Lares

The bank in which Cindy Lares had deposited the proceeds of the sale of her home exercised its contractual right to offset the funds in the account against a preexisting business debt personally guaranteed by Lares. She appeals the district court’s order affirming the bankruptcy court’s decision denying her claim that the funds were exempt from setoff.

FACTS AND PROCEDURAL HISTORY

Cindy Lares (“Lares”) and her then husband, Michael, were sole owners of a small incorporated business. The business borrowed approximately $70,000 in two separate transactions from West One Bank, now U.S. Bank (“Bank”) and Lares personally guaranteed the corporate indebtedness reflected in the two notes. Both guaranties contained the following language:

The Lares’ marriage later ended in divorce. Their home was sold, and $26,000 of the sale proceeds was deposited with *1168 the Bank in an account which was ultimately awarded to Lares in the property settlement. When the notes went into default, the Bank offset the $26,000 against the approximately $50,000 still due on the notes. Lares later filed a petition in bankruptcy and claimed that the $26,000 was exempt under Idaho Code § 55-1008 , which…