Open/Close Menu Bankruptcy Lawyer Port St Lucie | Palm City Lawyer | Serving Stuart, Jensen Beach, Vero Beach, and the entire Treasure Coast - Jon L Martin Attorney at Law

Debtors in Bankruptcy can strip away 2nd Mortgages on their homes in Chapter 11, 12 and 13, under 11 U.S.C. § 506, as long as the Balance owed on the 1st Mortgage is greater than the value of the home. Not so in chapter 7 because of “Dewsnup v.Timm, 502 U.S. 410 (1992)”
However now, a new case (pending certiorari) may be heard by the U.S. Supreme Court in which two retired Bankruptcy Judges and four law professors have filed a Motion for leave to file an Amicus Curie Brief urging the overruling of “Dewsnup”. Their argument is that it would bring Chapter 7 into alignment with the other chapters where it is well settled law that allows debtors to avoid liens that have no claim in equity based on their position in priority and the value of the property.
Up to 2015 Florida and Georgia were stripping 2nd Mortgages in spite of “Dewsnup”. However, another case “Bank of America v. Caulkett, 135 S. CT. 1995 (2015)” stopped that all together. Now a new case “Ritter v Brady (Supreme Court Case No. 18-747) is in the wings and the Professors and Retired Judges believe the that case presents an opportunity to overrule “Dewsnup”, long a target of criticism, because lien avoidance is a critical aspect of the “fresh start” policy in Bankruptcy.
If “Desnup” is overruled, it may well be a case of too little too late to help many homeowners save their home due to the continued run up that has been occurring in values since 2010 following the Real Estate Collapse. All it takes is $1.00 of an equity position to be “in the Money.”
On the other hand, it could create a minor surge in Chapter 7 filings for those homeowners who still find themselves short of 1st Mortgage Balance in their home’s value while struggling to keep up with onerous payments up on 2nd mortgages that are “out of the Money.” Under the means test however debtors stripping 2nd Mortgages will have to be cautious about having a resulting budget that throws them into Chapter 13!

For more information on bankruptcy and debt settlement issues, please contact Jon L Martin Bankruptcy Attorney at (772)419-0057 or visit us online http://jonlmartinlaw.com/. With over 40 years of combined legal and business experience, we have helped hundreds of people in and around Martin and St Lucie County to relieve their financial problems. Bankruptcy Lawyer Port St Lucie Florida and a chairman of Martin County Bar Bankruptcy Committee Jon L. Martin helps clients throughout the following cities and surrounding areas: Hobe Sound, Jensen Beach, Palm City, Port Salerno, Port St. Lucie, Stuart, Sewall’s Point, and the entire Treasure Coast of Florida.

Everyone “knows” 401K funds, IRA’s and other Retirement funds are exempt in bankruptcy, “. . . to the extent that those funds are in a fund or account that is exempt from taxation under section 401,403,408,414,457 or 501(a) of the Internal Revenue Code of 1986.     11 U.S.C. §522(d)(12)(2018)” … until now!retirement-funds

 

Recently, the Bankruptcy Appellate Panel for the Eighth Circuit ruled that merely having a divorce decree that awards half of an ex-spouse’s retirement funds to the parting spouse did not qualify as exempt under 11 U.S.C. USC § 522 (b)(3)(C), absent a properly drafted and executed QDRO. *1

 

The Eighth Circuit decision relied on an earlier U. S. Supreme Court decision *2 stating that inherited I.R.A.’s do not meet the criteria under 11 USC 522 (b)(3)(C) and are therefore non-exempt.

 

While the decision is currently an Eighth Circuit decision, it’s a sure bet the same result will soon come to The Southern District of Florida. A word to the wise suggests that Divorce Attorneys should get familiar with this situation and make sure adequate QDROS accompany all divorce settlements going forward.

