17 Mar NY Bankruptcy Court Uses The Eddie Murphy Method Of Allocating Tax Returns
Remember when Eddie Murphy was Eddie Murphy, not some cut-rate actor in a collection of kid’s movies? I mean, when he was fall-off-the-chair hysterical that involved language to make your parents blush?
It turns out that the New York bankruptcy courts do, too. And they’re using him as a guide when it comes to allocating tax refunds for people who file for bankruptcy in New York.
Allow me to explain. In 1987, Eddie came out with a concert video called Raw. If you’ve never seen it, you need to. Very good stuff.
At any rate, in Raw he talks about relationships and how wives typically get half of their husbands’ belongings. The quote to remember here is, “Eddie, I want half. Half, Eddie!” Here’s the clip to jog your memory.
In the context of a bankruptcy filing, there may be a time when a debtor has a tax refund coming to him (or her) that exceeds the statutory exemption. In the case of In re Spina, 416 NR 92 (Bankr. EDNY 2009) Judge Trust looked at the question of how to divide the refund as between a debtor and his non-filing wife.
As with Eddie, he chose what is called the 50/50 Rule. Previously followed by bankruptcy courts elsewhere in New York State, the 50/50 Rule Rule applies New York state matrimonial law to first establish each spouse’s rights to marital
property, and then considers what the division of
marital property, such as a tax refund, would be in a
divorce proceeding.
The 50/50 Rule creates a rebuttable presumption that each spouse contributed equally to the household, including nonmonetary contributions, and, therefore, the refund should be divided equally between the spouses.
In other words, it applies even when one spouse does not work outside of the home.
As opposed to the world of Eddie Murphy, the 50/50 Rule is of enormous help to people filing for bankruptcy in New York. Rather than walking into bankruptcy court with an enormous non-exempt tax refund and being worried that most of it will be taken, it’s now clear that bankruptcy cases in all of New City and the suburbs can rest a little easier.
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