Exemptions In Bankruptcy

01 Feb Car in Someone Else’s Name: Resulting Trust

You're worried about the car your son put in your name to save on insurance. Will a bankruptcy trustee take it? Not in Massachusetts, and probably not in your state. It's called a "resulting trust," and this trust relationship is presumed where the non-owner son actually paid for the car and is its primary user. In effect, you are your son's trustee for the car. You hold legal title, but your son owns the beneficial interest. In the bankruptcy world, you need to list your legal ownership in the bankruptcy papers but the trustee cannot take it from you or from your son. A trustee can seek proof of the payments and use, of course. She also can emotionally extort a settlement from you by threatening unfounded litigation.
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29 Jan Protect your income tax refund in bankruptcy

If you file a bankruptcy case between January and April, you may be expecting a tax refund.  If you want to keep your tax refund in bankruptcy, read on.  Your bankruptcy trustee wants to take your tax refund from you.  Tax refunds are perhaps the largest single type of asset which debtors lose in bankruptcy.   These days, you might also be expecting an economic stimulus payment. What should you do? First, tell your bankruptcy attorney if you are expecting a tax refund.  Your attorney should ask but make a point of disclosing.  If the tax refund is small enough, it might be exempt under your state law.  Illinois allows an exemption of up to $4,000 which can be applied to any asset.  Wisconsin allows reasonably liberal exemptions under both state and federal law.  Your state may too. If your tax refund includes "earned income credit" or "child care credit," you may be entitled to additional exemptions in states which consider these to be welfare benefits.
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03 Jan Seventh Circuit Limits Illinois Homestead Exemption

The US Court of Appeals for the Seventh Circuit has just decided that Illinois residents cannot claim a homestead exemption on a house in which they live unless they have some record title interest in the property. In re Belcher, (7th Cir. 07- 2174, December 31, 2008). Often, one spouse may hold title to a house while the other spouse has lived there for some time, secure in the knowledge that he or she has a marital interest in the house in the event of divorce or the expectation of inheriting the house in the event of death. Unfortunately, in the event that the couple is forced to seek bankruptcy relief, these potential interests in the house don't rise to the level of homestead exemption protection. In Illinois, a homestead exemption is available in the amount of $15,000 up to a limit of $30,000 per household. However, the homestead exemption has been construed to require more than simply being in possession of the house. One actually must have some ownership interest in the house to qualify. Much more effective than the homestead exemption for Illinois residents is the concept of tenancy by the entireties.
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25 Dec In re Montanaro: The Fallout From In re Addison Continues

A December 10, 2008, ruling from the Missouri bankruptcy court shows that the fallout from the Eighth Circuit Court of Appeals' ruling in In re Addison continues unabated. Addison held that exemption planning was still permissible under the 2005 Bankruptcy Reform Act, notwithstanding the new section 522(o). The recent Missouri decision from Bankruptcy Judge Federman, In re Montanaro, No. 08-60665 (Bky.W.D.Mo. Dec. 10, 2008), follows Addison, and holds that a debtor's prebankruptcy conversion of nonexempt mutual funds into an exempt IRA was not fraudulent. In Montanaro, the debtor transferred $5,500 from a nonexempt mutual fund to an exempt IRA account two months prior to filing a chapter 7 bankruptcy case. The debtor inadvertently omitted the IRA from his bankruptcy schedules, but he informed the trustee of the IRA's existence at the section 341(a) meeting. The debtor amended his schedules, and then claimed the IRA as exempt under Missouri law.
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