Tober v. Lang (In Re Tober)

Arizona Revised Statutes Section 33-1126(A)(6) and (7) allow a debtor in a bankruptcy proceeding to exempt the cash surrender value of life insurance policies and proceeds of annuity contracts from the bankruptcy estate if the debtor names certain beneficiaries. Arizona law requires us to construe these bankruptcy statutory exemptions in favor of the debt- or. As a matter of first impression in Arizona, we conclude that the statutory text does not require a debtor’s child to be a “dependent” to qualify for the exemption. Therefore, we REVERSE the Bankruptcy Appellate Panel’s (“BAP”) ruling and REMAND for further proceedings consistent with this opinion.

I. FACTS AND PROCEDURAL HISTORY

When Ronda Hummel filed her Chapter 7 petition, she owned three life insurance policies, each of which named her adult, non-dependent daughter as the beneficiary. Hummel claimed them exempt.

Similarly, when Joan Tober filed her Chapter 7 petition, she owned an annuity, which named her adult, non-dependent daughter as the beneficiary. Tober claimed it exempt.

The Chapter 7 Trustees in both cases objected to the claimed exemptions. The Trustees argued that the exemption did not apply,…