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Interplay Between Exemptions and Disposable Income in a Ch 13

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    Interplay Between Exemptions and Disposable Income in a Ch 13

    An advanced topic. Let's see if I have this right.

    Examples: (assume no wildcard exemption available and no exemption for cash or deposit accounts)

    1) You have a car worth $5000. Pretend the exemption for the car is $5000. It is totally exempt. Done.
    2) You own and live in a house worth $50000. Pretend the homestead exemption for the house is $50000. You are supposed to reinvest the proceeds within six months in another homestead. You sell the house and buy another one for the same price and move in. Done.
    3) You own and live a house worth $50000. Same homestead exemption. You buy another house for $40000. What happens to the $10000? Pretend there is no exemption for cash or deposit accounts. Now this $10000 is one-time disposable income that needs to be turned over to the trustee.
    4) You have a personal injury case for $25000. The exemption for personal injury cases is $25000 and unlimited for pending unliquidated PI cases. No exemption for cash or deposit accounts. You settle for $12000 which is under the PI lawsuit exemption. But you have to expose the lawsuit to cash. Now this $12000 from the PI case is one-time disposable income that needs to be turned over to the trustee.
    5) Coronavirus CARES stimulus check exempt. Legislative history would suggest that Congress intended the resulting cash to be exempt as well. But perhaps an enterprising trustee somewhere in the country will try to seize the cash.
    6) You take a Coronavirus withdraw from your 401k. 401k is exempt completely. It is converted to cash, which needs to be turned over to the trustee when he finds out via your tax return. Or you could roll over to IRA maybe assuming IRAs are exempt???
    7) Cash from wages are spent on the trustee payment and for support per schedule I & J plus implied inflation on income and expenses so this issue never comes up every paycheck.

    Exemptions don't seem to matter that much in a 13. In #1 and #2, they protect the asset fully. In my #3, #4, and #6, the cash is exposed to the trustee.

    Some semi-rhetorical questions: Is the best strategy to come up with necessary expenses for the support of the debtor and his dependents to soak up the non-exempt cash in #3 to #6 derived from exempt assets via a motion to retain funds? For #5, we just not worry about it and go our merry way?

    One actual question: Is all of the above correct?

    #2
    Originally posted by flashoflight View Post
    Examples: (assume no wildcard exemption available and no exemption for cash or deposit accounts)
    Okay, I'll play.

    Originally posted by flashoflight View Post
    1) You have a car worth $5000. Pretend the exemption for the car is $5000. It is totally exempt. Done.
    Nothing to see here. WOuld not affect the so-called "Chapter 7 Liquidation Test" (a/k/a best interest of creditor's test or the "BIC test").

    Originally posted by flashoflight View Post
    2) You own and live in a house worth $50000. Pretend the homestead exemption for the house is $50000. You are supposed to reinvest the proceeds within six months in another homestead. You sell the house and buy another one for the same price and move in. Done.
    Nothing here either. This would not cause any issue with the BIC test in a hypothetical Chapter 13.

    Originally posted by flashoflight View Post
    3) You own and live a house worth $50000. Same homestead exemption. You buy another house for $40000. What happens to the $10000? Pretend there is no exemption for cash or deposit accounts. Now this $10000 is one-time disposable income that needs to be turned over to the trustee.
    For a Chapter 13, this would fall under the BIC test. While you would not need to surrender the cash, your Chapter 13 Plan must propose to pay at least $10,000 over the term of the plan (*** see below as the BIC test is a little more complex).

    Originally posted by flashoflight View Post
    4) You have a personal injury case for $25000. The exemption for personal injury cases is $25000 and unlimited for pending unliquidated PI cases. No exemption for cash or deposit accounts. You settle for $12000 which is under the PI lawsuit exemption. But you have to expose the lawsuit to cash. Now this $12000 from the PI case is one-time disposable income that needs to be turned over to the trustee.
    PI exemptions are not simple! A lot has to do with the wording on the settlement agreement. If you are going to file bankruptcy and have a personal injury case, your attorney must make sure the language is correct or portions (or all) of the settlement could become property of the bankruptcy estate. The jurisdiction of the case is also important as States have different exemption schemes.

