DEBTOR                                                                               CASE NO. 98-21474



           1.        Introduction

           On January 6, 2006, the United States Trustee (“UST”) filed an Emergency Motion to Reopen Case to Administer an Asset (“the Motion to Reopen”), this case having been closed since July 21, 1999. On January 18, 2006 the court entered its Order Reopening Case to Administer Assets. On that same date, a successor Chapter 7 Trustee (“the Trustee”) was appointed, the original Chapter 7 Trustee being deceased. He filed a Motion to Approve Compromise on March 30, 2006, and an Order Approving Compromise was entered on April 24, 2006. The Debtor filed his Motion to Set Aside Order Approving Compromise (“Motion to Set Aside”) on May 1, 2006. The Debtor’s Motion is now before the court for decision. For the reasons set out below, the court will overruled the Motion.

           2.        Factual and procedural history

           The Motion to Reopen sets out a brief history of this Debtor, and his business, Jude Custom Systems, Inc. (Case No. 96-21729), which filed its Chapter 11 petition in this court on December 2, 1996. A Chapter 11 Operating Trustee, Leonard Eppel, was appointed in that case on March 31, 1997. At some point, Mr. Eppel requested that the Debtor herein leave the business premises, but gave him permission to retrieve his personal items therefrom. The Debtor commenced his own Chapter 7 case in Florida on January 5, 1998; the case was moved to this district on May 27, 1998. The Debtor was discharged on June 30, 1999, and the case was closed on July 21, 1999.

           The UST’s Motion to Reopen was apparently precipitated by communication with an attorney for Fifth Third Bank (“Fifth Third”) regarding a state cause of action (Case #01-CI-02134, Kenton Circuit Court, Civil Division) the Debtor had filed to collect proceeds of a $100,000 Certificate of Deposit (“the C.D.”) that was issued in 1989. Fifth Third filed a Memorandum in Support of the Motion to Reopen on January 11, 2006. The C.D. is in the name of “Jude Custom System Inc. Defined Benefit Pension Trust” (“the Pension Plan”), and the Debtor purportedly obtained it when he was allowed to retrieve his personal items from the business premises. The Debtor has apparently claimed that he is owed the proceeds of the C.D. as the last remaining member of his company’s pension plan.

           The Debtor’s Chapter 7 petition did not list the C.D. on any schedule. In a deposition taken by Fifth Third on February 16, 2004, the Debtor stated he had possession of the C.D. prior to the filing of his Chapter 7 petition (Mot. to Reopen, Exh. 2, p. 91). The Debtor further stated in that deposition that he failed to disclose the C.D. in his bankruptcy case on the advice of someone, possibly his attorney (unidentified), who told him not to because it might be confiscated (Mot. to Reopen, Exh. 2, p. 101). The UST’s position is that the Debtor intentionally failed to list the C.D. in his Chapter 7 petition, thereby preventing the then case Trustee from investigating a possible asset.

           Fifth Third did not admit the existence of the C.D., but offered to pay a portion of its face value to the Debtor’s bankruptcy estate if the case were reopened. Upon its reopening, as set out above, the Trustee filed his Motion to Approve Compromise. Therein he set out that Fifth Third had offered to settle the matter for $17,500.00; the court approved that settlement. The Debtor then filed his Motion to Set Aside, alleging 1) that the Debtor was not properly served with the Motion to Approve Compromise, 2) that the C.D. was never an asset of the Debtor or property of the bankruptcy estate, and 3) that pension funds are exempt. The Trustee filed his Response to Debtor’s Motion to Vacate on June 7, 2006. The matter was heard on June 13, 2006, and an Order of Submission was entered on June 29, 2006.

           3.        Discussion

                       a.        Notice to the Debtor

           The Debtor’s Motion to Set Aside contends that he was not properly served with the Motion to Approve Compromise. He states that the Motion was served on his former bankruptcy counsel who is not counsel of record at this time, and, further, that while he (the Debtor) is listed on the Motion’s certificate of service, his address is incorrect. He also states that his state court counsel was not counsel of record in the bankruptcy case at the time the Motion was filed, and “whether state court counsel received the pleading is irrelevant.” This statement apparently addresses the Trustee’s contention that the Debtor was notified of the UST’s intent prior to the filing of the Motion to Reopen, and that his counsel was provided a courtesy copy of that Motion.

           Federal Rules of Bankruptcy Procedure 9019(a) and 2002(a)(3) govern here. Rule 9019(a) provides: “On motion by the trustee and after notice and a hearing the court may approve a compromise or settlement. Notice shall be given to creditors, the United States trustee, the debtor, and indenture trustees as provided in Rule 2002 and to any other entity as the court may direct.” Fed. R. Bankr. P. 9019(a). Rule 2002(a)(3) provides for 20 day notice by mail to the debtor, the trustee, creditors and indenture trustees of “the hearing on approval of a compromise or settlement of a controversy . . .” Fed. R. Bankr. P. 2002(a)(3).

