Whatley v. Stijakovich-Santilli (In re Stijakovich-Santilli), 542 B.R. 245 (9th Cir. BAP 2015)
The U.S. Bankruptcy Appellate Panel of the Ninth Circuit (“BAP”) construed Rule 4003(b)(2) of the Federal Rules of Bankruptcy Procedure (“FRBP”), which extends the period for a trustee to object to exemptions where the exemption was fraudulently asserted, and held that a debtor fraudulently asserts an exemption when the debtor knowingly misrepresents a material fact that supports the claim of exemption and the trustee justifiably relies on a misrepresentation. A trustee can justifiably rely on that misrepresentation even if the trustee could have uncovered the fraud had the trustee carefully investigated. In determining whether a debtor fraudulently asserted an exemption, the court must look to the circumstances that existed when the exemption claim was made and, in doing so, can consider later statements made by the debtor regarding those circumstances.