Ainsworths - Trustee Meadors' Objection to Claimed Exemptions Overruled

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Jan. 14, 2026 Get Citation Alerts Download PDF Add Note

In re: Edward Clark Ainsworth and Stephanie Jo Ainsworth

United States Bankruptcy Court, D. South Dakota

• Citations: None known
• Docket Number: 25-50051

• Precedential Status: Unknown Status

• Opinion

• Authorities (18)

• Cited By (0)

• Summaries (0)

• Similar Cases (11.1K)

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Trial Court Document

UNITED STATES BANKRUPTCY COURT
DISTRICT OF SOUTH DAKOTA

In re: ) Bankr. No. 25-50051
) Chapter 7
EDWARD CLARK AINSWORTH )
SSN/ITIN xxx-xx-5978 )
) DECISION RE: TRUSTEE
and ) MEADORS' OBJECTION
) TO CLAIMED EXEMPTIONS
STEPHANIE JO AINSWORTH )
SSN/ITIN xxx-xx-0285 )
)
Debtors. )

The matter before the Court is Chapter 7 Trustee Robert L. Meadors’ Objection
to Claimed Exemptions and Debtors’ response. The parties submitted Joint
Stipulated Facts and Issues and briefs. The Court has jurisdiction over this
proceeding under 28 U.S.C. §1334 and 28 U.S.C. §157 (a). This is a core proceeding
pursuant to 28 U.S.C. §157 (b)(2). The Court enters these findings and conclusions
pursuant to Fed.Rs.Bankr.P. 7052 and 9014(c). For the reasons discussed below,
the Court will overrule the Trustee’s objection.

FACTS
The facts are undisputed. On May 4, 2025, Debtors Edward Clark Ainsworth
and Stephanie Jo Ainsworth (“Debtors”) filed for bankruptcy. In the two months
prior to filing, $1,704.30 of Stephanie Ainsworth’s wages were garnished by creditor
Credit Collections Bureau (“CCB”) and transmitted by her employer Intertribal Buffalo
Council to CCB (“Garnished Wages”). Debtors claimed these funds as “exempt”
personal property pursuant to S.D.C.L. §43-45-4 on Schedule C, which accompanied
their bankruptcy petition. Pursuant to a request from Trustee Meadors, CCB turned
over the Garnished Wages to Trustee Meadors on or about June 2, 2025.
The Garnished Wages represent portions of five paychecks from pay dates
February 26, 2025, March 12, 2025, March 26, 2025, April 9, 2025, and April 23,
2025, for work performed between February 9 and April 19, 2025. Debtors also
sought to exempt a portion of the paycheck of May 7, 2025, which Debtors
apparently anticipated would be transmitted to CCB as a garnishment. However, the
stipulated issue in this case applies only to the $1,704.30 that was turned over to
Trustee Meadors by CCB, which Debtors seek to exempt.

DISCUSSION
The parties are asking the Court to consider whether wages garnished in the
90 days before the petition was filed, and exempted on Debtors’ schedules, should
be treated as “earned, but unpaid” under S.D.C.L. §43-45-14, as that statute was
revised in 2007. Analysis of the above statute and how it fits into South Dakota’s
statutory framework for exemptions is required to address the stipulated issue:
whether Debtors may claim the Garnished Wages exempt under S.D.C.L. §43-45-4.
The Trustee argues garnished wages are earned and paid to the garnisher and,
therefore, do not meet the requirements under section 43-45-14 and cannot be
claimed exempt by Debtors under section 43-45-4. Debtors argue garnished wages
are earned and, because they are withheld from the employee, unpaid and may be
claimed exempt from the bankruptcy estate under section 43-45-4 as long as they
meet the remaining requirements of section 43-45-14.

I. Burden of Proof
“A debtor's claimed exemptions are presumed to be valid, and an objecting
party bears the burden of proving that a claimed exemption is invalid.” Grueneich v.
Doeling (In re Grueneich), 400 B.R. 680, 684 (B.A.P. 8th Cir. 2009). The burden of
proof here is on Trustee Meadors.

