In re Wettach of the Western District of Pennsylvania from 2013 involved the Chapter 7 trustee bringing an adversary action to avoid alleged fraufulent transfers of the debtor's income deposited into his entirieties bank account (one he had with his wife), thusly preventing his creditors from reaching those funds.  The Trustee objected to the state law exemptions to his pension fund.  The court ruled that the individual debtor's compensation into the entireties accounts may constitute a fraudulent transfer unless such deposits were subsequently spent on "necessities" (i.e. rent, utilities, food) for the marital unity.  

The court ruled that the defendant has the burden to show how the money was spent.  The court, upon examination, ruled that stock purchases were not necessities (no kidding!).  The person also had 7 cars, and the court allowed the debtor and his wife to keep 2 passenger cars and an SUV, but surrender the remaining 4 cars.  

The court further ruled that charitable contributions of 3% of their income were allowed, but not political contributions. The court further stated that they would look back 4 years to see how these funds were spent.  

As you can see, this was a tumultuous case and I don't know a Chester County bankruptcy lawyer who would have stretched the rules so far (and ultimately lose).  

So, you have filed your bankruptcy petition with your Chester County bankruptcy lawyer.  You now, however, must change your exemptions on Schedule D.  

You have a right to amend, as a matter of course, at any time before the case is close.  This is controlled by the case of Matter of Yonikus from the 7th Circuit of 1993.  The ability to amend is construed quite liberally and courts have little discretion to deny a motion to amend a claim of exemption.  The only time they may is in a matter of fraud (which you better not have done!).  

But, if you try to amend and the property has been concealed or the property has been amended in bad faith or is prejudicial to creditors, you are in a pickle.  There is a host of cases, from all across the country, that show that you can't amend (especially if it hurts the creditors) if you are acting dishonestly or in fraud.  For example, In re Grogan in Utah in 2003, stated that debtors who intentionally concealed a personal injury cause of action and its proceeds could not be allowed to amend their schedules to claim an exemption in the proceeds.  You have to understand that prejudice may be found where a trustee has commenced proceedings to sell property or commenced distribution of assets of the bankruptcy estate.  

The debtor must provide notice of any exemption changes.  This in turn will apply to creditors.  Creditors will then be given 30 days to object to the amended exemption.  If the debtor fails to send notice of an amended exemption, the 30-day notice begins to run upon the creditor's receipt of actual notice.  If, however, the creditor is never notified, the exemption may be lost.  

I wrote about joint bankruptcy cases in Chester County earlier last month.  In a bankruptcy, a married person must include both their income and their spouse's income, even if the spouse is not a debtor.  The adjustments for a non-filing spouse is made under the "marital adjustment" on Lines 13 and 19 of the petition.  In addition, if there are other "income-earners" in the household, these contributions must be included on Line 7.  This typically includes if a dependent gets Social Security.  

The bankruptcy case called In re Collins from 2002, was after the debtor husband's death, a debtor wife cleaned exemption of $50,172 in life insurance proceeds. The trustee claimed that the amount exceeded the exemption limit, something a Chester County bankruptcy lawyer would object to. The court had determined the wife's reasonable needs. She had a high school education and had worked as a court clerk for 13 years. She and her children, ages four and 10, were in good health and had no special needs. 

In addition to nominal exemptions in other assets, she exempted interest in a retirement plan, a 401(k) plan, other life insurance proceeds and certificates of deposit having an aggregate value of $31,997. She had a monthly deficit on her schedules I & J of $352 for basic subsistence requirements, however, and exemptions were designed to avoid such a situation. Her age was not in evidence, but if she was young, she would incur taxes and penalties and making early withdrawals from her pension and 401(k) plans might reduce the amounts by 20% or more. In the absence of penalties, the total value of the uncontested exempt assets was insufficient for  her entire term of retirement. Thus, all of the insurance proceeds were reasonably necessary for the subsistence of herself and her minor children.

Student Loan Bankruptcy in Chester County

I have written consistently about the difficulty of having student loans discharged in a bankruptcy filed with a Chester County bankruptcy lawyer.  Student loan debt is now at $11.52 trillion in the last quarter of 2013.  The Huffington Post calls it a ticking time bomb.  

An interesting angle on student loan debt was proposed in the San Francisco Chronicle.  The op-ed writer states,

Monthly payments on student loans should be a percentage of the borrower's income, after essentials like food and housing are covered, instead of being fixed.

Interest rates on student loans should be nonprofit, which means equal to the Fed's discount rate, currently 0.75 percent.

Keeping Household Furnishings

You can have your cake and eat it too in a Chester County bankruptcy.  Well, sort of.  You can keep your personal household furnishings if you have less than $10,775 in total household furnishings and no particular item exceeds $525.  Look to Section 522(d)(3) of the Bankruptcy Code.  

So, what are household goods?  They include clothing, furniture, appliances, 1 radio, 1 television, 1 VCR (do they even exist anymore?), linens, china, crockery (what I also call a group of lawyers), and kitchenware.  It also includes medical equipment and supplies, furniture for minor children, personal effects including toys and hobby equipment and one computer.  

