Category: Bankruptcy Information

Information about bankruptcy, the process, and some of the basics one should to be aware of

exceptions to bankruptcy discharge 523

Bankruptcy Discharge Exceptions of 523: Explained in Simple Terms

Bankruptcy Discharge Exceptions of 523: Explained in Simple Terms

In bankruptcy, debt is discharged unless there’s an exception that makes it nondischargeable. That’s the rule: all unsecured debt is eliminated in bankruptcy unless the exception is in Section 523 of the Bankruptcy Code. What kind of things are listed there? You can guess: recent taxes, most student loans, and so on. Here’s a look at the the bankruptcy discharge exceptions of 11 USC 523.

The statute: 11 USC 523(a)

The rule is all unsecured debt goes away in bankruptcy, and 11 USC 523(a) is the list of exceptions to the rule. In some cases, there are exceptions to the exceptions. That is, the list below is not absolute; sometimes debts in 523a can be discharged in bankruptcy.

Before launching into the long list, Section 523(a) of the Bankruptcy Code says:

A discharge under section 727, 1141, 1192 [1] 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt:

That’s the preamble. It basically says that a discharge in Chapter 7 bankruptcy, Chapter 13 bankruptcy, Chapter 11 or Chapter 12 bankruptcy doesn’t eliminate the following debts.

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Amending exemptions or schedules in a reopened case is not allowed in some courts

Amend Exemption in Reopened Bankruptcy? The Three Approaches

Amend Exemption in Reopened Bankruptcy? The Three Approaches

In a bankruptcy case where you already got the order of discharge and has been closed, can you go back and reopen the case to amend the exemptions to protect an asset? The answer is (say it with me): it depends.

The Scenario: Need to Reopen & and Amend Schedules

If you practice bankruptcy long enough, you know the situation. Debtor files bankruptcy, and somehow forgets that they had a cause of action and (potential) lawsuit against someone, and doesn’t disclose the potential asset.

Years later, defendant finds out about the bankruptcy, considers judicial estoppel, and for good measure, notifies the old bankruptcy trustee about the asset in the closed bankruptcy case.

Debtor then reopens the bankruptcy case, and amends the schedule of assets and exemptions and all is forgiven. No harm, no foul.

Of course, this can also happen when you want to avoid the lien of a home with no equity at the time of an old case, using Section 522(f). This would lead to the need to reopen and amend Schedule C with a de minimis amount to show that the lien is impairing an exemption.  In re Higgins, 201 BR 965 (9th Cir BAP 1996)

The Problem: Can you Amend Exemptions after a Bankruptcy is Closed?

We start with one potential issue:  Rule 1009(a) of the Federal Rules of Bankruptcy Procedures says when a case can be amended. “A voluntary petition, list, schedule, or statement may be amended by the debtor as a matter of course at any time before the case is closed.”

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double homestead exemption for married couple filing bankruptcy jointly

Can Married Couples Double Stack Homestead Exemptions: Explained

Can Married Couples Double Stack Homestead Exemptions: Explained

If each spouse gets a homestead exemption in bankruptcy, it could double the amount of equity protected.

If married, can you double or stack a homestead exemption?  A homestead exemption helps protect your residence when you file bankruptcy. But if a married couple files jointly, does each get an exemption? Does the homestead exemption double for each spouse? Maybe. That would allow the debtors to double or stack the homestead exemption and protect more equity.

Courts have struggled with this. On the one hand, the law means what the law says. If the statute says the limit is a number, that’s the number. On the other hand, why should a person not get same the amount as if they were single? Put differently, if the exemption amount is the same if someone single or married, a married person is only getting half the protection.

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bankruptcy venue for is which district or circuit jurisdiction someone can file bankruptcy

Bankruptcy Venue and Where Can you File

Bankruptcy Venue and Where Can you File

Bankruptcy venue is the concept that guides where, in which specific geographic location, someone can file a Chapter 7, Chapter 11 or other bankruptcy petition.

Where? In bankruptcy court, of course! Yes, but in which location? Must it be the exact federal circuit, state, or district in which someone lives? Or is having one asset in that district enough? And what if someone lives outside the United States… can they even file bankruptcy? Is having a bank account in a district sufficient contacts to establish proper venue?

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A converted bankruptcy case may start the objection deadline

Bankruptcy Conversion and Exemption Objection Deadlines

Bankruptcy Conversion and Exemption Objection Deadlines

Does a converted bankruptcy case restart the deadline for objections to exemptions?

