Process for filing a Chapter 7 exemption pro se.

[vhs]

No, I didn't list the exemption YET. But, I will. Thanks again.

[justbroke]

They read it but you never exempted it?

Doesn't matter if your lawsuit attorney understands the settlement better than anyone else. It matters how the language applies in a bankruptcy court! For example, personal injury (PI) proceeds that go to the care and future care of the debtor are generally exempt. However, if the settlement just says this is a settlement of $100,000 without specifying how it is split into different component parts. Here in Florida, the compensation received for emotional pain and suffering is not exempt. If the settlement just says $100K for the injury... oops!

This is why many people preparing to file bankruptcy will make sure their bankruptcy attorney, divorce attorney, and/or PI attorney are talking before any divorce or PI settlement is done. The wording matters. The words in your settlement are perfect for a general lawsuit. They may not be "perfect" in a bankruptcy context because the wording is unclear as to exactly which $1 goes to what part of the claim.

I'm just trying to let you see how it could be analyzed.

I'm assuming you're an asset case which means the Trustee wants to administer the claim as an asset. Has the Trustee already contacted your lawsuit attorney? Maybe the Trustee will just abandon it. Who knows.

[vhs]

Thanks again.

I think they both have read it, the trustee and BK attorney. However, my lawsuit attorney said I will get 75%, and he understands the settlement better than everyone else.

So, like you stated, I just have to wait and see at this point. List the exemptions and then lawyer up if I need to then.

[justbroke]

So, why would the trustee want to go to court on this, when they are going to lose?

They don't "know" right now if they are going to lose. Has the Trustee even seen the countersigned and executed settlement agreement? No, because you haven't even exempted the proceeds. Right now, it's just a settlement and settlement proceeds are likely the property of the bankruptcy estate. If they are wages, against which you may apply a State exemption, then all or some portion of the proceeds are not property of the bankruptcy estate. No one knows of sure until they read the settlement agreement... and it must be seen and viewed within the context of a bankruptcy proceeding regarding the bankruptcy estate created when the case was filed. Words matter in bankruptcy.

Trust me when I says this. Unless a Trustee is trying to question existing policy or looking to change a law, they are not going to spend time litigating an exemption issue to (a) only get paid $65 and (b) lose thousands in litigation costs, especially where they employ outside counsel. Trust me, they will look at your claim of exemption, likely immediately object, then they'll want to see the actual executed settlement agreement, and then, and only then, decide whether to continue to pursue the exemption objection or withdraw.

It has zero to do with the "dynamic" of the underlying lawsuit and settlement. It has 100% to do with the wording used in that settlement and whether the proceeds are in fact wages. That is what is called a "question of fact" and is for a finder-of-fact to determine. Has your BK attorney seen the actual countersigned and executed settlement agreement? I'm sure the Trustee has not.

Again, this is all speculative. You have not (a) claimed the exemption or (b) the Trustee has not objected to your claim of exemption. You also have not shown that you actually have an executed settlement or that your BK attorney has seen it. It seems like pure speculation at this point about what the words mean in the agreement. Not that it has been executed and the proceeds have been paid. In fact you used words to indicate that it was "unliquidated," "disputed," and "unknown" in the past.

[vhs]

Yes, and I think my BK attorney and trustee don't understand the settlement, which is 100 percent a retaliation claim that is considered wages. So, I will win any situation, but might have to pay up to get the trustee to understand. Its BS to me, because I don't think the trustee or my attorney took the time to really understand the dynamics of the settlement, that it was a "wages" settlement. My guess is that the trustee, when they dig in on the settlement, will have no choice but to let it go. If they want to fight with me on this, it will cost the trustee as well, and they are going to lose because I already have confirmation from my "lawsuit attorney" that this is indeed, a "wages settlement".

So, why would the trustee want to go to court on this, when they are going to lose? My guess is that he doesn't understand the dynamics of the lawsuit, and that would all be taken care of if he just made a phone call to my "lawsuit attorney", not my BK attorney, who also doesn't understand the dynamics of the settlement.

[vhs]

You are the best.

I appreciate you taking the time to educate me on this.

[justbroke]

I don't think they bluff. It is more a demand that you "prove" your exemption or position. The creditors can directly object themselves as well. I think it is more of... if the exemption as-applied isn't clear then the Trustee probably has a duty to object to the claim of exemption. In most cases, it doesn't even go to a hearing. The Trustee and the debtor's attorney will discuss the exemption by phone/email and figure out if the debtor's attorney can convince the Trustee that the exemption is correct and to have the Trustee withdraw their objection to claim of exemption.

