United States Bankruptcy Appellate Panel
                             FOR THE EIGHTH CIRCUIT



                                     No. 09-6003


In re:                                     *
                                           *
James Robert Barrows and                   *
Terri Lee Barrows,                         *
                                           *
         Debtors.                          *
                                           *
James Robert Barrows and                   *        Appeal from the United States
Terri Lee Barrows,                         *        Bankruptcy Court for the
                                           *        District of Minnesota
         Debtors-Appellants,               *
                                           *
               v.                          *
                                           *
Julia Christians,                          *
                                           *
         Trustee-Appellee.                 *



                               Submitted: June 30, 2009
                                 Filed: July 10, 1009



Before SCHERMER, FEDERMAN, and SALADINO, Bankruptcy Judges

SCHERMER, Bankruptcy Judge
       Debtors James Robert Barrows and Terri Lee Barrows (“Debtors”) appeal from
the bankruptcy court1 order granting the objection to the Debtors’ amendment of
exemptions filed by Trustee Julia Christians (“Trustee”). We have jurisdiction over
this appeal from the final order and judgment of the bankruptcy court. See 28 U.S.C.
§ 158(b). For the reasons set forth below, we affirm.

                                       ISSUES

       The issues on appeal are whether the bankruptcy court erred in finding bad faith
on the part of the Debtors and whether it abused its discretion in disallowing the
Debtors’ attempt to amend their exemptions because of such bad faith. We conclude
that the bankruptcy court did not err in finding bad faith nor abuse its discretion in
disallowing the Debtors’ amended exemptions.

                                  BACKGROUND

      The Debtors are married. Terri Lee Barrows was out of work in early 2008 and
the family’s consumer debts became unmanageable. On March 3, 2008, the Debtors
met with Attorney Alan Albrecht (“Attorney”) to discuss bankruptcy. The Attorney
gave them a worksheet to fill out and return to him. The worksheet included questions
about the Debtors’ assets, income, expenses and creditors. The worksheet did not
purport to be an official document, nor did the Debtors believe it to be one. The
worksheet stated as follows: “Official Bankruptcy Forms will be completed using the
information that you give in these worksheets and you will be required to sign a
declaration stating under penalty of perjury that the information is true and correct.”




      1
       The Honorable Robert J. Kressel, United States Bankruptcy Judge for the
District of Minnesota.
                                          2
       The Debtors took the worksheet home and spent a lot of time filling it out.
Question 16 of the worksheet asked the Debtors to list the approximate average daily
balance in their bank accounts. Terri Lee Barrow looked up the balance in the
couple’s checking account online and listed $300 as the approximate average daily
balance of the checking account and $25 as the approximate daily balance of the
savings account. The Debtors returned the completed worksheet to the Attorney’s
office on June 15, 2008.

      After completing the worksheet and returning it to the Attorney’s office but
before they reviewed and signed their bankruptcy petition and schedules, the Debtors
borrowed $17,000 from James Robert Barrows’ 401K account. The Debtors
deposited the proceeds from the 401K loan into their checking account on June 30,
2008.

        The Debtors returned to the Attorney’s office on July 7, 2008, where they
carefully reviewed their petition and schedules page by page, comparing the schedules
to the information they had provided on the worksheet. The Debtors knew at the time
that they had deposited the $17,000 proceeds from the 401K loan into their checking
account. Nonetheless, the Debtors approved and signed under oath the bankruptcy
petition, schedules, and statements on July 7, 2008. The schedules listed the current
value of the Debtors’ interest in the checking and savings accounts as $325. The
Debtors claimed an exemption for their savings and checking accounts with a current
value of $325. The Debtors listed James Robert Barrow’s 401K account with a
current value of $65,000. On their statement of financial affairs when asked to list all
property other than property transferred in the ordinary course of business or financial
affairs of the debtor transferred either absolutely or as security within two years
immediately preceding the commencement of this case, the Debtors listed “None.”
Finally, the Debtors indicated no anticipated change in income or expenses in their
statements.