    Originally posted by flashoflight View Post
    5) Coronavirus CARES stimulus check exempt. Legislative history would suggest that Congress intended the resulting cash to be exempt as well. But perhaps an enterprising trustee somewhere in the country will try to seize the cash.
    Nope. There are cases where there were Trustees that went after the 2008 stimulus money and won. Chapter 13s are special and have a special clause that "any" property after filing, is property of the bankruptcy estate. Unless the plan provides for this money, it is "technically" property of the bankruptcy estate. Now, most Chapter 13 Trustees seem to be fair and are not asking for this particular stimulus money, but there's nothing stopping an enterprising (perhaps young) Chapter 13 Trustee to go for it.

    I think it would be morally absurd, but the CARES act did not specifically exempt the stimulus check from bankruptcy even though Congress did address bankruptcy. That Congress didn't directly address this for Chapter 13s, by removing it from 11 USC 1306! They had the opportunity, but arguing Congress intended for it not to be "income" because they modified 11 USC 101 won't work. It doesn't work because there is a lot of caselaw that says that 11 USC 1306 builds on all the other paragraphs in Title 11 and that unless there's a very specific exemption from 11 USC 1306, any property after filing is property of the Chapter 13 bankruptcy estate.

    Originally posted by flashoflight View Post
    6) You take a Coronavirus withdraw from your 401k. 401k is exempt completely. It is converted to cash, which needs to be turned over to the trustee when he finds out via your tax return. Or you could roll over to IRA maybe assuming IRAs are exempt???
    Here's the first rule of Chapter 13. Always talk to your lawyer before touching exempt funds. If you have having difficulties there are many things they can do to help you. A perfect example is that the CARES Act has provisions to allow you to extend a Chapter 13 (filed before the Act went into law) to a total period of 7 years. You can actually use 11 USC 1329 (Plan Modification) with a combination of abatements or "re-financing" the Chapter 13 payments over more years. Very important to talk to your attorney before dipping into any 401(k)!

    Originally posted by flashoflight View Post
    7) Cash from wages are spent on the trustee payment and for support per schedule I & J plus implied inflation on income and expenses so this issue never comes up every paycheck.
    I don't know what this means? Implied inflation? There's no such thing in a Chapter 13 as an approved expense. Having the best negotiated plan, and trust me they are all negotiations, is the best to account for most things that could occur. But addressing inflation is never something people even think about when drafting a Chapter 13 plan.

    Originally posted by flashoflight View Post
    Exemptions don't seem to matter that much in a 13. In #1 and #2, they protect the asset fully. In my #3, #4, and #6, the cash is exposed to the trustee.
    Oh, they matter because of the BIC test!

    Originally posted by flashoflight View Post
    Some semi-rhetorical questions: Is the best strategy to come up with necessary expenses for the support of the debtor and his dependents to soak up the non-exempt cash in #3 to #6 derived from exempt assets via a motion to retain funds? For #5, we just not worry about it and go our merry way?
    See the answers individually. This is truly some complex parts of a Chapter 13 but none are insurmountable. Your (skilled, hopefully) Chapter 13 attorney has experience and practice in dealing with Chapter 13 economic issues. Remember, a Chapter 13 is actually desiened to handle economic issues because of 11 USC 1329 (Plan Modification). Not all economic issues can be overcome, but with the current CARES act, a plan can go for 7 years to deal with some economic issues in a major way.

    Originally posted by flashoflight View Post
    One actual question: Is all of the above correct?
    Hmmm... too complex and a lot of this is both State, District, and Court of Appeals dependent. Throw in the skill of the debtor's attorney and the Trustee's motivation, and you will agree with me that this is too fact and case-specific.

    It's still an interesting hypothetical.

    *** BIC test: is a little more complex than simply saying that anything not exempt would need to go to the unsecured creditors. The Chapter 13 Liquidation Test (a/k/a the BIC test) looks to see if there would have been remaining non-exempt liquidated property AFTER the priority debt is paid. In other words, this looks different when you owe the IRS $10,000 and have $10,000 in unprotected cash at the start of your Chapter 13. Since you MUST pay the IRS as a priority creditor, the BIC test would yield a minimum of $0 (for the scenario in #3).
    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
    Status: (Auto) Discharged and Closed! 5/10
    Visit My BKForum Blog: justbroke's Blog

    Any advice provided is not legal advice, but simply the musings of a fellow bankrupt.