You see, lawyers work together. The Federal court system is the best in that they not only encourage the attorneys to work together but to try to settle differences without the court. Think of the court as the referee and the attorneys as players in a game (although the law is not a game). The players only go to the referee if the there is disagreement on the rule in the game. It's that simple. It is quite the adversarial system, but, yes, they may leave the court and go for drinks at O'Malley's.

In the bankruptcy context, most things are settled outside the presence of the judge. It only goes to the judge and a hearing if the parties just can't come to an agreement.

Please remember, that a Chapter 7 Trustee makes about $65 on a case. No smart or seasoned Chapter 7 (Panel) Trustee would ever waste their time on something that can cost them a lot of $$$ to prosecute. When you file your exemption through an amendment to Schedule C, the Chapter 7 Trustee will take a look and decide if (a) they understand the application of your exemption to the property (proceeds of the lawsuit) and (b) whether it's worth the time even if there is a presumption that the exemption applies.

In your case, the Chapter 7 Trustee may not even blink and just ignore the amendment. They will certainly look at it quickly. They may, however, object just so that they can get a look at the settlement agreement to make sure the proceeds are correctly classified for the exemption to apply. Now do you see how that works? A sort of checks-and-balances situation. Your claim isn't validated until the Trustee looks and determines it's either (a) valid on its face (so obvious) or (b) valid after examining the claim of exemption against the supporting documentation.

[vhs]

Thanks again.

Yes, I will just file and then deal with it if he objects.

Would there be a scenario where the trustee is "bluffing". I just don't understand why the trustee would object to a situation where they are wrong here, except to show the creditors that he is doing his job?

[justbroke]

Just very disappointed to see how the "law" works. A trustee that wants to object to something that he is clearly wrong (yes, it is clear now that I think of it, because in the past I said it was unclear...NO...it is very clear based on my conversation with my "settlement" attorney).

It is literally the job of the Trustee--who represents the creditors--to question anything you put as an exemption. It's just that simple.

You are pitting a settlement (torts/contracts litigation) attorney against practicing bankruptcy attorneys on interpretation of an exemption in a bankruptcy proceeding. Interesting.

I really think the trustee is just bluffing on the objection here or he also doesn't understand the nature of the settlement, because he is going to lose if it goes to court.

Trustees know their business. They are actually practicing attorneys that are usually seasoned bankruptcy attorneys and trial attorneys.

I just have to find an attorney who will do it for cheap if the trustee objects. Any suggestions? I was thinking of asking for help from a student lawyers or something like that.

Law students cannot help you. The unauthorized practice of law is a killer. No (smart) law student would touch this. You are going to pay a-la-carte rates for a bankruptcy attorney at $250-500 an hour. You'll probably be charged a 5-10 hour retainer up front (total guess).

I just don't think its right for me to have to pay all the money to fight this when I am correct.

I was writing something in the other thread about whether this was about the money. This is the nature of litigation in general. We don't know if you're correct. No one knows if you're correct. If you want to find out if you're correct... file the claim of exemption, respond to an objection to the claim by the Trustee, fight it in an evidentiary hearing. That simple.

[vhs]

Well, that's the distinction. You can claim they are wages, but it is a wage settlement. Are they going to pay this settlement under a W-2 or 1099? It appears that your attorney does not believe it will be W-2 "earned" income.

I'm not trying to belabor the point but the ND exemption reads "75% of earned but unpaid wages." What does "earned" mean. In a settlement, did you "earn" those wages or are they simply paying you the equivalent wage to settle the case. Language matters in settlements.

That's why we keep saying that it is "not clear" that you can "prove" the exemption. That's for a trier of fact to determine. The threshold question, however, is are you applying the rule correctly.

I can't answer your legal question of whether a potential settlement would be or could be claimed as wages (does it get reported as W-2 income?). You clearly have a different opinion of the application of the exemption than your seasoned bankruptcy attorney. You will not find the answer to your wage question (is it an earned wage or settlement proceeds) here or anywhere besides making the claim of exemption, seeing if the Trustee objects, and defending the position that it is a wage and not proceeds. That's a distinction that matters and is why this is "not clear."

Its a W-2 that is going to be issued to my estate. My "settlement" attorney (who is one of the best attorneys for these situations in the country) has stated to me TWICE that my situation was a double back pay settlement from the retaliation, so I know I will win if the trustee wants to go to court. This attorney is very careful on what he says as well, and he hasn't gotten back to me in nearly a month since we last spoke about this. So, the facts are the facts, and it is a wage exemption.

