The Bankruptcy Appellate Panel for the Eighth Circuit found that a Missouri exception to its homestead exemption was preempted by section 522(c) of the federal exemption scheme. In re Moore, 495 B.R. 1 (B.A.P. 8th Cir. July 8, 2013). [Read more…] about State Exception to Homestead Exemption Pre-empted
Lower Court Sides with “Majority View” with respect to Inherited IRAs
Despite the recent holding to the contrary by the seventh circuit, the court in In re Trawick, No. 12-12581 (Bankr. C.D. Cal. Aug. 29, 2013), held that inherited IRAs may be exempt under section 522(b)(3)(C). Exemptibility is contingent upon two elements: 1) that the IRA has received a favorable determination under IRC section 7805, or is otherwise in compliance with the requirement of the IRC, and 2) that the funds in the account are “retirement” funds. Here, the court noted that there is a split in the circuits as to whether inherited IRAs can ever be exempt, under the second factor, since the debtor himself did not contribute the funds toward his own retirement. See, e.g. Chilton v. Moser, 674 F.3d 486 (5th Cir. 2012); Mullen v. Hamlin, 465 B.R 863 (B.A.P. 9th Cir. 2012); Doeling v. Nessa, 426 B.R. 312 (B.A.P. 8th Cir. 2010) (exempt); In re Clark, 714 F.3d 559 (7th Cir. 2013), petition for cert. filed, No.13-299 (Sept. 6, 2013) (never exempt).
[Read more…] about Lower Court Sides with “Majority View” with respect to Inherited IRAs
NACBA Amicus Filed in Supreme Court Exemption Case
The NACBA membership filed an amicus brief in the Supreme Court case of Law v. Seigel (In re Law), No. 12-5196 (Sept 3, 2013), in an effort to defend the debtor’s homestead exemption against surcharge. In that case, the lower court, ostensibly pursuant to its power under section 105(a), imposed the surcharge to pay trustee fees resulting from litigation necessitated by debtor misconduct. See Law v. Siegel (In re Law), 435 Fed. Appx. 697, 2011 WL 2181198 (9th Cir. 2011). [Read more…] about NACBA Amicus Filed in Supreme Court Exemption Case
Kansas EITC Exemption Constitutional
Despite relentless attacks by the bankruptcy trustees Kansas’s bankruptcy-only exemption scheme, under which a debtor in bankruptcy is permitted to exempt his Earned Income Tax Credit, has once again been deemed constitutional. Nazar v. Lea (In re Lea), No. 12-1297 (D. Kans. Aug. 16, 2013), consolidated with Parks v. Hudson (In re Hudson), No. 12-1298. The exemption benefits low-income families with dependent children by treating the excess of EITC credit over taxes owed as an overpayment of taxes and refunding the difference. [Read more…] about Kansas EITC Exemption Constitutional
Eighth Circuit Rejects State Common-Law Exemptions
The Eighth Circuit found that the Missouri opt-out statute does not permit exemptions that are based on state common law. In re Abdul-Rahim, 12-3448 (8th Cir. July 12, 2013). In that case, the debtors sought to exempt their unliquidated personal injury claim from their bankruptcy estate. The bankruptcy court rejected the exemption because it originated under state common law rather than by statutory enactment. Missouri’s opt-out statute, section 513.427, provides that Missouri debtors “shall be permitted to exempt from property of the [bankruptcy] estate any property that is exempt from attachment and execution under the law of the state of Missouri.” In finding that the state exemptions referred to in that section did not include common law exemptions, the court relied on and felt compelled to follow, In re Benn, 491 F.3d 811 (8th Cir. 2007), which held that under Missouri law, the tax refunds that the debtor sought to exempt were property of the bankruptcy estate and were not exemptible. [Read more…] about Eighth Circuit Rejects State Common-Law Exemptions
“Lien Provision” Does Not Render IRA Non-Exemptible
The Sixth Circuit found that the debtor’s pledge of his IRA account against future indebtedness which he never incurred did not render the account non-exemptible in bankruptcy. Daley v. Mostoller (In re Daley), No. 12-6130 (June 17, 2013). [Read more…] about “Lien Provision” Does Not Render IRA Non-Exemptible
Bankruptcy-Specific Exemptions Found Constitutional by Tenth Circuit BAP
The Bankruptcy Appellate Panel for the Tenth Circuit found that Kansas’s bankruptcy-only exemption scheme, under which a debtor in bankruptcy is permitted to exempt his Earned Income Tax Credit, is constitutional. Williamson v. Westby (In re Westby), No. 12-27 (B.A.P. 10th Cir. Feb. 4, 2013). [Read more…] about Bankruptcy-Specific Exemptions Found Constitutional by Tenth Circuit BAP
Bankruptcy-Specific Exemptions Found Constitutional
In a comprehensive opinion, the Sixth Circuit today joined the Fourth Circuit and upheld bankruptcy-specific exemptions against a challenge based on the Bankruptcy and Supremacy Clauses of the Constitution. Richardson v. Schafer (In re Schafer), No. 11-1340 (6th Cir. Aug. 20, 2012) (rev’g 455 B.R. 590 (B.A.P. 6th Cir. 2011)). See also Sheehan v. Peveich, 574 F.3d 248, 252 (4th Cir. 2009). [Read more…] about Bankruptcy-Specific Exemptions Found Constitutional
Third Circuit Allows Trustee Retention of Post-Discharge Appreciation
Relying on Schwab v. Reilly, 130 S.Ct. 2652 (2010), the Third Circuit has found that the chapter 7 trustee is entitled to the value of future appreciation in an asset the debtor has exempted under the wildcard exemption to the extent the value exceeds the dollar amount exempted. In re Orton, No. 11-4157 (3rd Cir. July 20, 2012) (affirming the decisions of the bankruptcy and district courts for the Western District of Pennsylvania). [Read more…] about Third Circuit Allows Trustee Retention of Post-Discharge Appreciation
Seventh Circuit to Address Inherited IRAs
On May 4, NACBA filed an amicus brief in the consolidated cases of Rameker v. Clark, No. 12-1241 and, Adili v. Clark, No. 12-1255 (7th Cir.) on the issue of whether a debtor may exempt an inherited IRA under section 522(b)(3)(C). NACBA has been actively involved in the successful presentation of this issue in courts around the country, arguing that the plain language of the Bankruptcy Code and the Internal Revenue Code militates in favor of recognizing the exemption. The Bankruptcy Code exempts from the debtor’s estate “retirement funds to the extent that those fund are in a fund or account that is exempt from taxation under section 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code of 1986.” Section 408(e) of the IRC provides that any IRA, including one that is inherited from a non-spouses, is exempt from taxation.
Recently, debtors obtained favorable outcomes on this issue in the Fifth Circuit, In re Chilton, No. 11-40377 (5th Cir., March 12, 2012) (exemption under section 522(d)(12)), and the Bankruptcy Appellate Panel for the Ninth Circuit, In re Hamlin, No. 11-1083 (B.A.P. 9th Cir. February 21, 2012). NACBA has also filed an amicus brief on this issue in the Bankruptcy Court District of Massachussetts. In re Seeling, No. 11-30957 (Bankr. D. Mass.)