    Comment


      #3
      Originally posted by justbroke View Post

      *** BIC test: is a little more complex than simply saying that anything not exempt would need to go to the unsecured creditors. The Chapter 13 Liquidation Test (a/k/a the BIC test) looks to see if there would have been remaining non-exempt liquidated property AFTER the priority debt is paid. In other words, this looks different when you owe the IRS $10,000 and have $10,000 in unprotected cash at the start of your Chapter 13. Since you MUST pay the IRS as a priority creditor, the BIC test would yield a minimum of $0 (for the scenario in #3).
      Thanks for playing.

      I should have added the assumption that everything is post-confirmation. I'm interested in what happens when an exempt asset is liquidated to non-exempt cash like a properly perfected personal injury lawsuit that fits completely into the state's PI exemption.

      In the wages example, it's common for income and expenses to rise each year without the trustee trying to seize a <10% annual cost-of-living increase. It's also common for the trustee to exempt a portion of tax refund ($500-$2500) while seizing the excess up to 100% of the unsecured debt. 100% of the wages are already accounted for in payroll deductions, net wages, and the plan payment. I don't think the trustee is letting everyone keep the first $500-$2000 of a tax refund for free. She assumes it will be used for the support of the debtor and dependents, especially given that costs rise over time, life happens to most people, and to reduce administrative headaches resulting from motions to retain funds. Debtors and trustees should not keep modifying the confirmed plan every year for inflation or <$1000 car repairs. These motions cost hundreds of dollars at the expense of unsecured creditors and even the debtor if the payback is reduced to 0%. That's why I think there is an implicit allowance for increased income and expenses so we don't end up changing the plan every year.

      I want to get to the point where we have a 100% exempt asset like a perfected personal injury settlement and then go back to the statement where "exemptions don't matter much in a 13". Exemption don't matter as much in a 13 because that PI lawsuit has to be reduced to a check deposited in a bank which is not exempt without a wildcard and now everything non-exempt including cash post petition is property of the estate. So how do you fight the trustee seizing your portion of the PI settlement? The same way you try to keep a tax refund by spending it all on support necessary for the debtor and his dependents, right? If that's the case, you can do the same thing with a $5000 lottery prize, $5000 inheritance, $5000 Coronavirus 401k withdrawal, or anything other non-exempt windfall. In the end, exempt doesn't matter and doesn't help at all if it is liquidated to cash during the chapter 13 plan. So am I correct?



      Comment


        #4
        Originally posted by flashoflight View Post
        It's also common for the trustee to exempt a portion of tax refund ($500-$2500)
        Actually not that common. Only some jurisdictions allow a fixed amount of the tax refund to be exempted from turnover, but in many cases the attorney has calculated the average tax refund into the Means Test and/or Schedule I/J (for Chapter 13s).

        Originally posted by flashoflight View Post
        That's why I think there is an implicit allowance for increased income and expenses so we don't end up changing the plan every year.
        There's no implicit allowance. The reason that most Chapter 13 Trustees don't pursue "minor" increases in income is that it would make their jobs much more difficult. Chapter 13 Trustees in larger districts can have several thousand open and pending cases. Monnitoring each case down to the dollar and tying up the court with more hearings, on top of the new annual cases, can literally bring everything to a crawl. It more about efficacy of the process than any "implied" allowances. The allowances are what's in the IRS Collection Financial Standards (CFS) and they don't change too often and I haven't seen that the IRS CFS is on par with inflation.

        Originally posted by flashoflight View Post
        I want to get to the point where we have a 100% exempt asset like a perfected personal injury settlement and then go back to the statement where "exemptions don't matter much in a 13". Exemption don't matter as much in a 13 because that PI lawsuit has to be reduced to a check deposited in a bank which is not exempt without a wildcard and now everything non-exempt including cash post petition is property of the estate. So how do you fight the trustee seizing your portion of the PI settlement?
        Exemptions do matter because of 11 USC 1306 (Property of the Estate). For the bankruptcy estate to include any "property" doesn't mean that the property has to be reduced to a judgment or money. In fact, from many hearing that I have attended, most of the debtor attorneys negotiated with the Chapter 13 Trustee on what portion of the settlements would be subject to turnover based on exemptions. From my personal experience, it matters what is in the language in the settlement as to what is in fact property of the bankruptcy estate. State and federal exemption schemes can protect certain portions of proceeds from a PI lawsuit, but the language matters.

        Originally posted by flashoflight View Post
        The same way you try to keep a tax refund by spending it all on support necessary for the debtor and his dependents, right?
        Not in a Chapter 13... especially a confirmed Chapter 13. You can't just spend property of the bankruptcy estate.

