion of the court having jurisdiction, the debtor procured, concealed or transferred assets with the intention of defrauding creditors.”

    Bronk v. Cirilli is an appropriate case for Section involvement.  Judge Utschig’s ruling, if sustained by the Seventh Circuit, would effectively mean that bankruptcy courts throughout Wisconsin would be bound by Circuit precedent interpreting Wisconsin law to disallow account owners’ claims of exemption in EdVest accounts. 

    Given this possibility for a binding precedential ruling, the BICR Section believes that Section involvement is appropriate. The issue is an important and recurring one to Wisconsin residents.


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