                                           3
      The Attorney filed the Debtors’ bankruptcy petition and schedules on July 15,
2008 (“Petition Date”). On the Petition Date the Debtors’ checking account had a
balance of $13,918.89. The Debtors had been actively drawing on the account prior
to and after their bankruptcy filing, paying their mortgage and other bills.

      The Trustee conducted the Debtors’ Section 341 meeting of creditors on August
18, 2008. At the meeting the Debtors testified under oath that their petition and
schedules were true, correct and complete. The Debtors provided the Trustee with
copies of their bank statements but did not disclose the 401K loan or the fact that the
balance in the checking account exceeded the amount listed in their schedules by more
than $13,000. After the Section 341 meeting of creditors, the Trustee reviewed the
bank statements and sent a written demand to the Debtors for turnover of the funds in
the bank account in excess of the $325 which the Debtors had exempted. On August
26, 2008, the Debtors filed Amended Schedules B and C listing the value of the bank
accounts at $13,970.19 and asserting an exemption of the entire balance in the
accounts.

       The Trustee objected to the Debtors’ amended exemption of the bank accounts.
The bankruptcy court conducted a hearing on the objection. The Debtors testified that
Terri Lee Barrows spent a significant amount of time researching and collecting
information and filling out the worksheet provided by the Attorney. The Debtors
carefully reviewed the petition, schedules, and statements prepared by the Attorney
and signed them under oath, attesting to their accuracy. In examining the petition,
schedules and statements, the Debtors checked to make sure the documents matched
the information contained in the worksheet the Debtors had provided to the Attorney
and did not contain any typographical errors. The Debtors knew the worksheet was
prepared before the 401K loan and that the petition, schedules, and statements did not
accurately reflect the balances of the bank accounts and the 401K account as of the
day they signed the documents under oath. The Debtors explained that they thought
the bankruptcy documents only needed to reflect the balances disclosed in the

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worksheet and that they did not need to be updated. The Debtors had been advised
by the Attorney that they would have to provide copies of bank statements to the
Trustee. They knew such statements would show the actual account balances on the
Petition Date. The Debtors thought this was sufficient. The Debtors also stated that
they did not consider the 401K loan to be a transfer of assets – instead it was merely
the transformation of an asset from one form – funds in a 401K account – to another
form – funds in a bank account. The bankruptcy court determined that the Debtors
had acted in bad faith in failing to accurately disclose the amount of funds in the bank
accounts and then asserting an exemption therein only after the Trustee demanded
turnover of the funds in excess of the originally disclosed amount. The court
sustained the Trustee’s objection to the amended exemption and limited the Debtors’
exemption of the bank account to $325. The Debtors appeal that order.

                             STANDARD OF REVIEW

      We review the bankruptcy court’s findings of fact for clear error and its
conclusions of law de novo. Kaelin v. Bassett (In re Kaelin), 

, 888 (8th
Cir. 2002); Bauer v. Iannacone (In re Bauer), 

, 356 (B.A.P. 8th Cir.
2003). The bankruptcy court has discretion to deny an amendment of exemptions if
the amendment is proposed in bad faith. 

; 

. Bad faith is a finding of fact which is subject to review for clear error. 

; 

. A finding is clearly erroneous when
although evidence exists to support it the reviewing court is left with the definite and
firm conviction that a mistake has been committed. 

; 

.




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                                    DISCUSSION

       Pursuant to Section 522(b) of the Bankruptcy Code, a debtor may exempt
property either under the federal exemptions set forth in Section 522(d)2 or under state
or other applicable exemption laws. 11 U.S.C. § 522(b). Exemption claims are
generally subject to liberal amendment. 

; Armstrong v. Harris
(In re Harris), 

, 1015 (8th Cir. 1989); 

.3 The right
to freely amend exemptions is not absolute, however, and “can be tempered by the
actions of the debtor or the consequences to the creditors.” 

