Tag: exemption

Bankr. W.D.N.C.: In re Mergentime- Transferred Social Security Benefits

Summary:

Ms. Mergentime received $62,417.80 as a lump sum payment for retroactive Social Security benefits, approximately 4 months after filing her Chapter 7 bankruptcy. She had not disclosed those potential funds in her petition. Pursuant to her equitable distribution agreement, she paid half of those funds to her ex-husband. The Trustee sought to recovery those transferred funds and to deny Ms. Mergentime’s discharge, arguing that even though those funds would have been fully protected, the transfer to her ex-husband changed the nature of those funds such that they were no longer protected.

The bankruptcy court rejected this argument as the Social Security benefits were not, pursuant to 42 U.S.C.… Read More

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4th Circuit: Jones v. College of Southern Maryland- Only Chapter 7 Trustee Has Standing in Non-exempt Personal Injury Case

Summary:

Ms. Jones brought suit against the College of Southern Maryland under the Family and Medical Leave Act and subsequently filed a Chapter 7 bankruptcy petition, eventually listing the lawsuit as an asset in her schedules. The Trustee then settled the lawsuit with the College of Southern Maryland for $75,000, with $25,000 to the attorney, as she was the only party having standing to pursue the claim. Ms. Jones objected to this settlement.

The Court of Appeal affirmed that the Trustee was the sole party with standing to prosecute and settle the claim.

Commentary:

This would not be an issue in North Carolina, unlike Maryland, where personal injury claims, even for non-bodily injuries, also unlike the federal exemption, such as the FMLA, would be fully exempt.… Read More

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Bankr. E.D.N.C.: In re Rogers- Denial of Homestead Exemption in Adjacent Property

Summary:

Ms. Roger inherited real property from her mother, which included a residence and a building originally used as a country store, which was subsequently renovated into a residential rental property. After obtaining a mortgage against the entire property, Ms. Rogers, with the consent of the lienholder, subdivided the residence and the rental properties. Upon filing Chapter 13, Ms. Rogers claimed both properties under her homestead exemption, as the two were previous a single parcel and the rental property produced revenue necessary for payment of taxes and insurance on both.

Relying on both the definitions of the term “residence” from the dictionary and the Bankruptcy Code at 11 U.S.C.… Read More

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Bankr. W.D.N.C.: In re Foley- Sole Use and Benefit under Life Insurance Exemption

Summary:

Mr. and Mrs. Foley each had several life insurance policies which named as the beneficiary a testamentary trust created by virtually identical wills. These directed the estate trustee to use any income and principal from the trust “for the health, maintenance and support” of the surviving spouse or subsequently their son. A later provision, however, authorized the trustee to “compromise claims”. Based on this provision, the bankruptcy trustee objected to the Foley’s claimed exemption.
The bankruptcy court started from the position that exemptions are to be liberally construed in favor of the debtor, see Elmwood v. Elmwood, 295 N.C. 168, 185, 244 S.E.2d 668, 678 (1978) (citing Goodwin v.… Read More

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Bankr. E.D.N.C.: In re Smith- Widow’s Exemption and Tenancy by the Entireties

Summary:

The Debtor, 71 years old, was married until her husband died in 1999. At the time of his death, he was the sole owner of a house and land, purchased in 1962, with a mortgage signed by both the Debtor and her husband, and which the Debtor later inherited, pursuant to his will. Upon filing bankruptcy, the Debtor sought to claim the increased “widow’s” exemption of $60,000 in the property, based on N.C.G.S. § 1C-1601(a)(1), which in addition to the regular $35,000 homestead exemption, which provides that heightened amount “so long as the property was previously owned by the debtor as a tenant by the entireties or as a joint tenant with rights of survivorship and the former co-owner of the property is deceased.” The Trustee objected as there was no evidence that the Debtor was an owner of the real property prior to her husband’s death.… Read More

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31 C.F.R. § 212 – Garnishment of Accounts Containing Federal Benefits: Commingled Funds Still Exempt

