The issue before the Court was whether the bankruptcy court properly allowed debtors Duffin (“Debtors”) to claim a Utah state law exemption in proceeds and avails of their unmatured life insurance policies, including payments made on the policies in the year preceding their bankruptcy filing. Appellant Stephen W. Rupp, Chapter 7 trustee (“Trustee”) contends the bankruptcy court incorrectly interpreted the Utah exemption statute and that the exemption should not extend to premium payments made within one year of commencement of Debtors’ bankruptcy case.
The Debtors filed a Chapter 7 bankruptcy petition on August 20, 2009. In their schedules, the Debtors disclosed ownership of two $250,000 life insurance policies, having a combined cash value of $8,500. The parties stipulated that, during the year prior to the petition date, Debtors made monthly premium payments on the policies totaling $2,712. The Debtors claimed an exemption for the policies under a Utah statute that provides an exemption for the “proceeds and avails of any unmatured life insurance contracts owned by the debtor . . . excluding any payments made on the contract during the one year immediately preceding a creditor’s levy or execution.”
The Trustee objected to the Debtors’ claimed exemption, arguing that, while the value of the policies was covered under the statute, the exemption did not extend to the $2,712 the Debtors paid in premiums in the year prior to bankruptcy. The Debtors apparently conceded that a portion of the $2,712 was non-exempt under the statute, but argued that only those premium payments that were allocated to the investment portion of the policies should be excluded. The bankruptcy court rejected both parties’ arguments, holding that the Debtors were entitled to claim an exemption for the entire $2,712, along with the value of the policies. The Trustee moved for post-judgment relief, which the bankruptcy court also denied.
Reversed.