UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
DEBTORS CASE NO. 92-20155
This matter is before the Court on the trustee's Motion to withhold or revoke the debtors' discharge for failure to turn over $1824.85 in non-exempt assets. Although the Motion does not identify the "non-exempt assets", this amount apparently represents a tax refund or some portion of a tax refund which the debtors have included in their claim of exemption pursuant to KRS 427.160.
The debtors herein filed their Chapter 7 petition in this Court on February 4, 1992. Their Schedule I indicates that the debtor husband's gross monthly income was $2200.00 and the debtor wife's gross monthly income was $560.00. Their petition does not include information as to their annual gross incomes for the tax year to which the refund relates. Their Schedule C indicates that each claimed a $1000.00 exemption pursuant to KRS 427.160, but does not identify what property or interest in property is being claimed as exempt. It is impossible for this Court to tell if the debtors intended to use up their entire exemption under this section with their tax refund, or if other property interests were included.
In any case, pursuant to KRS 427.160, each debtor must claim as exempt only the property of that same debtor. The debtors apparently filed a joint tax return and were entitled to a tax refund based on their combined incomes. Each debtor may claim as exempt only that proportion of the refund from a joint return which his or her gross annual income bears to the total gross annual income of the two debtors combined but not to exceed the $1,000 exemption limit set forth in KRS 427.160. For example, if one debtor earned 25% of the gross income of the two debtors combined, then that debtor may claim as exempt 25% of the refund but not more than $1,000.
An order in conformity with this opinion will be entered separately.
By the Court -
Charles L.J. Freihofer, Esq., Trustee
Edward G. Drennen II, Esq.