        Originally posted by flashoflight View Post
        If that's the case, you can do the same thing with a $5000 lottery prize, $5000 inheritance, $5000 Coronavirus 401k withdrawal, or anything other non-exempt windfall. In the end, exempt doesn't matter and doesn't help at all if it is liquidated to cash during the chapter 13 plan. So am I correct?
        That's just simply not how a Chapter 13 works. The most important piece is the affect of 11 USC 1306 which has been successfully used by hundreds of Chapter 13 Trustees to recover property for the bankruptcy estate. Compared to a Chapter 7, a Chapter 13 is very different in how it treats property acquired post-petition. In a Chapter 13, 11 USC 1306 operates as a continuing catchall for all new property which is acquired by the debtor post filing. That portion of the Chapter 13 section of the code is so inclusive that it simply includes "all property... that the debtor acquires after the commencement of the case but before the case is closed, dismissed, or converted..." There are no exclusions.

        This has been argued, ad naseum, and there is a lot of caselaw on the effect of 11 USC 1306 (even prior to confirmation). Here's the most recent SCOTUS case which looked at the affect of 1306 (related to a conversion under 348, but still they make a powerful statement).

        The Chapter 13 estate, unlike a Chapter 7 estate, therefore includes both the debtor’s property at the time of his bankruptcy petition, and any assets he acquires after filing. §1306(a).

        Harris v. Viegelahn, 575 U.S. ___, 135 S. Ct. 1829, 1839 (2015). (emphasis added is mine)
        Prior to the SCOTUS decision in Harris v Vieglahn, the majority of courts followed the rule that 11 USC 1306 does in fact include all post-petition property in a Chapter 13, regardless of any other provisions in the law. For example, 11 USC 541 normally includes the right to the proceeds of an inheritance within 180 days of filing. However, these same courts have found that the temporal meaning in 541, regarding the 180 days, does not apply in a Chapter 13. This is why 11 USC 1306(a) is powerful in its reach.

        At least, that's my read and from some of my prior research on the affect on 11 USC 1306 on conversions (11 USC 348).
        Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
        Status: (Auto) Discharged and Closed! 5/10
        Visit My BKForum Blog: justbroke's Blog

        Any advice provided is not legal advice, but simply the musings of a fellow bankrupt.

        Comment


          #5
          Originally posted by justbroke View Post
          Not in a Chapter 13... especially a confirmed Chapter 13. You can't just spend property of the bankruptcy estate.
          When I say spend a post-confirmation windfall, I actually mean filing a motion to retain funds for unexpected living expenses like a broken gas furnace and then spending it on replacing the gas furnace. Nolo has a lawsuit example where they say the lawsuit as a property is exempt but it is still disposable income unless you use it for support. In many districts, you can motion to retain tax refund, which is the proceeds of an overstated expense on J, but you have to submit documentation and the judge can always say no and the trustee can fight it. So what happens if it is a winning lottery ticket with no exemption? You can't use it at all even with a motion to retain for support? Replace lottery ticket with anything else that has an exemption or no exemption. So exemptions don't matter in a 13 after the filing date?

          Comment


            #6
            ,
            Originally posted by flashoflight View Post
            When I say spend a post-confirmation windfall, I actually mean filing a motion to retain funds for unexpected living expenses like a broken gas furnace and then spending it on replacing the gas furnace.
            As a Chapter 13 debtor that has used this several times, the Chapter 13 Trustee wants receipts before they'll agree to allow the Motion To Retain be granted.

            Originally posted by flashoflight View Post
            Nolo has a lawsuit example where they say the lawsuit as a property is exempt but it is still disposable income unless you use it for support.
            In a Chapter 13? What case do they actually reference?

            Originally posted by flashoflight View Post
            In many districts, you can motion to retain tax refund, which is the proceeds of an overstated expense on J, but you have to submit documentation and the judge can always say no and the trustee can fight it. So what happens if it is a winning lottery ticket with no exemption? You can't use it at all even with a motion to retain for support? Replace lottery ticket with anything else that has an exemption or no exemption. So exemptions don't matter in a 13 after the filing date?
            Exemptions do matter. You can exempt something under State exemption schemes. This is how someone who has a PI settlement, during the Chapter 13, can actually retain a portion or all of the proceeds. That's why I say that the wording in the settlement matters. A lottery windfall is property of the bankruptcy estate because you likely exhausted all of your "cash" (or cash equivalent) exemptions when you filed the Chapter 13. (Especially true in places like Florida where the exemptions are a measly $1,000 for all your personal property -- unless you get to use the unused homestead exemption or $4,000.)

