Question about wildcard in Ohio

[LadyInTheRed]

I'm very glad to hear that news!

I hope that your attorney learned something from this!

Me too!

[justbroke]

Yay! Good news finally today! The trustee finally agreed that we were right and he is closing the case now, no-asset! So relieved!

I am relieved as well. My real relief is not that the Trustee finally agreed, it's that your attorney finally stood up to the Trustee! This was clearly, in my non-professional but educated view, that the Trustee did not have a valid claim that your exemption was invalid.

I hope that your attorney learned something from this!

[bk2009]

Yay! Good news finally today! The trustee finally agreed that we were right and he is closing the case now, no-asset! So relieved!

[justbroke]

I am mad as well. There is no way that I can see that a "tax refund" that was reduced to cash, and spent down before filing, could ever be subject to the Trustee's wrath. Your assets are as of the day of filing.

There is something wrong here.

[bk2009]

So, the exemptions are as follows:
EIC: $610
Child Tax: $1407
DHs wildcard: $1150
Cash on Hand: $425

Total exemptions = $3592. It should have had another $1150 on it for my exemption, but the trustee says that I can't use it because I didn't work, so it's not my refund (never mind that it comes addressed to both of our names).

So, if you go by date of filing, we had $3k on hand, it's a no brainer, we had enough exemptions. He's saying that we have to cover $4870 - our entire fed and state refund rec'd nearly a month before we filed and the roughly $1800 was used to catch up on utilities and to pay our attorney. The trustee is arguing that we could do that, but only out of our exempted portion. But everything I read says it's day of filing, not day of receipt of tax refund.

And I'm pissed at my attorney b/c I wanted to spend it all down -fixing my car, buying some clothes for the kids (this has totally screwed us this year b/c my kids have very limited summer clothes, mainly wearing what they did last year) and he assured us that we shouldn't and it would be looked at badly. And now the trustee wants $1278, it's just garbage.

[justbroke]

Well, if the attorney is not going to fight with the Trustee, you may just be out of luck. The exemption would be on what cash you had the DAY that you filed, but I can see some weird scenario where it is claimed that the $3,000 of cash was from the refund and since it was the refund, only $E can be exempted. However, that still makes no sense at all and your attorney says that there is no case law on this.

I think I now understand your attorney's (and Trustee's) position. Since you are trying to exempt the money by using Tax Refund related exemptions, the Trustee is saying that those exemptions apply only against the original refund. IN other words, to use a "tax refund" exemption, you must apply it against the entire tax refund.

Is there no other way to exempt the $3,000?

[bk2009]

It was listed as cash, tax return, exempted. Our EITC, child tax credit and DHs exemption (since the trustee said no to me), more than cover the $3k, but he's saying that DHs exempted cash paid for the lawyer (from prior to date of filing).

[LadyInTheRed]

So, did you list cash on the petition and show it as exempt? Then, did the trustee say it's not cash, it's a tax refund? Then, if it's a tax refund only one spouse's exemption applies? Just trying to undetstand. Knowing how the asset was listed on your petition and what exemption was used would help.

[bk2009]

So this was the response from our lawyer today, when I asked him if there was case law on this:

I've told you already that this is very fact intensive and there is no case law directly on point. The law provides that the trustee is entitled to any non-exempt property that a debtor had on the day of filing. You guys had $3,000 or so in the bank on the day of filing. He is arguing that at least a portion of that money was un-exempt tax refund. Its as simple as that. We are arguing that after exemptions there is nothing there for him because you spent some of the $ on necessaries.

He is arguing that you spent the "exempt" $ on the necessaries and so there is non-exempt money left for him.

I think the court could go either way on this.

So, he wants like $1300 of the money. We don't have anything left. Like, nothing. I spent it on things like tuition that I wanted to pay prior to filing but to which our lawyer said wasn't necessary because it was all covered with our exemptions, and now we're getting screwed. And I still owe more for tuition too.

[bk2009]

Well boo that the discharge doesn't mean that he can't go after some assets that should be exempt!

[LadyInTheRed]

Congratulations on your discharge!

I agree with JB. Based on what you've told us, you had cash on the date of filing, not a tax refund. If a refund is what was listed on your petition, maybe the petition needs to be amended. You need to pin your attorney down on this. Unless there was a voidable transfer, it makes no sense for the trustee to try to get any portion of your tax refund that was already spent on the date you filed.

[justbroke]

I opened our mail today (from yesterday, it came after 6 pm so I didn't get it until today) and I have a discharge letter. Does this mean that we won't have to pay him anything and that the trustee is dropping his argument? Or could we still have to pay? I'm sending an email to our lawyer, but wanted to ask here too, since you all seem to know more than he does.

The discharge has nothing to do with the asset determination, administration of your case, and the subsequent closing. You are now in the "administration" phase of the bankruptcy. Because you have been classified as an asset case, the Trustee must administer the case and recover any available assets.

I still do not believe that a Trustee can recover any proceeds of a Tax Refund that was spent by you (the debtor) prior to filing. It just makes no sense. Maybe your attorney listed the Tax Refund as an asset of the bankruptcy. The attorney should not have done that, in my opinion. (Take that with a grain of salt though.) On your schedules, you should have just shown it as "Cash On Hand or In Banks"! Not as a tax refund! Since you already had the tax refund, it was "reduced" to cash, so is just that... cash on hand. I am saying that if you had a tax refund due AFTER your filing date, then you schedule that as an "Anticipated Tax Refund" on your Schedules and you would exempt a portion or all of that amount.

Otherwise, I'm missing something... and that could be the case. Ask your attorney, under what theory of the bankruptcy code or your State's exemptions could the Trustee go after the entire amount of a refund received prior to filing, is now "cash on hand", and the amount has been reduced on living expenses. I'm wondering if the attorney listed it as a "Tax Refund" on the schedules and THAT is what's throwing the Trustee. I would think that it would just be listed as "cash" as I stated above. People only use the words "tax refund" on the schedules when referring to an anticipated and not yet unpaid tax refund. People use "cash" on the schedules when the money is already in the bank on the day of filing.

[bk2009]

Okay, so justbroke hit the nail on the head, and what we argued with our lawyer. He seemed to want us to make an offer to the trustee, I told him I thought he wasn't fighting hard enough.

I opened our mail today (from yesterday, it came after 6 pm so I didn't get it until today) and I have a discharge letter. Does this mean that we won't have to pay him anything and that the trustee is dropping his argument? Or could we still have to pay? I'm sending an email to our lawyer, but wanted to ask here too, since you all seem to know more than he does.

[justbroke]

Yes, this is starting to get a bit confusing. If the Trustee is trying to apply exemptions BEFORE The filing date, that does not make one bit of sense! You exempt property on the day that you file.

[bk2009]

The cash amount we had on hand was listed on the petition. The trustee is trying to use both dates - the date that we received the refund and the date that we filed. He's trying to say that my DHs wildcard was applied the day that we received our tax refund and deduct it, along with the EIC and child tax credits on that date. Then, he is saying that we paid our attorney with that cash was exempted. I asked our lawyer this morning for clarification as to what date the trustee is using, as it's my understanding that it only matters on the day of filing and that he can't go back and apply the exemptions to that day.