Norwest Bank Nebraska v. Tveten

Omar Tveten (defendant), a Minnesota physician, became involved in a number of highly leveraged real estate investments that eventually soured. On account of personal guarantees executed by Tveten, he came to owe Norwest Bank Nebraska and other creditors (plaintiffs) close to $19,000,000. Some of the creditors initiated lawsuits against Tveten; in October 1985, one such lawsuit resulted in a $139,657 judgment against Tveten. In January 1986, Tveten filed a Chapter 11 bankruptcy petition. Prior to filing the petition, Tveten consulted with an attorney to prepare for bankruptcy. Through 17 transactions, he converted almost all of his nonexempt property into approximately $700,000 of exempt property by selling or otherwise liquidating the nonexempt property and then transferring the proceeds to life insurance or annuity contracts with the Lutheran Brotherhood, a fraternal organization under Minnesota law. State law shielded from creditors any payments made, in unlimited amount, by a fraternal benefit association. In his bankruptcy filing, Tveten sought to exempt the assets held with the Lutheran Brotherhood and to receive a discharge of $18,920,000 of his debts. The creditors objected. The bankruptcy court denied discharge on the grounds that Tveten had abused the protections of the Bankruptcy Code and had unlawfully intended to hinder and delay his creditors. The district court affirmed. Tveten appealed.