Category Archives: Chapter 7 Bankruptcy in Kansas City

Are Health Savings Accounts (HSAs) Exempt In Bankruptcy?

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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.

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An Inherited IRA Is Different From Other Types Of IRAs

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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).

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Exemption Of Funds From Student Loan Proceeds In Bankruptcy

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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.

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Commissions From Pre-Petition Real Estate Sales Contracts: Property Of The Bankruptcy Estate?

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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?

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Exemption Of Child Tax Credits And Earned Income Credits In Bankruptcy

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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.

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Construction Contracts, Bankruptcy, And Objections To Discharge Under 523(a)(4): Fraud Or Defalcation In A Fiduciary Capacity

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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.

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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.

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Claiming Missouri’s Head Of Household Exemption In Bankruptcy

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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.

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Kansas Exemptions For Life Insurance Proceeds In Bankruptcy

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Under what circumstances are life insurance policies exempt in bankruptcy? Can the exemption ever be forfeited? These were some of the questions considered by the 10th Circuit Bankruptcy Appellate Panel in the case of In Re Larry Erickson and Betty Moore, filed in August 2011 (KS-11-005). Life insurance proceeds are normally exempt in bankruptcy provided certain conditions are met, but this case had an unusual set of facts.

Husband and wife Larry J. Erickson and Betty L. Moore filed a petition for Chapter 7 relief on March 30, 2010. At the time the petition was filed, Erickson owned several insurance policies on his life with respect to which Moore was the designated beneficiary. Debtors neither scheduled the life insurance policies as assets, nor claimed them as exempt.

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What Is A “Core Proceeding” In A Bankruptcy Case?

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What is a “core proceeding” arising from a bankruptcy case?  What standard is used to evaluate this issue?  These were the questions asked by the Eighth Circuit case of In Re Schmidt, decided in 2011 (11-6028 to 11-6030).  In this case, Klein Bank appealed the bankruptcy court’s order  denying its motions to remand its replevin actions which had been removed from the state court to the bankruptcy court.

In denying the motions, the bankruptcy court had originally concluded that the replevin actions were core proceedings. The Eighth Circuit B.A.P. disagreed, stating that  core proceedings are limited to those “arising under or arising in” a bankruptcy case.

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Charitable Contributions In Bankruptcy: What Is Reasonable?

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How much charity should a person in bankruptcy be able to contribute?  At some point, can donations become excessive?  These issues often come up in bankruptcy cases.  Some debtors need to tithe as part of their religious obligations.

Some debtors have a need to contribute as part of their work obligations.  These were the questions under consideration in a recent 10th Circuit bankruptcy appellate case from 2012.  The case was In Re McGough (B.A.P. No. CO-11-038).

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