 

The “CLARK” decision was based upon the lack of definition in the Bankruptcy Code of the term “retirement funds” wherein the Court resorted to “ordinary meaning” in the following manner;

 

“. . . fund[s] is sum[s] of money . . . set aside for a specific purpose.”

And;

“. . . retirement means. . . “[w]ithdrawal from one’s occupation, business, or office.”

 

The “LERBAKKEN” Court said that both conditions must be met and neither occurred, since absent the QDRO the Debtor had unlimited and unrestricted access to the funds thereby rendering them available to the bankruptcy estate. An interpretation that might find its own way to yet another Supreme Court decision. In the meantime, better hone up on QDROS!

*1 United States Bankruptcy Appellate Case No. 18-6018 October 16, 2018 (InRe. Brian A. Lerbakken v Sieloff and Associates,P.A. (Appeal from United States Bankruptcy Court For the District of Minnesota – Duluth)

 

*2 [(Clark v. Rameker) 134 S. CT 2242 (2014)].

For more information on bankruptcy and debt settlement issues, please contact Jon L Martin Bankruptcy Attorney at (772)419-0057 or visit us online http://jonlmartinlaw.com/. With over 40 years of combined legal and business experience, we have helped hundreds of people in and around Martin and St Lucie County to relieve their financial problems. Bankruptcy Lawyer Port St Lucie Florida and a chairman of Martin County Bar Bankruptcy Committee Jon L. Martin helps clients throughout the following cities and surrounding areas: Hobe Sound, Jensen Beach, Palm City, Port Salerno, Port St. Lucie, Stuart, Sewall’s Point, and the entire Treasure Coast of Florida.

Most people think Bankruptcy falls under either Chapter 7 or Chapter 13. These are the basic consumer formats. Chapter 7 is basically a straight liquidation of non-exempt assets; while Chapter 13 supposedly allows a debtor to retain non-exempt assets through what is essentially a “buy-back” plan over a 3 to 5 years period.

chapter-12-bankruptcySome people (especially small business owners and high net worth individuals) are also aware that there is something “out there” called Chapter 11, of which there is even less known.

Chapter 11 is similar to Chapter 13, however it provides for a special set of rules and longer periods of time to deal with the much larger issues usually associated with these larger cases.

Mention Chapter 12 however, and most likely you will get blank stares and /or questioning double takes. Enacted in October of 1986 and effective that November, Chapter 12 is directed to Farmers and Fishermen, essentially because of the unique nature of their structure and providers of the nation’s breadbasket.

It came about in response to the “Farm Crisis” of the time which was causing a rapid collapse in Family Owned Farms.

Passed almost as an after thought in wrapping up that year’s legislative session, little thought was given to how the existing bankruptcy code would interface with the new provisions, particularly in regards to “the absolute priority rule,’ concerning capital gains taxes when large assets were sold in downsizing operations.

On October 26, 2017, President Trump signed Pub. L. 115-72, thus allowing family farmers to “de-prioritize” tax claims, effectively making them unsecured claims, unlike most tax claims in other Chapters of the Bankruptcy Code.

Effectively, the new rule serves to relieve the effects of capital gains that result when large farming equipment and other high cost assets are sold to in order to pay dividends to lesser priority classes. It stops the IRS from objecting to confirmation of a plan, thus avoiding forced liquidation and allowing survival of the enterprise.

For more information on bankruptcy and debt settlement issues, please contact Jon L Martin Bankruptcy Attorney at (772)419-0057 or visit us online http://jonlmartinlaw.com/. With over 40 years of combined legal and business experience, we have helped hundreds of people in and around Martin and St Lucie County to relieve their financial problems. Bankruptcy Lawyer Port St Lucie Florida and a chairman of Martin County Bar Bankruptcy Committee Jon L. Martin helps clients throughout the following cities and surrounding areas: Hobe Sound, Jensen Beach, Palm City, Port Salerno, Port St. Lucie, Stuart, Sewall’s Point, and the entire Treasure Coast of Florida.