Debtors Have Right to Convert Non-Exempt Assets into Exempt Assets before filing

MAXIMIZING THE BENEFIT OF A DEBTOR’S EXEMPTIONS

It is well established that under the Code the conversion of non-exempt to exempt property for the purpose of placing the property out of the reach of creditors, without more, will not deprive the debtor of the exemption to which he otherwise would be entitled. E.g., Ford v. Poston, 773 F.2d 52, 54 (4th Cir. 1985); In re Lindberg, 735 F.2d 1087, 1090 (8th Cir.), cert. denied sub nom. Armstrong v. Lindberg, 469 U.S. 1073, 83 L. Ed. 2d 507, 105 S. Ct. 566 (1984); In re Reed, 700 F.2d 986, 990 (5th Cir. 1983); 3 Collier on Bankruptcy para. 522.08[4], at 36-37 (15th ed. 1984).Both the House and Senate Reports regarding the debtor's right to claim exemptions state: As under current law, the debtor will be permitted to convert nonexempt property into exempt property before filing a bankruptcy petition. The practice is not fraudulent as to creditors, and permits the debtor to make full use of the exemptions to which he is entitled under the law. H.R. Rep. No. 595, 95th Cong., 1st Sess. 361 (1977), reprinted in 1978 U.S. Code Cong. & Ad. News 5963, 6317; S. Rep. No. 989, 95th Cong., 2d Sess. 76 (1978), reprinted in 1978 U.S. Code Cong. & Ad. News.