In a recent case litigated by our law firm Phillips & Thomas LLC, a Kansas bankruptcy court discharged $234,046.00 of student loans in one of our bankruptcy cases. The court found that our debtors had satisfied the “undue burden” standard with regard to most of their student loans and therefore entered a discharge for the majority of the student loans in question.
The case in question was adversary proceeding In Re Murray (Murray v. ECMC), Dist. of Kansas, Adv. No. 15-6099 (Filed Dec. 8, 2016). In addition to the large amount of student debt that was wiped out, the outcome is significant because it demonstrates the fact that the Tenth Circuit (like many others) permits the partial discharge of student loans: as the Court said, “[in the Tenth Circuit] discharge of student loans is not an all-or-nothing proposition.”
The official bankruptcy forms and schedules underwent significant changes to their appearance, layout, and presentation on December 1, 2015. It was one of the most important overhauls of the forms in their history.
What does this mean for you? Or does it make any difference at all? We will explore some of the answers here.
You want your case to be a success, and we want your case to be a success. And to ensure that this happens, I wanted to go over some tips and pointers that experience has shown to be some of the best ways to make sure that success happens.
I’ll start with the pre-bankruptcy phase of things, then talk about things to be aware of during the case. And then I’ll talk about things to be mindful of after your case. OK?
All right. Here we go.
What Are Health Savings Accounts (HSAs)?
Health savings accounts (HSAs) have gained some popularity in recent years. The idea is that a person can deposit money in an account and receive tax benefits for doing so. The funds can then be used for the payment of medical expenses when and where needed. The idea seems to be a good one, but it is not without potential pitfalls.
When a bankruptcy case is filed, however, unused money sitting in a health savings account may not be exempt. A recent case from the Eighth Circuit Bankruptcy Appellate Panel (BAP) considered whether certain funds held in a “health savings account” (HSA) could be exempted in a bankruptcy case. The case was In Re Leitch, BAP No. 13-6009, from 2013.
Can an IRA (individual retirement account) inherited from a relative be exempted by a debtor in bankruptcy? No, says a recent Kansas bankruptcy judge’s decision. The case was In Re Mosby (14-22981), decided in June 2015 by Judge Dale Somers. The facts were interesting.
The debtor filed a voluntary petition under Chapter 7 on December 29, 2014. The debtor claimed Jackson Life IRA valued at $15,015.50 as exempt under various Kansas statutes, including K.S.A. 60-2308, 60-2308(b), and 60-2313(a)(1).
Are the funds that a debtor deposits in his or her bank account exempt, if those funds are exclusively the proceeds of a federal student loan? This was the question recently examined by a Kansas bankruptcy court. The case was In Re Decena, and it was decided on March 30, 2015 (Case no. 14-10668, Dist. Of Kansas).
In the Decena case, the debtor filed a Chapter 7 bankruptcy and listed on the schedules a bank account that held funds that were exclusively loan proceeds from federally-guaranteed student loans. There was about $4500 in the account on the day of the filing of the case.
There are situations in which bankruptcy debtors work in fields that involve “commissions” rather than regular salary. Examples of these types of employment are real estate agents, insurance brokers, or any other job that pays commissions rather than salary. Under what circumstances are commissions property of the bankruptcy estate? What happens, for example, when a real estate agent enters into a sales contract before he files a bankruptcy, but does not “close the sale” until after the bankruptcy is filed?
To what extent are “child tax credits” from a debtor’s income tax refund considered exempt in a bankruptcy case as a “public assistance benefit”? This was the question considered by the Eighth Circuit Bankruptcy Appellate Panel (B.A.P.) in the 2013 case of In Re Pepper Hardy (B.A.P. No. 13-6029). The answer was: not at all. The appeal involved a Chapter 13 bankruptcy case coming from the Kansas City-based Chapter 13 Trustee, Richard V. Fink.
Adversary proceedings objecting to the discharge of certain debts sometimes arise in the context of bankruptcy cases. One such type of adversary proceeding, one based on “fraud or defalcation while acting in a fiduciary capacity,” is based on Section 523(a)(4) of the Bankruptcy Code. But to prevail under this section requires that certain conditions must exist. A recent case illustrated how such conditions may in fact exist. The case was a 10th Circuit B.A.P. case, NM-12-017, Hawks Holding LLC v. Kalinowski, decided in 2012.
In 2008, Hawks Holdings, LLC (“Hawks”) contracted with K2 Construction Company, LLC (“K2”) to build three homes on property Hawks owned near Santa Fe, New Mexico, for a contract price of more than $3.6 million. K2 was formed in 2007 as a New Mexico limited liability company, and held a general contractor’s license issued under the New Mexico Construction Industries Licensing Act (the “Contractors Act”). K2 neither completed the construction 1 called for by the Hawks contract, nor paid all of the subcontractors and material suppliers that had contributed to the project.
The bankruptcy “head of household” exemption in Missouri applies to your children, and not someone else’s children. The children have to be related to the head of the family (either a man or a woman) either biologically or by adoption. That was the gist of a ruling by the Eighth Circuit B.A.P. in a recent Missouri case. The case was In Re Mark Turpen (B.A.P. 12-6039), from the Western District of Missouri.
Turpen was single and lived with his two minor children, an unrelated woman, and the woman’s three minor children. He filed a voluntary Chapter 7 petition in 2011. He then filed amended schedules B and C on February 20, 2012. The amended schedule B listed a 2011 tax refund of $8,491.00. The amended schedule C listed claimed exemptions in that refund totaling $3,600.00: $600.00 under § 513.430.1(3) and $3,000.00 under § 513.440, $1,250.00 for Turpen as head of the family, and $350.00 each for his two minor children and the woman’s three minor children.