II. Property of the Estate and Exemptions in General
Section 541(a) of the Bankruptcy Code defines property of the bankruptcy
estate. 11 U.S.C. §541 (a). “[A]ll legal or equitable interests of the debtor in property
as of the commencement of the case” are in the estate. Stoebner v. Wick (In re
Wick), 276 F.3d 412, 415 (8th Cir. 2002) (citing 11 U.S.C. §541 (a)(1)). Though
certain types of property are expressly excluded from the bankruptcy estate under
the statute, the definition is intentionally broad and includes property of all kinds.
Mehlhaff v. Allred (In re Mehlhaff), 491 B.R. 898, 900-01 (B.A.P. 8th Cir. 2013).
Section 522 allows a debtor to withdraw certain property from the bankruptcy estate
as a claimed exemption at a stated value. In re Steen, 2012 WL 1252668, at *3
(Bankr. D.S.D. April 13, 2012). “South Dakota has opted out of the federal
exemption scheme, and so the Debtor is limited to the exemptions provided by South
Dakota law.” In re Mehlhaff, 491 B.R. at 901; see S.D.C.L. §43-45-13. The key
provisions of the South Dakota statutes debtors cite for exempting property are
found in S.D.C.L. §§ 43-45-2 through 43-45-4. See Nessan v. Lovald, 494 F. App'x
691, 694 (8th Cir. 2012).
To determine whether a statute is an exemption statute applicable to particular
property, courts look to the language of the statute and its relationship to other
statutory provisions. Benn v. Cole (In re Benn), 491 F.3d 811, 814 (8th Cir. 2007).
“[E]xemption statutes must be construed liberally in favor of the debtor and in light
of the purposes of the exemption.” Andersen v. Ries (In re Andersen), 259 B.R. 687,
690 (B.A.P. 8th Cir. 2001) (citing Wallerstedt v. Sosne (In re Wallerstedt), 930 F.2d
630, 631 (8th Cir. 1991)). “However, the liberal construction of exemption statutes
is ‘for the purpose of achieving the legislative intent, not to extend the provisions of
the legislative grant.'" In re Rousey, 275 B.R. 307, 311-12 (Bankr. W.D. Ark. 2002)
(quoting Eilbert v. Pelican (In re Eilbert), 162 F.3d 523 (8th Cir. 1998)), rev’d on
other grounds, Rousey v. Jacoway, 544 U.S. 320 (2005). "‘Exemption’ is a term
of art in bankruptcy, and . . . ‘while exemption may mean different things in different
contexts, in the context of 11 U.S.C. §522, it refers to laws enacted by the
legislative branch which explicitly identify property that judgment-debtors can keep
away from creditors for reasons of public policy.’" In re Benn, 491 F.3d at 814 (quoting Benn v. Cole (In re Benn), 340 B.R. 905, 914 (B.A.P. 8th Cir. 2006))
(Kressel, J., dissenting). Considering the unique language and context of various
statutes, courts in this circuit have recognized certain exemption statutes involving
wages and garnishments and denied others, looking to the specific language and
context of each. See, e.g., In re Wallerstedt, 930 F.2d at 631.

III. The 2007 Revision of S.D.C.L. §43-45-14 and Exempt Garnished Wages
In July 2007, a revision of S.D.C.L. §43-45-14 took effect. 2007 S.D. Sess.
Laws Ch. 251, §1. Prior to this revision, section 43-45-14 stated, “[t]he earnings
of a debtor are exempt from process or levy only to the extent provided in §§ 21-
18-51 and 21-18-52.” 1990 S.D. Sess. Laws Ch. 157, §9. As a result of the 2007
revision, this section now states:
For purposes of garnishment, the earnings of a debtor are exempt from
process or levy only to the extent provided in §§ 21-18-51 to 21-18-
53, inclusive. For the purposes of a petition filed pursuant to 11 U.S.C.
§ 301 et. seq. only, a debtor's claimed exemptions may include earned,
but unpaid earnings, whether or not such earnings have been
garnished, subject to the limits of § 43-45-4 and provisions of 11
U.S.C. § 547.

S.D.C.L. §43-45-14 (2025).