A recent look at objecting to exemptions and Rule 4003 revealed a circuit split — despite the rule’s text — as to whether a bankruptcy that is filed as Chapter 11 or as Chapter 13 but then converted to Chapter 7 resets the clock for objections to exemptions.

The Issue

The FRBP rule says that the opportunity to object to exemptions is within 30 days of the 341a meeting.  But when a case is filed as a Chapter 11 or Chapter 13, the trustee and creditors are not quite as motivated to challenge exemptions as in Chapter 7, as these chapters are not about liquidation or taking nonexempt assets for the benefit of the creditors. However, when a case is then converted to Chapter 7, a trustee who is focused like a laser beam on exemptions is then appointed. However, the 341(a) meeting was already concluded months (if not years) ago and the new trustee doesn’t get a chance to object to the exemptions.

Some courts have found this to be unfair as a backdoor way around exempting assets or a violation of due process, and the courts have allowed a new deadline. Others have held true to the statute’s plain text. This has led to a split in the circuits.

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Deadline to object extended by amending exemptions or schedules

Objecting to Exemptions: Amendments and the 4003 Deadline

Objecting to Exemptions: Amendments and the 4003 Deadline

When does the 30-day deadline of Rule 4003 get restarted?

Does any amendment of schedules extend the 30-day objection deadline of Rule 4003, or only amended exemptions or assets? Another bankruptcy attorney recently saw that a creditor objected to his client’s exemptions, which creditors are allowed to do. The issue is, there’s a deadline to object to exemptions, as a rule. Creditor objected after the deadline, and debtor’s counsel asked if he was justified to seek Rule 11 sanctions.

There are exceptions that can extend or restart that objection deadline. Obviously, it would be fair that, for example, amending the exemptions on Schedule C gives an opportunity to object to the amendments and new exemptions. But what if there’s an amendment to any of the schedules?  Does amending income on Schedule I give a new opportunity to object to exemptions? Let’s take a look.

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median income limits

2023 Median Income Limits to Nail Bankruptcy Means Test in Calif

Median Income Limits to Nail the Bankruptcy Means Test: New for 2023

The government just updated the numbers for 2023 median income limits. Using median household income, it again got easier to qualify for bankruptcy Chapter 7, because of another means test adjustment.  And while bankruptcy may seem to be “just forms,” make sure you check out my list of 12 crucial tips to do or avoid before filing bankruptcy.

The means test for bankruptcy decides who qualifies for Chapter 7 bankruptcy eligibility. The first step of this process is comparing your median household income against the California median income limits set by the Department Of Justice guidelines to see if you earn less than bankruptcy median income limits.

Again, this comparison against the median income is merely the first step, and does not absolutely determine your eligibility for Chapter 7 or not.

March 2023 Update:  The numbers for the means test adjust April 1, 2023, and will be used after that until late 2023.

Because of the above statement, these will be the second and updated 2023 median income limits.

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Post-confirmation proceeds may or may not go into a Chapter 13, depending on circuit and judge.

Post-confirmation Assets Part of a Chapter 13? It Depends

Post-confirmation Assets in Chapter 13: Property of the Estate? Maybe.

In a Chapter 13 bankruptcy, do Debtors have to pay the trustee new property they get after confirmation? The answer may surprise you.

Your chapter 13 case is confirmed, things are sailing along, and then it happens:  there’s an inheritance or personal injury reward or life insurance payout or large asset of new property. Is this property of the estate, or is this the debtor’s and excluded from the bankruptcy case?

It all hinges on the tension between Sections 1306 versus 1327 of the Bankruptcy Code. Let’s see what all the fuss is about.

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Tax Day can be postponed, which affects the 3-yr rule and their dischargeability

How Bankruptcy Can Ditch IRS Tax: 3-Year Rule & Key Dates to Know

How Bankruptcy Can Ditch IRS Tax: 3-Year Rule & Key Dates to Know

Postponed Tax Filing Due Dates Impact Bankruptcy and the Three-Year Rule

Taxes in bankruptcy don’t normally go away or get discharged. However, there are some exceptions to the rule. Sometimes, older tax debts can be discharged in bankruptcy.  One of the keys is the due date of the taxes, which is not always April 15. Events can move the tax due date. These extensions impact the 3-year rule.

One of the factors to determine bankruptcy dischargeability of tax debt is what we call the “three-year rule” per 11 USC 507. Note: there are factors that can stop (or toll) the three-year clock, so three years is not set in stone. See a bankruptcy professional or tax expert for analysis of your unique situation.

The Three-Year Rule of Section 507

Let’s start with the general rule. Section 507 of the Bankruptcy Code says, in part, at (8)(A)(i):

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