            In any event, here is a Chapter 13 case which may may sense to you. In this case, a post-petition and post-confirmation accident occurred resulting in a PI claim. The Trustee tried to take the net proceeds (of about $16,000) from reaching the debtor having objected to the Debror's post-petition/post-confirmation amendment to Schedule C (Exempt Property of the Estate). The Trustee lost the case and a.) it came down to the wording in the settlement as to what the proceeds of the settlement represented, and b.) the debtor was allowed to amend their Schedule C exemptions to exempt the post-petition/post-confirmation (PI) settlement under the Federal exemption scheme.

            Reference: IN RE: JOYCE M. BRATCHER, CASE NO: 08-36225, USBC SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION (2013)
            Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
            Status: (Auto) Discharged and Closed! 5/10
            Visit My BKForum Blog: justbroke's Blog

            Any advice provided is not legal advice, but simply the musings of a fellow bankrupt.

            Comment


              #7
              Originally posted by justbroke View Post
              In a Chapter 13? What case do they actually reference?
              They don't. But I am very sure Nolo is correct on this. This BK lawyer does cite: https://www.youtube.com/watch?v=hANvjga1Ilg&t=633s (time stamp on purpose to reduce viewing time to get to the meat) on a workers comp case for $8700 exempted on the wildcard and the trustee filed an objection anyway for the entire $8700 for the benefit of the creditors because it is disposable income without reasonable and necessary support. Notwithstanding the exemption, the money had to go to the creditors. If the exempt asset turns into cash post-petition, it always becomes property of the estate unless you use it for support. So is it any better than the winning lottery ticket?

              https://www2.txwb.uscourts.gov/opini...-18_230931.pdf
              Last edited by flashoflight; 05-01-2020, 07:17 PM.

              Comment


                #8
                Worker's compensation is different as that is "income" and not just property of the bankruptcy estate. That's why it matters as to exactly what is the post-petition property and why I say that a personal injury lawsuit is different.

                So I just read the Texas opinion after writing the above, and they too say that the worker's compensation claim was "income". In a PI settlement, some of the proceeds could be "defined" as payments for medical care which would neither be property of the estate nor income. The argument about a Personal Injury settlement is different than something that is income and is why I said that for a PI claim, the wording matters in the settlement (as to how the proceeds are allocated).

                More specifically, the case you reference is a retaliation case which is not related to any workplace injury itself, but a punishment to an employer for retaliating against a worker that filed a worker's compensation claim. That would be "income" for purposes of the bankruptcy and is why I will say that it's different than a PI settlement.

                In general, any post-petition "income" in a Chapter 13 is property of the estate under 11 USC 1306.

                Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
                Status: (Auto) Discharged and Closed! 5/10
                Visit My BKForum Blog: justbroke's Blog

                Any advice provided is not legal advice, but simply the musings of a fellow bankrupt.

                Comment


                  #9
                  justbroke
                  https://www.courtlistener.com/opinio.../in-re-launza/

                  This is the personal injury lawsuit cited by the worker's comp decision. It doesn't seem to matter what is inside the settlement language since neither decision mentions it.

                  The Launza personal injury case cites the following:
                  Including exempt income in disposable income does not make exempt property "liable" to Chapter 13 unsecured creditors. Chapter 13 relief is at the option of the debtor. The disposable income limitation in § 1325(b) simply defines the terms upon which Congress has made the benefits of Chapter 13 available.





                  In sum, as this Court stated in In re Moreno, No. 394-33027-SAF-13, at 4 (Bankr.N.D. Tex. June 17, 1999)(Memorandum Opinion and Order):
                  *292 A debtor may not be compelled to proceed under Chapter 13 of the Bankruptcy Code. 11 U.S.C. § 303. A debtor may voluntarily seek relief under Chapter 13 and may not be compelled to remain under Chapter 13. 11 U.S.C. § 1307(a),(b). But a discharge under Chapter 13 grants the debtor broader relief than available under Chapter 7. 11 U.S.C. § 1328. When a debtor voluntarily seeks that broad discharge, the debtor exposes his property to the bankruptcy estate for the life of the Chapter 13 case, 11 U S C § 1306, and commits to making his disposable income available to creditors for 36 months, regardless of whether the income derives from property that may otherwise be exempt 11 U.S.C §§ 1322(b)(8) and 1325(b)(1)





                  If that is the case, a 100% exempt personal injury case settlement no matter the language is no better than a non-exempt winning lottery ticket. So both items waterfall into disposable income exactly the same way. If the settlement language made any difference, at least one of the cited decisions in the majority would have mentioned it. Reimbursement for medical expenses if not subrogated isn't a windfall like legal fees aren't a windfall.

