Kentucky Bankruptcy Law

Counsel with Care

16th Biennial Judge Joe Lee Bankruptcy Institute Notes

I spent a day and a half recently at a continuing legal education event, The 16th Biennial Judge Joe Lee Bankruptcy Institute, to keep my mind sharp and filled up with facts and tactics of varying degrees of usefulness. This post will have a few bullet points worth looking into further.

Upon filing a bankruptcy, a temporary “freeze” by the IRS in processing a tax refund owed to the Debtor while they determine to whom the refund is to be paid is not a violation of the automatic stay of bankruptcy. Harchar v. United States of America (In re Harchar), 694 F.3d 639 (6th Cir. 2012). So, if you are counting on receiving a timely refund post filing, beware.

Individual Retirement Accounts (IRAs) inherited by Debtors before filing a bankruptcy or within 180 days of the filing date have repeatedly been treated exempt those accounts under 11 USC Sect 522(d)(12). This is clear as to an IRA inherited from a spouse because that inherited IRA receives the same protection under the Internal Revenue Code (IRC) as it did while held by the now deceased spouse. However, IRAs inherited from other persons are treated differently under the IRC. They must begin withdrawals within a year of inheritance and must be entirely disbursed within five years. This creates the argument that they cannot receive the same exempt status under 522(d)(12). We must wait to see what, if anything develops on this in the 6th Circuit. Until then decisions come down, attempt to exempt all inherited IRAs fully but be aware of the potential objections.

There are rules and forms going into effect December of 2013. They are unlikely to be changed or opposed at this point. Among them are:

  • When the financial management course requirement (Debtor’s Education) is completed, the providers of those courses will be able to directly file the notice of completion of that course into the record, bypassing the attorneys.
  • Form B3 will no longer require non-cash government assistance no longer has to be reported on income calculations.
  • Schedules I & J will now require more information on contributions made from friends, roommates, relatives, etc. to be included.

Coming down the road is a comment period will begin on creating a National Chapter 13 form plan that would be MANDATORY for use in all bankruptcy courts. This mandatory form plan:

  • Proof of claim will control the amount of arrears on a secured claim where the plan seeks to cure those loans. This is how it currently works in the Eastern District of Kentucky, but they will force the creditor to file their proof of claim within sixty (60) days of the filing date but allow for documentation supporting the claim to be filed much later.
  • There will be twenty-eight (28) days notice of the confirmation hearing and objections must be filed seven (7) days in advance of the confirmation hearing.
  • No provision would be included in the plan for adequate protection payments, but a separate form would be submitted.
  • Provide a way for non-standard provisions to be included, but only if the box saying they are there exists.
  • If the plan proposes to strip down or strip off a lien by way of valuation, then the plan must be served on that creditor the way a summons would be served upon that creditor under Rule 7004.
  • Lien avoidance under 11 USC Sect 522(f) would occur in the plan, but the plan must be served like a summons under Rule 7004.
  • Debtor will be able to obtain confirmation that a secured claim has been satisfied.
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June 7, 2013 - Posted by | Chapter 13, Chapter 7 | , , , , , , ,

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