;

. Bad faith on the part of the debtor or prejudice to creditors
can eliminate a debtor’s right to amend exemptions. Here, prejudice to creditors is not
at issue; instead, bad faith by the Debtors is.

       The Trustee, as the objector, bears the burden of establishing bad faith by a
preponderance of the evidence. Fed.R.Bankr.P. 4003(c); see also Grogan v. Garner,

, 

(1991); 

. Bad faith is determined
by an examination of the totality of the circumstances. 

;

. Concealment of an asset generally supports a finding of bad
faith. 

. The efficiency of the bankruptcy process depends on
the accuracy and reliability of the petition, schedules, and statements without the
necessity of digging around or conducting independent examinations to get the true
facts. Mertz v. Rott, 

, 598 (8th Cir. 1992). Full and accurate disclosure
is required of debtors.




      2
        A state may opt out of the federal exemptions, leaving only state
exemptions available for debtors. Minnesota has not opted out and therefore
debtors in Minnesota may choose between the federal and state exemptions.
      3
        See also Fed. R. Bankr. P. 1009 permitting a debtor to amend schedules as
a matter of course at any time before the case is closed.
                                           6
       Here, the bankruptcy court considered the evidence and determined that the
Debtors had acted in bad faith in listing the amount in their bank accounts at $325
when they knew they had borrowed $17,000 from a 401K account and had deposited
the loan proceeds into their bank account shortly before filing bankruptcy. The
Debtors had been actively spending the money and were well aware of its inclusion
in the bank account, yet they understated the account balance by more than $13,000.
The Debtors continued to spend the loan proceeds post-petition, yet again attested
under oath to the accuracy of the bankruptcy schedules when the Trustee asked about
them at the Section 341 meeting of creditors. The Debtors failed to mention the
discrepancy between the listed bank account balance and the actual bank account
balance or the 401K loan, instead explaining that they knew they were providing bank
statements to the Trustee and that the Trustee would learn the true balance upon
review of the statements. The bankruptcy judge did not believe the Debtors’
explanation or that their actions were taken in good faith. As the trier of fact, the
bankruptcy judge was in the ideal position to evaluate the veracity of the Debtors as
they testified at trial. 

. As long as the trial court’s conclusion
is plausible in light of the record viewed as a whole, we shall not reverse it even if the
record also supports the alternative conclusion. Anderson v. City of Bessemer City,
N.C., 

, 573-74, 

, 1511 (1985). The trial court’s choice
between two permissible views of the evidence cannot be clearly erroneous. 

court considered the totality of circumstances, determined that the Debtors
acted in bad faith, and exercised its discretion to sustain the objection to the amended
exemption in light of the Debtors’ bad faith. The bankruptcy court’s conclusion is not
clearly erroneous. Furthermore, the court did not abuse its discretion in sustaining the
objection to the amended exemption based on its determination of bad faith.

      Alternatively the bankruptcy court determined that the Debtors acted with
reckless indifference to the truth when they provided inaccurate schedules and
statements and failed to correct the material falsehoods therein. Again, the bankruptcy



                                            7
court’s conclusion is based on its evaluation of the Debtors’ veracity and is supported
by the record as a whole and therefore should be affirmed.

       The Debtors argue that they could have exempted the funds if they had
remained in the 401K account so there is no harm in allowing the Debtors to exempt
the funds after transferring them to the bank account. This fact does not change the
result. 

(“The irony here is that if the Debtors had accurately
disclosed the [funds in the bank accounts and the 401K loan] from the outset, they
may have been entitled to exempt [the funds].”) While there may be no harm to
creditors, the Debtors acted in bad faith and that bad faith alone is sufficient to
disallow the amended exemption.

                                   CONCLUSION

       The bankruptcy court correctly considered the totality of circumstances and did
not err in finding bad faith on the part of the Debtors. The court did not abuse its
discretion in denying the Debtors’ asserted exemption in the entire bank account
balance. Accordingly, we AFFIRM.




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