I do think my BK attorney is not well versed outside of BK law.

Also, I don't think he didn't talk to my "settlement" attorney, which irks me, because that is not doing his "due diligence".

Just very disappointed to see how the "law" works. A trustee that wants to object to something that he is clearly wrong (yes, it is clear now that I think of it, because in the past I said it was unclear...NO...it is very clear based on my conversation with my "settlement" attorney).

I really think the trustee is just bluffing on the objection here or he also doesn't understand the nature of the settlement, because he is going to lose if it goes to court. This might cost me a few bucks to fight, but its going to cost the trustee as well, and I will win. So, its a win for me.

I just have to find an attorney who will do it for cheap if the trustee objects. Any suggestions? I was thinking of asking for help from a student lawyers or something like that.

I just don't think its right for me to have to pay all the money to fight this when I am correct.

[justbroke]

Yes, I can prove they are wages. My attorney is not reading the settlement correctly.

Well, that's the distinction. You can claim they are wages, but it is a wage settlement. Are they going to pay this settlement under a W-2 or 1099? It appears that your attorney does not believe it will be W-2 "earned" income.

I'm not trying to belabor the point but the ND exemption reads "75% of earned but unpaid wages." What does "earned" mean. In a settlement, did you "earn" those wages or are they simply paying you the equivalent wage to settle the case. Language matters in settlements.

That's why we keep saying that it is "not clear" that you can "prove" the exemption. That's for a trier of fact to determine. The threshold question, however, is are you applying the rule correctly.

I can't answer your legal question of whether a potential settlement would be or could be claimed as wages (does it get reported as W-2 income or as 1099-MISC?). You clearly have a difference opinion of the application of the exemption than your seasoned bankruptcy attorney. You will not find the answer to your wage question (is it an earned wage or settlement proceeds) here or anywhere besides making the claim of exemption, seeing if the Trustee objects, and defending the position that it is a wage and not 1099-MISC proceeds. That's a distinction that matters and is why this may not be "clear."

[vhs]

Yes, I can prove they are wages. My attorney is not reading the settlement correctly.

Thanks for your reply.

[justbroke]

Do you know what would happen in a situation where the trustee is clearly wrong, but might still object?

There's no way to tell if the Trustee is "clearly wrong." Only the court can adjudicate whether or not the exception applies if there is an objection. When there is an objection then local procedure may require the moving party to request a hearing. The initial hearing is usually more a conference and then it would go to an evidentiary hearing (with blocked time on the court's calendar).

You would have to prove that the exception applies. I don't know if you have the initial burden of proof, but the burden will shift or start with you. You will need case law to support the assertion (that the exception applies and the Trustee is wrong). This evidentiary hearing is technically a mini-trial.

To answer your question more closely; is the trustee is clearly wrong, but might still object? There's nothing that defines "clearly" wrong. This is especially true when this is an edge case and the exception is uncommon. For example, can you prove that it's a wage? Are pre-petition wages protected? Even though you say it's being paid as a wage, is it nonetheless considered a settlement? As despritfreya wrote, can you prove that you need all the money (as the exemption requires)? Do you now see why this would go to an evidentiary hearing (mini-trial) to ascertain the facts to determine if the exemption applies?

Think about it. The Trustee objects because merely claiming an exemption on Schedule C may require proof. That's what the objection serves... a demand for proof that the exemption applies. Some are easy because they apply on their face (e.g., the homestead exemption, but even that could be challenged... is it your homestead?). Others are more fact-driven such as yours. The exemption only applies if they are (a) wages, and (b) you can prove that they are necessary. (I don't recall all the details of the exemption, but it's something like that). The Trustee is clearly within their right to protect creditors by making you prove the elements of the exemption.

For some reason, and your attorney is much more learned than I and has much more information, your attorney doesn't believe the exemption applies. I don't know what to say.

[vhs]

Thanks for the feedback.

Do you know what would happen in a situation where the trustee is clearly wrong, but might still object?

If that is the case, what happens?

When does the judge come in to make their decision on the exemption?

[justbroke]

Your problem is going to become if the Trustee files an objection. Who is going to properly defend the exemption?

Be aware that this assumes that you file the amendment(s) correctly, pay any fee, and the Clerk doesn't reject the amendment. (They won't reject it at the counter unless some "local form" is missing, but they'll take the filing, docket it, review it, and the file an abatement and deficiency notice.)