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Removal of Trust Contingency Benefits Estate

Removal of a contingency in a Trust did not create a new asset such that the resulting increase in value to the debtor/beneficiary would be considered a post-petition asset. In re Wright, No. 19-21544 (Bankr. D. Kans. Dec. 7, 2022).

The Wrights filed for chapter 13 bankruptcy with unsecured debts totaling $14,196.53. They confirmed a three-year plan that provided little to no distribution to unsecured creditors. When they filed for bankruptcy, Ms. Wright and her siblings were the beneficiaries of an irrevocable Trust consisting of 40 acres of real property. The Trust had a contingency that one of Ms. Wright’s siblings, Ronnie True, would receive the Trust income and continue to live on the Trust property for the remainder of his life. Upon Mr. True’s death, the Trustee could then either deed or sell the property for the benefit of the remaining siblings, including Ms. Wright. [Read more…] about Removal of Trust Contingency Benefits Estate

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IRA Withdrawals Create Regular Income for 109(e) Purposes

The debtor had “income” for purposes of eligibility to be a chapter 13 debtor where he intended to use regular withdrawals from his IRA to fund his plan. In re Frysinger, No. 20-31202 (Bankr. D. Ore. Dec. 21, 2022).

The debtor created a plan which he proposed to fund through: 1) holdings in bank account consisting of funds he received pre-petition from settlement of a personal injury lawsuit, 2) future sales of property, and 3) IRA withdrawals. The case came before the court on a creditor’s challenge to the debtor’s status as a bankruptcy debtor under section 109(e). [Read more…] about IRA Withdrawals Create Regular Income for 109(e) Purposes

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Wells Fargo and False Loan Forbearance Class Action

The court denied a motion to dismiss the debtors’ class action adversary complaint against Wells Fargo based on Wells Fargo’s inaccurate notices to various bankruptcy courts that the debtors’ loans had been placed in COVID forbearance at the debtors’ request. Harlow v. Wells Fargo & Co., No. 17-71487, Adv. Proc. No. 20-7028 (Bankr. W.D. Dec. 12, 2022). [Read more…] about Wells Fargo and False Loan Forbearance Class Action

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Unemployment Overpayment Not a Priority Tax Debt

Kentucky’s Office of Unemployment Insurance’s claim for an overpayment of unemployment compensation benefits was not entitled to priority in the debtor’s chapter 13 case where the nature of the claim was better characterized as a “penalty” than a “tax.” In re Clardy, No. 22-30089 (Bankr. W.D. Ky. Dec. 1, 2022). [Read more…] about Unemployment Overpayment Not a Priority Tax Debt

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Who Would Win in a Fight, Allowed Claim or Confirmed Plan?

The winner? Confirmed plan. Where the mortgagee had notice and opportunity to object to confirmation of the debtors’ chapter 13 plan providing for mortgage arrears in the amount of approximately half the mortgagee’s allowed proof of claim, the mortgagee could not be heard, at the debtors’ successful completion of their plan, to complain that the debtors still owed pre-petition arrears. In re Edelstein, No. 17-11461 (Bankr. N.D. Ill. Nov. 7, 2022). [Read more…] about Who Would Win in a Fight, Allowed Claim or Confirmed Plan?

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Post-Petition Fee Agreement a No-Go

A fee agreement that purports to attach an attorney’s lien on the debtor’s exempt personal property is unenforceable under section 526(a) where state law allows such liens only on non-exempt property or on exempt personal property for specified exceptions not including attorney’s fees. In re Turner, No. 22-41570 (Bankr. D. Minn. Dec. 2, 2022). [Read more…] about Post-Petition Fee Agreement a No-Go

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First Circuit Dodges Late-Filed Tax Return Issues

Faced with the question of whether the debtor’s tax debt based on a late-filed tax return was excepted from discharge, the circuit declined to reexamine its holding in Fahey where it applied the strict “one day late” rule, found the debtor waived his argument in support of an objective test that does not consider timing of filing, and instead, held the debtor’s late-filed tax return did not meet Beard’s subjective test for a “return.” In re Kriss, 21-1206 (1st Cir. Nov. 22, 2022). [Read more…] about First Circuit Dodges Late-Filed Tax Return Issues

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Exemption Amount in Lien Avoidance Action

For purposes of lien avoidance under section 522(f), the debtor was able to claim a homestead exemption in the amount of the California exemption in effect at the time of his bankruptcy petition, despite California law that fixed the exemption amount at the time of lien creation. Barclay v. Boskoski (In re Boskoski), No. 22-55098 (9th Cir. Nov. 14, 2022). [Read more…] about Exemption Amount in Lien Avoidance Action

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Ovation Denied Keys to the Candy Store

A bankruptcy court rejected the tax lender’s challenge to the district’s Mandatory Form Chapter 13 Plan where it found the lender, whose claim would be fully paid through that plan, simply did “not want this Court’s oversight in approving claims for reimbursement for any post-petition expense charges.” In re Martin, No. 22-30148 (Bankr. S.D. Tex. Nov. 14, 2022). [Read more…] about Ovation Denied Keys to the Candy Store