No court has interpreted this revised language, so the issue before the Court
is one of first impression. The South Dakota Supreme Court has instructed courts
interpreting amendments to South Dakota statutes to “give legislation its plain
meaning” unless the legislation is ambiguous, absurd, or unreasonable. Jensen v.
Turner Cnty. Bd. of Adjustment, 730 N.W.2d 411, 413 (S.D. 2007) (quoting Petition
of Famous Brands, Inc., 347 N.W.2d 882, 885 (S.D. 1984)). Applying a plain
reading to S.D.C.L. §43-45-14, the legislature created an addition with the second
sentence relating to proceedings under the United States Bankruptcy Code, i.e.,
proceedings initiated with “a petition filed pursuant to 11 U.S.C. § 301 et. seq.”
S.D.C.L. §43-45-14. This new second sentence addresses the possibility that a
debtor in bankruptcy could claim an exemption covering “earned, but unpaid
earnings, whether or not such earnings have been garnished[.]” Id. It appears the
legislature added this second sentence to section 43-45-14 to allow a debtor in
bankruptcy the right to claim exempt wages subject to garnishment, at least insofar
as those exemptions are permitted under S.D.C.L. §43-45-4 and recoverable under 11 U.S.C. §547. In other words, it appears the legislature sought to bring garnished
wages within the exemption cap of S.D.C.L. §43-45-4 if a debtor meets the
requirements under S.D.C.L. §43-45-14.
The Trustee argues Debtors’ Garnished Wages were “paid” in the sense Debtor
Stephanie Ainsworth’s employer paid it to the garnisher creditor and, therefore,
section 43-45-14 is not applicable. However, if the legislature intended for garnished
wages to be recognized as paid wages, then there would have been no need for it
to add the phrase “whether or not such earnings have been garnished” to the revised
section. S.D.C.L. §43-45-14 does not appear unclear, uncertain, or ambiguous and
it explicitly identifies property a debtor can keep away from creditors. Debtors’
Garnished Wages were earned by Debtors but not paid to them prior to filing
bankruptcy because they were garnished by CCB. Therefore, the Garnished Wages
qualify under section 43-45-14 as “earned, but unpaid earnings.”
Prior to the 2007 revision, the Court had considered some related issues
regarding exempting garnished wages. In a decision issued only a few months before
the 2007 revision took effect, the Court ruled neither S.D.C.L. §21-18-53 nor §43-
45-14 bars a debtor from exempting under S.D.C.L. §43-45-4 accrued but unpaid
wages not subject to garnishment, to the extent permitted by section 43-45-4. In re
Kraft, Bankr. No. 06-10113, oral decision (Bankr. D.S.D. March 15, 2007) (Nail, J.).
The Court’s decision in Kraft was consistent with earlier rulings, which
concluded S.D.C.L. §15-20-121 is not an exemption statute pursuant to section 522
of the Bankruptcy Code and took a clear position against “stacking” a claimed
exemption for unpaid wages on top of the personal property exemption a debtor may
claim under S.D.C.L. §43-45-4. See, e.g. In re Roxanne R. Swiontek, Bankr. No. 05-
10146, slip op. (Bankr. D.S.D. October 31, 2005) (concluding S.D.C.L. §15-20-12
is not an exemption statute recognized in bankruptcy and did not increase the total
sum of personal property a debtor could claim exempt in addition to S.D.C.L. §43-

