The debtor could not exempt property of the estate which he owned as a tenant in the entirety with his non-filing spouse with respect to a debt he owed to the IRS where section 522(b)(3)(B) exempts such property only to the extent it would be exempt under nonbankruptcy law and the Tax Code permits the IRS to collect against the property. Morgan v. Bruton (In re Morgan), No. 21-891 (N.D. N.C. Aug. 12, 2022). [Read more…] about Tenancy by Entirety Not Exempt from IRS Debt
$5 Million Domestic Support Debt and Offshore Trust
The bankruptcy court was not bound by the state court’s finding that the debtor’s ex-wife did not violate the stay when she had the debtor arrested for failure to pay domestic support out of an offshore trust he claimed no ownership interest in, but the court found the issues more appropriate for summary judgment and granted the debtor’s motion to vacate its earlier order of dismissal. Foufas v. Foufas, No. 20-22967, Adv. Proc. No. 22-1013 (Bankr. S.D. Fla. June 17, 2022). [Read more…] about $5 Million Domestic Support Debt and Offshore Trust
Lien for Incarceration Costs Is Avoidable Judicial Lien
The State Treasurer’s lien based on a statute authorizing the state to seek reimbursement from a prisoner for the costs of his incarceration was not a statutory lien but a judicial lien which the debtor could avoid as impairing his exemptions. State Treasurer v. Wigger, No. 19-732 (W.D. Mich. Nov. 16, 2020).
The debtor was a prisoner in the Central Michigan Correctional Facility. The Michigan State Treasurer sought to recover some of the costs of his incarceration under the State Correctional Facility Reimbursement Act (SCFRA). After a bench trial, the state court found the State Treasurer was entitled to reimbursement from the debtor’s IRA funds and from proceeds from a judgment the debtor had against his son. The debtor initiated a chapter 7 bankruptcy and filed an adversary proceeding seeking to have the state’s lien voided as a judicial lien impairing his exemptions under section 522(f)(1). The bankruptcy court granted the debtor’s lien avoidance motion finding that the lien impaired his exemption for retirement funds under section 522(d)(12), and his exemption for property valued up to $13,100 under section 522(d)(5). [Read more…] about Lien for Incarceration Costs Is Avoidable Judicial Lien
Debtor’s Post-Discharge Pre-Closure Motion to Convert Denied
The debtor was not permitted to convert from chapter 7 to chapter 13 post-discharge but prior to administrative closure of his case where the court found the attempted conversion to be an abuse of process and his conduct in his chapter 7 case to indicate bad faith. In re Chamoun, No. 20-5069 (C.D. Cal. Dec. 2, 2020). [Read more…] about Debtor’s Post-Discharge Pre-Closure Motion to Convert Denied
Unlawful Possession of Real Property Does Not Create Property Interest
Where the debtor was subject to a state court judgment cutting off his right to cure the default on an installment land contract, he had no interest in the property despite his continued unlawful possession and, therefore, the bankruptcy court erred in confirming the debtor’s chapter 13 plan that provided for payment of the default judgment. In re Peralta, No. 20-2380 (E.D. Pa. Dec. 4, 2020).
The debtor entered into an installment contract with the creditor for the transfer of real property. After the debtor defaulted on the contract, a new agreement was reached obligating the debtor in the event of future default to submit to a default judgment and vacate the property. He defaulted and the creditor obtained a judgment in the amount of $41,151.70, as well as a Judgment for Possession in state court. But rather than vacate the property, the debtor filed for chapter 13 bankruptcy and proposed a plan under which he would pay off the judgment and obtain possession of the property free and clear of the creditor’s interest. The bankruptcy confirmed the plan over the creditor’s objection. [Read more…] about Unlawful Possession of Real Property Does Not Create Property Interest
California Clarifies Marital Property Presumptions
Relying on the answer to a certified question propounded to the California Supreme Court regarding presumptions attached to marital property, the Ninth Circuit found that one of two properties owned by the individual debtor and his wife was community property despite its being designated a joint tenancy. Brace v. Speier (In re Brace), No. 17-60032 (9th Cir. Nov. 9, 2020).
The debtor and his wife acquired the San Bernardino property sometime after they married in 1972, and the Redlands property in 1977 or 1978. When the husband filed for chapter 7 bankruptcy, the trustee sought to sell both properties and distribute the proceeds to the debtor’s creditors. Even though both deeds characterized the properties as joint tenancies, the bankruptcy court found that, under the California Family Code, they were community property and could be sold to satisfy the husband’s debts. The BAP affirmed. In re Brace, 566 B.R. 13 (B.A.P. 9th Cir. 2017). [Read more…] about California Clarifies Marital Property Presumptions