           Notice has been determined to be adequate when it can be shown that the party complaining that he did not receive formal notice received actual notice. In Bayoud v. Med. Center Hosp. (In re Am. Dev. Intern. Corp.), 188 B.R. 925 (N.D. Tex. 1995), a non-debtor third party maintained that he did not receive formal notice of a settlement agreement prior to the hearing on the matter. The court found that he had actual notice as he knew about the settlement before the motion was filed, had an opportunity to communicate his objections and thereby put the trustee on notice of those objections. He filed two motions before the hearing and attended, presenting testimony, exhibits, and argument in opposition to the settlement. Id. at 934.

           This court believes that the Debtor here had actual notice of the hearing on the Motion to Approve Compromise, notwithstanding his statement that receipt of the Motion by his state court counsel was “irrelevant.” His counsel’s knowledge of the UST’s action gave him the opportunity to appear at the hearing on the Motion to Compromise, but he failed to do so. Further, as the Trustee points out in his Response, counsel for the Debtor entered his appearance and filed the Motion to Set Aside only a few days after the Trustee filed a certification of mailing the Order Approving Compromise. The Debtor and his counsel apparently had sufficient notice to take that action.

           b.        Whether the C.D. was an asset of the Debtor’s estate

           The Debtor contends that the C.D. was never property of his bankruptcy estate because he never owned it. His interest in the C.D. resides in his assertion that he was the only remaining record beneficiary of the Pension Plan. The Debtor testified in his February 16, 2004 deposition, however, that he had taken the C.D. from his office when Mr. Eppel asked him to leave, and that he had tried to cash it prior to his filing his bankruptcy case (Mot. to Reopen, Exh. 2, p. 91). When asked whether he listed the C.D. as an asset in his bankruptcy case, he replied: “No, because it was pension money. Let me tell you about personal bankruptcy. I did that through bad advice. I didn’t owe the money I found out. Everybody was paid. I just got a bad strike for nothing.” Id.

           The Debtor was also questioned about whether he had any paperwork to support his contention that he was entitled to disbursement from the Pension Plan. He answered that he did not, “[b]ut if I’m the last one in, I bought it, I paid everybody out, it becomes mine.” Id. at p. 102. The cumulative effect of this testimony is that the Debtor obviously considered the C.D. to be his personal property, an asset that he should be able to retain because he had been ill-advised in filing his bankruptcy. The Debtor considered the C.D. to be his, treated it as his, and attempted to cash it. Property of the estate is defined as “all legal and equitable interests of the debtor in property as of the commencement of the case.” 11 U.S.C. § 541(a)(1). The C.D. is an interest of the Debtor in property that comes within the purview of section 541. He cannot justify his failure to list it as an asset in his bankruptcy case, and the court finds that it is property of the estate.

           c.         Exempt nature of pension funds

           Finally, the Debtor contends that the C.D. is an exempt asset as it is part of a pension plan. He cites KRS 427.150 and Bankruptcy Code section 522(b) in support of this proposition. Pension funds may be exempt under KRS 427.150; see In re Peklenk, 106 B.R. 119 (Bankr. W.D. Ky. 1989). The Debtor, however, does not address the issue of his failure to list the C.D. on his bankruptcy schedules and the effect of that failure on his right to claim an exemption. A debtor who does not list an asset may not later claim that such asset is exempt:

If bad faith and prejudice to creditors may be found in circumstances where a debtor disputes that an asset is property of the estate, and thus fails to claim an exemption, the intentional concealment of an asset raises heightened concerns regarding good faith. Courts in other jurisdictions have consistently held that intentional concealment of assets bars the debtor’s exemption claim after the assets are uncovered.

In re Grogan, 300 B.R. 804, 808 (Bankr. D. Utah 2003). See also In re Yonikus, 996 F.2d 866, 868 (7th Cir. 1993)(“fraudulent concealment of an asset works as a forfeiture of exemption rights”); In re Miller, 255 B.R. 221, 222 (Bankr. D. Neb. 2000)(concluding “a debtor may not claim as exempt property intentionally omitted from schedules”). This court therefore concludes that the Debtor herein has no basis for claiming the C.D. as exempt.

           In consideration of all of the foregoing it is the opinion of this court that the Debtor’s Motion to Set Aside Order Approving Compromise should be, and it hereby is, overruled.

Copies to:

David M. Cantor, Esq.

L. Craig Kendrick, Esq., Trustee

Dennis R. Williams, Esq.

U.S. Trustee