November 2008

30 Nov Social Security Benefits Not Exempt If Already Received, Minnesota Court Says

When social security benefits have already been received, but not yet spent on the date a bankruptcy case is filed, the funds cannot be claimed exempt under the federal bankruptcy exemptions, according to In re Carpenter, 2008 WL 4567128 (Bky.D.Minn. Oct. 14, 2008), a recent Minnesota bankruptcy court ruling. This case held that bankruptcy code section 522(d)(10)(A) only allows the debtor to exempt his or her right to receive social security benefits in the future, and that section 522(d)(10)(A) did not authorize exemption of such benefits, if the funds remained in the debtor's possession on the date of filing. The debtor in Carpenter had filed a chapter 7 case while in possession of about $17,000, which he had received as settlement of a social security claim shortly before filing bankruptcy. He selected the federal bankruptcy exemptions, and claimed the $17,000 exempt pursuant to section 522(d)(10)(A). He also argued that 42 U.S.C. section 407 insulated social security benefits from the reach of any bankruptcy trustee, regardless of whether he selected the federal or state bankruptcy exemptions.
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30 Nov Free Bankruptcy Basics Videos Launched by Courts

Nine free web videos on about filing for bankruptcy are now available on the federal court website: Introduction Types of Bankruptcy Limits of Debts Filing for Bankruptcy Meeting of Creditors Bankruptcy Crimes Court Hearings The Discharge Legal Assistance General bankruptcy information is no substitute for personalized advice from a bankruptcy attorney...

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30 Nov Chapter 13 Payments Misapplied without Penalty

An appellate court has held that a mortgagee may wrongfully apply post-bankruptcy payments to the pre-bankruptcy account without penalty. Ameriquest Mortgage kept two separate books to account for mortgage payments, one computerized and one manually. The computerized account would apply the latest payment to the earliest unpaid month, even if that month was before a bankruptcy was filed and the arrears was being paid through a Chapter 13 plan. The debtor learned of this when requesting a payment history as part of attempting to refinance her way out of the Chapter 13 bankruptcy. She, her counsel, and the bankruptcy judge were shocked at his practice, and $250,000 was awarded for emotional distress from Ameriquest's breach of good faith and fair dealing covenant. This became $750,000 after punitive damages were added. The First Circuit Court of Appeals found that there was no specific violation of any bankruptcy provision. Ameriquest's internal records, provided at the debtor's request, did not rise to the level of evidence that it regarded her as being in default.
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