                  Definition of disposable income from the Bankruptcy Code itself:
                  [I]ncome which is received by the debtor and which is not reasonably necessary to be expended —(A) for the maintenance or support of the debtor or a dependent of the debtor, including [charitable contributions]; and (B) if the debtor is engaged in business, for the payment of expenditures necessary for the continuation, *289 preservation, and operation of such business.
                  Last edited by flashoflight; 05-02-2020, 09:57 AM.

                  Comment


                    #10
                    I think the distinction is that in certain PI cases, the money is allocated to payments to doctors, attorneys, and other providers. That money is not a windfall and is not subject to the bankruptcy estate. I do agree that in cases where it's purely "income" (additional/disposable) then it is subject to the clause in 11 USC 1306. I think that's where we are talking past each other.

                    If, in a PI lawsuit, the lawsuit terms says that 30% goes to the attorney and allocates a dollar value to medical bills (and providers), then that is not property of the bankruptcy estate and is not income. Anything else that is "not" necessary for the debtor would be excess and treated at income. That doesn't depart from what you wrote and what I was trying to convey. The reason I say the language in the settlement is important, because the money has to be properly allocated into the right places.

                    And nothing I wrote allows a Chapter 13 debtor a windfall from a PI lawsuit. I know, from earlier research in 2014, that monetary damages not allocated to specific categories are fair game and are property of the bankruptcy estate.

                    I think we were talking about two different aspects of a lawsuit; you were talking about excess income and I was talking about money allocated within a PI lawsuit to attorney, doctor, medical and other fees.
                    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
                    Status: (Auto) Discharged and Closed! 5/10
                    Visit My BKForum Blog: justbroke's Blog

                    Any advice provided is not legal advice, but simply the musings of a fellow bankrupt.

                    Comment


                      #11
                      Originally posted by justbroke View Post
                      I think we were talking about two different aspects of a lawsuit; you were talking about excess income and I was talking about money allocated within a PI lawsuit to attorney, doctor, medical and other fees.
                      So let's talk about only the windfall portion outside of attorney fees, medical liens, and copays in a lawsuit started post-petition. The reason I want to limit to the windfall portion is: Nobody with health insurance who always spends the deductible every year would prosecute a post-petition PI lawsuit if they knew the entire windfall portion would go to the unsecured creditors. It's even risky to include medical expenses because that could already be partially accounted in J and end up with the unsecureds.

                      So prior to the lawsuit being filed, go to the trustee and say I'm gonna spend $x on support, pay all the fees and liens, and give you $2k of the windfall if available after support expenses or I drop the case and nobody gets anything?

                      Comment


                        #12
                        Originally posted by flashoflight View Post

                        So let's talk about only the windfall portion outside of attorney fees, medical liens, and copays in a lawsuit started post-petition. The reason I want to limit to the windfall portion is: Nobody with health insurance who always spends the deductible every year would prosecute a post-petition PI lawsuit if they knew the entire windfall portion would go to the unsecured creditors. It's even risky to include medical expenses because that could already be partially accounted in J and end up with the unsecureds.
                        I think that's why the language, in a personal injury (PI) lawsuit, is important. Let's say instead of awarding a large non-medical/non-fees amount to the injured party, you allocate money to future medical needs? (I don't know if that works, but just wondering.) Allocate it to continuing medical care. That's why I think the language is important and it is important for the PI attorney to work with your Chapter 13 Trustee to make sure there are no misunderstanding.

                        Originally posted by flashoflight View Post
                        So prior to the lawsuit being filed, go to the trustee and say I'm gonna spend $x on support, pay all the fees and liens, and give you $2k of the windfall if available after support expenses or I drop the case and nobody gets anything?
                        Yes, this. As for whether you can drop the lawsuit and the (Chapter 13) Trustee can't stand in your place, is another story for another time.

                        Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
                        Status: (Auto) Discharged and Closed! 5/10
                        Visit My BKForum Blog: justbroke's Blog

                        Any advice provided is not legal advice, but simply the musings of a fellow bankrupt.

                        Comment

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