1 S.D.C.L. §15-20-12 exempts from property that can be applied to satisfy a judgment
certain earnings “necessary for the use of a family supported wholly or partly by [debtor’]s
labor.”
45-4); In re Gregory D. Zike, Bankr. No. 03-41477, slip op. (Bankr. D.S.D. December
30, 2003) (declining to recognize S.D.C.L. §15-20-12 as an exemption statute that
would allow a debtor to exempt garnished wages under the Bankruptcy Code,
reasoning the exemptions applicable to garnished wages were limited to S.D.C.L. §§
21-18-51 through 21-18-53); In re Michael and Amy Groetken, Bankr. No. 05-
40215, slip op. (Bankr. D.S.D. June 15, 2005) (holding pre-petition wages garnished
and received by the creditor, which the debtor did not declare exempt, belong to the
bankruptcy estate under 11 U.S.C. §541 (a)(1) and (a)(3)).
In drafting the 2007 revision of S.D.C.L. §43-45-14, the legislature appears
to have taken the same position the Court took in Kraft with respect to the issue of
“stacking”; the legislature specified any claimed exemption of earned, but unpaid
earnings were “subject to the limits of §43-45-4.” S.D.C.L. §43-45-14. The
legislature also left intact the Court’s interpretation that S.D.C.L. §15-20-12 was not
intended to define exemptions under the United States Bankruptcy Code. In other
words, the 2007 revision does not create a separate garnishment exemption under
S.D.C.L §43-45-14 that raises the total dollar value a debtor can exempt under
section 43-45-4. Instead, the plain reading of the 2007 revision allows a debtor to
claim an exemption for earned but unpaid wages, subject to garnishment, up to the
dollar limits provided in section 43-45-4 and subject to the provisions of 11 U.S.C.
§547. Section 43-45-14 identifies a type of property which may be exempted under
section 43-45-4.
In addressing the claimed exemption of earned but unpaid wages, whether or
not such earnings have been garnished, the legislature required it to be subject to
property exemptions allowed under S.D.C.L. §43-45-4 and limited to preferential
actions avoided under section 547 of the Bankruptcy Code. “Under the Bankruptcy
Code's preference avoidance section, 11 U.S.C. § 547, the trustee is permitted to
recover, with certain exceptions, transfers of property made by the debtor within 90
days before the date the bankruptcy petition was filed.” Wells Fargo Home Mortg.,
Inc. v. Lindquist, 592 F.3d 838, 842 (8th Cir. 2010) (quoting Barnhill v. Johnson, 503 U.S. 393, 394 (1992)). By referencing section 547 of the Bankruptcy Code in
the 2007 revision of S.D.C.L. §43-45-14, the legislature made clear the allowed
claim for the exemption of earned but unpaid wages, whether garnished or not, is
limited to what is recoverable as a preference under section 547. 11 U.S.C. §522 (h)
allows a debtor to bring an action to avoid a prepetition transfer of the debtor’s
property if the trustee could avoid it under section 547(b). Notably, “11 U.S.C. §
522(h), when read in conjunction with 11 U.S.C. § 522 (g), allows a debtor to avoid
prepetition preferential transfers if (1) the property transferred would have been
exempt; (2) the property was not transferred voluntarily; and (3) the trustee has not
sought to bring an avoidance action.” Pierce v. Collection Assocs. (In re Pierce), 504
B.R. 506, 509 (B.A.P. 8th Cir. 2014) (quoting McCarthy v. Brevik Law (In re
McCarthy), 501 B.R. 89 (B.A.P. 8th Cir. 2013)); see also 11 U.S.C. §522 (g)-(h).
Section 522(i)(2) further states a transfer avoided under either section 522(h) or
section 547 may be preserved for the debtor’s benefit if the debtor can exempt such
property under section 522(i)(1) by debtor avoiding the transfer under subsection (h)
and exempting such avoided property under 11 U.S.C. §522 (b). Ward v. Building
Material Distributors (In re Ward), 36 B.R. 794, 796 (Bankr. D.S.D. 1984). The 2007
revision is consistent with section 522 of the Bankruptcy Code, which allows a
debtor to protect an interest in property that was the subject of a preferential transfer
under section 547 to the extent the property can be exempted from the bankruptcy
estate. The Garnished Wages were a preference under 11 U.S.C. §547 because
they were transferred to the creditor within 90 days before the petition was filed. 11
U.S.C. §547 (b)(4). The Garnished Wages were not voluntarily transferred by
Debtors since they were garnished, and Debtors may avoid the transfers and look to
exempt them under section 522(b).
Since 11 U.S.C. §522 (b) allows Debtors to use state law exemptions, Debtors
may exempt the earned but unpaid garnished wages recovered under section 547 up
to the allowed amounts under S.D.C.L. §43-45-4. Section 43-45-4 grants Debtors
the right to exempt up to $12,000.00 in personal property. Debtors may select from
their personal property what they wish to exempt. Debtors listed the Garnished
Wages on their bankruptcy schedules and properly claimed them exempt under
section 43-45-4 on their Schedule C.
Prior to the 2007 revision, section 43-45-14 identified wages that were earned
but unpaid and not subject to garnishment as property of the estate that could be
exempt under S.D.C.L. 843-45-4. In re Kraft, Bankr. No. 06-10113, oral decision
(Bankr. D.S.D. March 15, 2007) (Nail, J.). After the 2007 revision, section 43-45-
14 was expanded to include earned but unpaid garnished wages Debtors can exempt
if they fit within the exemption limits under section 43-45-4 and were recoverable
as property of the estate by avoiding a preference under 11 U.S.C. 8547.
CONCLUSION
For the reasons stated herein, the Trustee failed to meet his burden of proof,
Debtors are entitled to exempt the Garnished Wages from the bankruptcy estate
under S.D.C.L. 843-45-4, and the Court will overrule Trustee Meadors’ Objection to
Claimed Exemptions. The Court will enter a separate order following the entry of
this decision.
So ordered: January 14, 2026.

BY THE COURT:

Laura L. Kulm Ask
Bankruptcy Judge