Other Important Issues in Household Furnishings

It does not include works of art, antiques exceeding $550, and jewelry exceeding $550.  As you can guess and the court in In re Barnes from the Maryland Bankruptcy Court of 1990 stated, it is a concept that furnishing relate to items routinely used within the household such as furniture or decorate items.  Generally, the items have to be for personal, family, or household use.  Also, some courts have taken a view that the exemption is in place to allow you to get a fresh start.  Thus, household furnishings are necessary.  If you are confronted by a U.S. Trustee over the value of the property, you will have to provide a subjective and objective value through your Chester County bankruptcy lawyer.  This includes a possible appraisal (sometimes Ebay will do) and the purpose for the item.  

Remember -- even if your household furnishings exceed the exemption, you can get the rest covered (possibly) through the wildcard exemption in bankruptcy.  

Your lawyer should have significant experience in your Chester County bankruptcy.  They should already know what is required by the bankruptcy courts.  This includes meeting with the Chester County debtors to determine their assets, income, and liabilities.  It also includes providing you with guidance and strategic suggestions to put you in the best spot to make your filing the most optimal one possible.  

Bankruptcy Reform Act of 2005 created a strange entity called a "debt relief agency".  This entity is defined as any person who provides bankruptcy assistance to an assisted person in return for the payment of money or other valuable consideration.  The controlling law on this section is 11 U.S.C. 101(12A).  An attorney who represents an individual in a Chester County bankruptcy is typically a "debt relief agency".  

The rule also talks about an "assisted person", which is defined as any person whose debts consist primarily of consumer debts and whose nonexempt property property is valued at less than $150,000.  Easily, this is most people filing for bankruptcy in Chester County and applies to most if not all Chester County bankruptcies.  

Chester County Joint Bankruptcy

An individual or his/her spouse in Chester County may file a joint petition under Chapter 7, pursuant to 11 U.S.C. 302(a).  Only a husband and wife may file a joint petition under Chapter 7.  However, an unmarried couple may not file a joint petition even if they are jointly liable for all or most of the debts, own property together, and live as husband and wife in every respect other than being lawfully married (a bit frustrating, I know).  

The filing fee for a joint petition is the same as a single petition.   Both parties, if filing, must complete the credit counseling requirement and must sign the petition.  Rule 1015(b) will normally establish that the parties court appearances will be scheduled for the same time and the same trustee will be appointed for both estates.  

Other Issues in Joint Bankruptcy

The general rule is that if both spouses are liable for one or more significant dischargeable debts, they should normally file a joint petition.  If it is difficult to determine whether one or both spouses are liable for a significant dischargeable debt, the best practice is to file a joint petition if there is any chance that both spouses may be liable for the debt.  If, however, it is clear that only one spouse is liable for all the debts of one spouse, a joint filing ma not be necessary.  

Credit reports should be run to determine if the debts are joint or not.  In addition, original statements and or bills should be disclosed and review by your Chester County bankruptcy lawyer to make sure the appropriate debts are covered, explored, and analyzed.  

There were a host of cases over the past couple years that discuss the discharge injunction.  The discharge injunction is permament and is authorized by section 524(a)(2) of the Bankruptcy Code. It  "operates as an injunction against... an act, to collect, recover or offset any such debt as a personal liability of the debtor, whether or not discharge of such debt is waived...." 11 USC § 524.  As the Eastern District of Pennsylvania state in In re Meyers in 2006, Section 524(a) is a broad injunction power which effectively bars creditors from collecting debts as personal liabilities from a discharged debtor." It eliminates a debt permanently (not liens) and gives people the "fresh start" they desire.  

In re Brown of the Western District of Pennsylvania, found that a mortgage company did not violate the discharge injunction by sending a "generic informational letters and notices" that contained no request for money. Another Western District case In re Englert involved a case where the debtor re-opened their case to file an adversary action against Ocwen mortgage company.  Ocwen was tremendously non-compliant with the process (failed to respond to Interrogatories, their attorney failed to appear at the status hearing).  The Court ruled that the debtor's only remedy for a violation of the discharge injunction was a civil contempt proceeding via 11 U.S.C.§ 105.  They had to prove the contempt through:

1. a valid order existed (like a discharge order)
2. the person accused of contempt knew of the order and
3. the person accused of contempt disobeyed the order.  

The court ruled that it would not hold Ocwen in contempt as there was doubt that they were trying to collect a pre-petition debt.  They Court did hit Ocwen for failing to comply with th Discovery Order and sanctions were ordered.  

Here's the general rule -- if you receive a debt collection after your bankruptcy and it is for a pre-petition debt, contact your Chester County bankruptcy lawyer to make sure there has not been a violation of the discharge injunction.  

The debtor's interest in a vehicle cannot exceed $3,225 in value for one vehicle (double for married couples filing).  This is under section 522(d)(2) of the Bankruptcy Code.  

The exemption is pretty straightforward.  You can keep your car/not go into a Chapter 13 as long as the value is less than or equal to $3,225.  If you are financing a car, it is almost assured that you are not going to have any worries since most people owe more on their car than their value.  Even if you have more value in your car than $3,225, your Chester County bankruptcy lawyer can elect to apply the wildcard exemption to cover the remaining value.  

Sometimes, arguments with creditors and the trustee surround whether the vehicle qualifies as a tool of the trade for lien avoidance.  

But, by and large, you can keep your car to live your life and move forward with getting your fresh start.