Category Archives: Exemptions

Post-Petition Inheritance

Post-Petition InheritancePost-petition inheritance disclaimer was avoided. Here’s what happened.

Post-petition inheritance disclaimer was avoided.  The Debtor’s mother died on June 27. 2006, and the debtor filed her bankruptcy petition on September 29, 2006. On November 3, 2006. the Debtor. who was executrix of the probate estate, filed a disclaimer of the inheritance she was to receive. The Trustee then sought to avoid the purported disclaimer as an unauthorized post-petition transfer under §549. The Debtor countered that under Fifth Circuit and Texas law the disclaimer related back to the date of death, and therefore did not occur post-petition. ln re Schmidt. 362 B.R. 318 (Bkrtcy.W.O. Tex. 2007).

Finding for the Trustee, Judge Clark followed In re Farrior, 344 B.R. 483 (Bkrtcy. W.O. Va. 2006), which held that federal pre-emption trumps a Debtor’s ability to employ if state law disclaimer as to property designated by federal statute (§54I) as property of the estate. The Court distinguished Simpson v. Penner 36 F.3d 450 (5th Cir. 1994) which involved a pre-petition disclaimer. However Judge Clark questioned whether Simpson was still good law, as it pre-dated Drye v. United States 528 U.S. 49 (1999), where the Supreme Court ruled that a state-authorized disclaimer of inheritance could not defeat attachment of a federal tax lien to the taxpayer’s beneficial interest in the inheritance prior to execution of the disclaimer. The Court also cited Matter of Burgess, 438 F.3d 493 (5th Cir. 2006) (en banc) as further authority that Simpson no longer applies. In Burgess. the Fifth Circuit held that a subsequent event (passage by Congress of a crop disaster relief bill) could not be used to revise a state of affairs that existed on the date of the bankruptcy filing. In this case the inheritance was property of the es tate on the petition date, giving the Trustee dominion and control over it, not the Debtor. Even if the Fifth Circuit did not find Drye persuasive, Judge Clark was certain that the Circuit Court would not permit a post-petition disclaimer to be effective. Post-petition inheritance disclaimer avoided.

For more information about post petition inheritance disclaimer avoided- contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.

Bankruptcy Exemption – Bank Account

Bankruptcy Exemption - Bank AccountBankruptcy Exemption – Bank Account What amount should be used in your bankruptcy schedules when you list the account on your schedule?  The amount should be the exact amount in the account on the day you file your petition.  What happens if you have outstanding checks that have not cleared your account?  You still must disclose the total amount in the account. 

Here’s the court case regarding Bankruptcy Exemption – Bank Account: The Debtors scheduled their bank account balance at $513. The actual bank account balance on the petition date was $5,862.38. The difference was due to checks written by the debtor before they filed their petition that had not cleared before the petition was filed. The trustee demanded the Debtors turnover of the account balance on the petition date of $5,862.38. Debtors opposed the motion arguing that because the funds were no longer in the account the trustee could not obtain turnover of the petition-date balance, citing In re Pyatt, 486 F.3d 423 (8th Cir. 2007).

The bankruptcy court here disagreed.  The Court sited In re Brubaker, 426 B.R. 902 (Bankr. M.D. Fla. 2010). The Court took notice that were two schools of thought regarding the bankruptcy exemption – bank accounts.

(1) the burden is placed on the debtor to recover the money and

(2) the trustee should be responsible and have to pursue the transferees (the people the checks were written to).

However, both schools had agreed that the funds were property of the estate and that neither outcome would be good for debtors. The court held that the funds remained in the account until the checks cleared and were therefore property of the bankruptcy estate subject to the control of the debtors until they had cleared. The checks that had been written were negotiable instruments that constituted an unconditional promise to pay. Although debtors may not have had technical custody of those funds as to which they had written checks to their creditors, they did have control over the funds on the date they filed their petition.

Therefore, the debtors were ordered to turnover the funds to the trustee with no reduction for checks which the debtors had written pre-petition, but which had not cleared their account as of the petition date.

For more information about Bankruptcy Exemption – bank account, contact the Remboldt Law Firm at 404-348-4081. Free consultations can be scheduled by calling 404-348-4081.

Bankruptcy Order to Vacate Home

Bankruptcy Order to Vacate HomeBankruptcy Order to Vacate Home. In a bankruptcy, can you be ordered to vacate your home? The answer is yes. Here’s what happened in another case.

The Trustee successfully avoided the lien on a debtor’s residence. Thereafter, the trustee sought to sell the home in order to realize the value for the benefit of the bankruptcy estate. Debtors refused to cooperate and argued that their exemptions exceeded the value of the home thereby depriving the trustee of the ability to administer the asset.

Alternatively, the debtors argued that the trustee would be required to foreclose the lien thereby giving the debtors an opportunity to exercise their right of redemption. The trustee moved for turnover of the property. The court granted the motion. In re Neal, 424 B.R. 235 (Bankr. E.D. Mich. 2010). Judge Rhodes first held that debtors would only be entitled to an exception to the extent of any equity therein, and there was none. Next the court found that the trustee was not required to foreclose in her capacity as holder of the lien on the property, because instead could exercise the rights of a trustee to sell the property under the Bankruptcy Code.

As the debtors had failed to cooperate with the trustee in the marketing of the property, the court held that the trustee was entitled to have them removed so that she could perform her statutory duties as a trustee. If you have questions about a bankruptcy order to vacate home, you should seek the advice of a knowledgeable bankruptcy attorney.

For more information about Bankruptcy and your home  – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.