Summary:

Effective February 23, 2011, federal regulations may have settled the question about whether federal benefits, including Social Security and VA benefits, that are exempt from garnishment or execution by judgment creditors and bankruptcy trustees retain that exempt status if commingled with other non-exempt funds. 31 C.F.R. § 212.3 applies to garnishment, which is defined to include “execution, levy, attachment, garnishment or other legal process” (Emphasis added), which should include actions by a bankruptcy trustee. Under this regulation, the burden of determining if a bank account is subject to garnishment falls on the financial institution holding the bank account. It must determine how much of any federal benefits in the account constitute a “protected amount”, defined as the lesser of the sum of all benefit payments posted to an account during the preceding two months, or the balance in an account when the account review is performed.… Read More

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Bankr. E.D.N.C.: In re Jourdan- Exemption of Vehicle by Non-Titled Equitable Owner

Summary:

Husband and Wife filed Chapter 7, with the Wife claiming both an equitable interest in a 2006 Lexus, despite not being listed as an owner on the title, and claiming an exemption. The Trustee objected, relying on In re Horstman, 276 B.R. 80 (Bankr. E.D.N.C. 2002), where the bankruptcy court held that a debtor could not claim an exemption in a vehicle, titled in her husband’s name only, based on the definition of “marital property.” This proposition was expanded in In re Thams, No. 10–33089, 2011 WL 863293, at *4 (Bankr. W.D.N.C. Mar. 10, 2011), where the bankruptcy court held that allowing an equitable claim “failed to consider the application of the Trustee’s strong arm
powers under 11 U.S.C.… Read More

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Bankr. E.D.N.C.: In re Gregory- Permissibility of Exemption of “100% of FMV”

Summary:

In several related Chapter 7 cases, the Debtors exemptions included a provision relying on Schwab v. Reilly, ___ U.S. ___, 130 S. Ct. 2652 (2010), that they “intend[ed] to claim 100% of Debtors’ interest and 100% fair market value in each and every item listed, irrespective of the actual value claimed as exempt.” Following objections by the Chapter 7 Trustee, the Debtors, still seeking to maximize their exemptions, amended their exemptions to include a provision that contemplated three separate scenarios: 1. If the “net value” of the asset is less than or equal to the claimed exemption and the “net value” is also less than the maximum exemption amount, the Debtors claimed to exempt the asset and their entire interest.… Read More

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Bankr. E.D.N.C.: In re Rouse- Exempt Personal Injury Award is not Disposable Income

Summary:

Around the time of the Confirmation of the Debtors’ plan, the Male Debtor was injured in a motor vehicle accident. Subsequently, he amended his schedules to disclose the personal injury claim and his exemptions to claim the d claimed the full $10,379.35 settlement as exempt property per N.C.G.S. § 1C-1601(a)(8). The Trustee failed to object to the exemption but did seek to have this amount determined to be disposable income.

Relying heavily on In re Graham, 258 B.R. 286 (Bankr. M.D. Fla. 2001), the bankruptcy court disagreed, holding that had “Congress intended ‘disposable income’ to include post-petition exempt personal injury proceeds, Congress could and should have explicitly said so in §§ 1306 and 1325.… Read More

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Bankr. E.D.N.C.: In re Dickerson- Settlement of Civil Lawsuit by Trustee

Summary:

Dickerson filed Chapter 7 pro se, initially failing to disclose and exempt a pending lawsuit against Bell Partners for personal injuries and pecuniary losses.  The Debtor eventually claimed the lawsuit as fully exempt, but the Trustee objected to the exemption of an pecuniary losses

Dickerson, the Trustee and Bell Partners subsequently agreed, both on the telephone and in emails, to settle the lawsuit for $15,000, consisting of $10,000 in exempt personal injury proceeds and $5,000 for pecuniary losses, that would be available for the bankruptcy estate.  Dickerson then withdrew her consent to this settlement, partly on the basis of her own alleged mental incompetency.… Read More

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