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In re Ricky Joe Jones, Cheryl Ann Jones, Debtors

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  • In re Ricky Joe Jones, Cheryl Ann Jones, Debtors


    Date Decided: Jan 25th, 2011

    Decided By: U.S. Court of Appeals, Tenth Circuit(Bankruptcy) (Federal)

    Court: United States Bankruptcy Court for the District of Kansas

    Citation: 446 B.R 466


    Background:

    Ricky Joe Jones ("Jones") was severely injured while
    employed by Kansas City Southern Railway ("KCS"). He brought a FELA claim in
    1987 alleging KCS was negligent and sought damages for a permanent disability.
    The parties ultimately settled the suit, whereby KCS agreed to pay Jones
    monthly payments of $700, and increasing lump sum payments every 5 years. Per the
    settlement agreement, payments owed to Jones pursuant to the Railroad
    Retirement Act ("RRA"), 45 U.S.C. 231a
    were reduced, and Jones waived his seniority rights and future employment with
    KCS.

    In 1998, Jones and his spouse ("Debtors") sold the rights to
    all of the lump sum payments with the exception of one $200,000 payment due in
    2023. In 2001, Debtors filed for bankruptcy. Debtors informed their bankruptcy
    council of the $200,000 payment, but failed to disclose it for the purposes of
    the bankruptcy proceedings.

    In 2003, Debtors attempted to sell the rights to the
    $200,000 payment. The potential buyer informed the bankruptcy Trustee and the
    Trustee filed a motion to reopen the bankruptcy proceedings. The Trustee sought
    to include the $200,000 payment into the schedule of assets available to
    creditors. In response, Debtors claimed the remaining payment was exempt.

    The Trustee objected to Debtors' exemption. Trustee claims
    that the settlement was for personal injury, which proceeds are not exempt
    under Kansas state law. Additionally, it claims the exemptions for disability
    benefits and employment-related benefits under the bankruptcy code do not apply
    to Debtors' settlement.

    Debtors argue that the injury disabled Jones, thus the
    settlement should be exempt because it was a disability benefit under the
    bankruptcy code.


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