Attorney Sanction Upheld by 9th Circuit BAP for Reckless Conduct for Meritless Claim of Exemption
The BAP upheld the bankruptcy court’s sanctions in In re Gomez. After a Chapter 7 Trustee voided an untimely perfected security interest in a vehicle that the Debtor originally failed to disclose, and after the Trustee filed a motion to compel turnover, the Debtor amended his exemptions to claim the car exempt.
There were several problems with the claim of exemption in the car: the debtor utilized both California Code of Civil Procedure (“CCP”) sections 703.140(b)(2) (special bankruptcy exemption) and 704.010 (regular exemption) and the Debtor was not entitled to exempt property the Trustee recovered if the transfer was a voluntary transfer by the Debtor, per 11 U.S.C. 522(g)(1). In upholding the Bankruptcy Court’s sanctions and attorney fee award, the BAP clarified why Law v. Siegel did not apply to allow late exemption claims that are not otherwise authorized by the Bankruptcy Code.
The Debtor's attorney's willful lack of knowledge, his failure to respond to the Trustee’s objections and motions, his reliance on another attorney's "expert opinion", a misinterpretation of Law v. Siegel, combined with a level of obtuseness rarely seen, cost him more than $9,500 in sanctions and attorney fees while the Trustee realized $2,500.00 at auction from the subject car.