Trustee Objection? File a Response!

04 Aug Trustee Objection? File a Response!

Bankruptcy trustees file objections. It’s part of the job description. Failing to respond is a good way to lose, even if you ought to win.

This harsh lesson comes from the Eighth Circuit Bankruptcy Appellate Panel today, in Johnny Walton v. Sosne. In this case, the debtor is set to lose a $75,000 IRA account to a Chapter 7 trustee in part because the debtor failed to file an answer to the trustee.

The case itself ought to revolve around the interesting question of whether a consumer could contribute a large sum of money into an Individual Retirement Account (IRA) within a year before a bankruptcy filing and exempt it from creditors in that case. In Missouri, that would be a useful case to develop this area of law more fully. And the underlying facts have some sympathetic aspects for the consumer.

Instead, because of the procedural problem of not filing a response to the trustee, Missourians may need to wait awhile longer on those issues. The BAP concluded it could not reach an issue which had not been properly raised before the bankruptcy court. The BAP did conclude — quite reasonably — that the debtor on the verge of losing a $75,000 asset was in fact a “person aggrieved” for purposes of having standing to take the appeal. It is nice to know the court agrees losing $75,000 might give you the right to at least be in court. But on the larger issue of whether the appellate court has to listen to the debtor, the panel could go no further.

The lesson: It is a fatal flaw to fail follow the formality of filing your forms in the lower forum first.

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I have been a bankruptcy attorney since 1989. Our firm represents consumers filing bankruptcy almost exclusively, although I have represented bankruptcy trustees as well as creditors. For 2017-2018 I am also serving on the American Bankruptcy Institute's Commission on Consumer Bankruptcy. If you live in Eastern Missouri, visit our website, send an e-mail or give us a call (314) 781-3400. Our website: STLBankruptcy.com
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