NCBRC has filed an amicus brief on behalf of the NACBA membership in the Supreme Court case of Clark v. Rameker (In re Clark), No. 13-299. The debtor in Clark inherited the funds in her mother’s IRA which were then transferred into the debtor’s tax-exempt account via a trustee-to-trustee transfer. In the debtor’s later bankruptcy she sought to exempt those funds. The Seventh Circuit created a split in the circuits when it held that a debtor may not exempt her inherited IRA in bankruptcy. In re Clark, 714 F.3d 559 (7th Cir. 2013). The Fifth Circuit had reached the opposite conclusion in Chilton v. Moser, 674 F.3d 486 (5th Cir. 2012). [Read more…] about NACBA Files Amicus in Supreme Court Inherited IRA Case
CTC Refund Not Exemptible Under Missouri Exemption Statute
A recent BAP decision found that the debtor may not exempt her federal Child Tax Credit refund under Missouri’s exemption for “public assistance.” Hardy v. Fink (In re Hardy), No. 13-6029 (B.A.P. 8th Cir. Dec. 23, 2013) (notice of appeal to 8th Cir. filed January 2, 2014). [Read more…] about CTC Refund Not Exemptible Under Missouri Exemption Statute
Supreme Court Hears Homestead Surcharge Case
The US Supreme Court heard arguments yesterday in the case of Law v. Siegel (In re Law), No. 12-5196. That case involves the issue of whether a bankruptcy court has the power under section 105(a) to impose a special surcharge by taking the debtor’s homestead exemption due to debtor misconduct.
NCBRC filed an amicus brief on behalf of the NACBA membership arguing that while section 105(a) grants equitable power to the court to effectuate the terms of the Bankruptcy Code, it does not permit the court to contravene other sections of the Code or bypass its otherwise applicable provisions. In sections 522(c) and (k) Congress specified that exempt property cannot be used to pay pre-petition debts or administrative expenses. In addition, in sections 522(o) and (q), Congress specified conditions under which a homestead exemption may be compromised as a result of debtor’s misconduct. Section 105(a) permits a court to use its equitable power to “carry out the provisions” of the Code, not to override or contradict them.
The transcript of the argument can be found here. Law v Siegel transcript
Exemption Allowed Where No Intent to Defraud
Actual intent to hinder, delay, or defraud a creditor is a required element for a reduction of homestead exemption under section 522(o). In re Halinga, No. 13-925 (Bankr. Idaho Nov. 27, 2013). [Read more…] about Exemption Allowed Where No Intent to Defraud
Annuity Purchased with Tax-Exempt Rollover Funds Exempt in Bankruptcy
The BAP for the Eighth Circuit found that, under section 522(b)(3)(C), the debtor could exempt an Annuity purchased with funds rolled over from a tax-exempt IRA. In re Miller, No. 13-6026 (Nov. 4, 2013). [Read more…] about Annuity Purchased with Tax-Exempt Rollover Funds Exempt in Bankruptcy
State Exemption Limited to Amount of Equity
The BAP for the Eighth Circuit found that, under the relevant Iowa exemption statute, the debtor could not exempt a vehicle in which she had no equity. In re Goben, No. 13-6039 (Sept. 23, 2013). [Read more…] about State Exemption Limited to Amount of Equity
60-Day Rollover Does Not Disqualify IRA Funds from Exemption
The Fourth Circuit is poised to review the bankruptcy court’s decision that a debtor may rely on the 60-day rollover rule to withdraw funds from his IRA, use them for living expenses, and redeposit them within 60 days without their losing their exempt status in bankruptcy. In re Rudd, 2013 WL 2684541 (Bankr. E.D. N.C., June 12, 2013). [Read more…] about 60-Day Rollover Does Not Disqualify IRA Funds from Exemption
State Exception to Homestead Exemption Pre-empted
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