RANDALL L. DUNN, Bankruptcy Judge.
The chapter 7
The relevant facts are few and undisputed. The Debtors filed their chapter 7 petition on May 2, 2014. In the schedules filed contemporaneously with their petition, the Debtors listed and clearly identified the Deposit on their Schedule B and claimed an exemption in the Deposit in their Schedule C under § 522(d)(5).
In the meantime, on July 7, 2014, the Trustee filed the Objection, arguing that under § 522(g), the Debtors could not exempt the Deposit voluntarily transferred to Washington County prepetition. Section 522(g)(1) provides in relevant part that:
In light of the Debtors' disclosure of the Deposit from day one in their schedules, concealment is not an issue. Accordingly, the focus is on whether the Debtors' prepetition transfer of the Deposit to the
In their Response to the Objection filed on July 28, 2014, the Debtors argued that a debtor's exemption claims should be interpreted liberally and argued that, "Deposit of a bail bond with a court or jail is not a transfer to a creditor. Bail is simply an amount of money deposited or pledged to a court to persuade the court to release a defendant from custody and to secure the defendant's appearance at all required hearings and trial." See Docket No. 15, at 2. The Debtors analogized the Deposit to an exempt security deposit held by a landlord, citing Sticka v. Casserino (In re Casserino), 379 F.3d 1069 (9th Cir.2004).
The Trustee filed a Reply on September 16, 2014, noting that there was no dispute that the Debtors had transferred the Deposit to Washington County and argued that by voluntarily transferring the otherwise exempt Deposit, the Debtors effectively waived their exemption claim. See Fox v. Smoker (In re Noblit), 72 F.3d 757, 758 (9th Cir.1995). The Trustee further argued that he could recover the Deposit for the benefit of the bankruptcy estate under § 542, even though, as yet, he had not done so. Finally, the Trustee argued that the Ninth Circuit's decision in In re Casserino was both "factually inapposite" and not relevant to the legal issues addressed in the Objection. See Docket No. 20, at 1-2.
The parties filed the Stipulated Facts on September 26, 2014. See Docket No. 24.
At the Hearing, counsel for the Debtors confirmed, without dispute from the Trustee, that the Debtors paying the Deposit by certified funds to the Washington County Sheriff's office on or about June 13, 2013, was the only way that Mr. Yarber could avoid being incarcerated on a criminal claim, that subsequently was dropped.
I have jurisdiction to resolve the issues raised by the Objection under 28 U.S.C. §§ 1334, 157(b)(1) and 157(b)(2)(B).
The Debtors do not contest that the Trustee would have the authority to recover the transfer of the Deposit under § 542, and it is undisputed that the Debtors did not conceal either the Deposit or its transfer. Therefore, the only issue for the court to decide is whether the Debtors' transfer of the Deposit to the Washington County Sheriff's office prepetition was "voluntary" for purposes of § 522(g)(1)(A).
I cannot find that transferring the Deposit to the sheriff's office specifically to keep Mr. Yarber from being incarcerated constituted a voluntary transfer. There was nothing about the transfer of the Deposit that was voluntary other than the fact that the Debtors made it. I therefore conclude that it was not voluntary.
The term "voluntary" with respect to transfers is not defined in the Bankruptcy Code; so, its interpretation varies depending on the facts presented. "For example, in most instances, the granting of a mortgage or security interest in the debtor's property is voluntary.... At the other end of the extreme, a payment to a creditor to obtain the release of a wage garnishment is an involuntary transfer." 4 Collier on Bankruptcy ¶ 522.12[b], at 522-114 (Alan N. Resnick & Henry J. Sommer eds., 16th ed. 2014). See, e.g., Via v. Colonial American Nat'l Bank (In re Via), 107 B.R. 91, 94-95 (Bankr.W.D.Va. 1989) (transfer involuntary where debtor responded to a garnishment notice by obtaining a loan to pay the creditor in order to avoid garnishment). Comparing the threat of garnishment to the threat of incarceration, if anything, the essential involuntariness
My ultimate conclusion is that the Debtors' prepetition transfer of the Deposit to the Washington County Sheriff's office in lieu of a bail bond to keep Mr. Yarber out of jail was not a voluntary transfer for purposes of § 522(g)(1)(A), and I overrule the Objection. The court will prepare the order overruling the Objection for the reasons stated in this Memorandum Opinion.