11 U.S.C.S. § 522(d)(11)(E) specifies an exemption for a payment in compensation of loss of future earnings of the debtor to the extent reasonably necessary for the support of the debtor and any dependent of the debtor.
In the debtors’ Chapter 7 bankruptcy petition, they listed the value of their wrongful termination lawsuit pursuant to 11 U.S.C.S. § 522(d)(11)(E) as an exemption from the estate. The case was settled, with the agreement specifying that the compensation was for future lost earnings. The debtors claimed the full amount of the net proceeds as exempt under § 522(d)(11)(E), but after the trustee objected, the bankruptcy court reduced the exemption amount.
Did § 522(d)(11)(E) allow the debtors to claim only post-petition loss of earnings as an exemption?
On appeal, the court agreed with the bankruptcy court’s determination that § 522(d)(11)(E) allowed the debtors to claim only post-petition loss of earnings as an exemption based on the clear and unambiguous language of the statute. The bankruptcy court was correct in prorating the settlement amount to allow an exemption for only post-petition loss of future earnings. The court did not agree with the debtors’ assertion that the bankruptcy court erred in calculating the amount reasonably necessary for support under § 522(d)(11)(E) based on the income and expenditure numbers provided by them.