The Florida Bankruptcy Law Blog

Does Means Test Include Income Earned By Non-filing Live-in Companions?

Many Chapter 7 means tests involve issues about the size of a household and computations of household income. Consider the following questions posed in an email. A prospective debtor lives with his young child and the child’s mother. The debtor and mother are not married. The debtor and his girlfriend have separate bank accounts, ad they share payment of household bills. The debtor wants to know if his means test includes income earned by the unmarried girlfriend.

Joint Tax Refund: Is It Exempt As Entireties Asset?

I would expect that tax refunds payable to husband and wife who filed taxes jointly would be considered tenants by entireties property exempt from the creditors of either spouse. A bankruptcy trustee challenged the exemption of a joint tax refund in a recent Orlando, Florida bankruptcy case. The trustee argued that either spouse, acting alone, can unilaterally revoke the couple’s election to file a joint taxt return (and therefore receive a joint refund) in a number of different ways even after the joint return has been filed. The trustee argued that the ability to unilaterally revoke a prior decision to file a joint tax return prevents married couples who file joint returns from owning tax refunds as tenants by entireties.

Can An Undersecured Mortgage Lender Attack Tenants By Entireties Assets In Chapter 7?

I often get legal questions I can’t answer with certainty. For instance, I recently consulted with a man who had guaranteed a large business debt. His wife did not sign the guarantee. The man and his wife had most of their assets in joint financial accounts. He and his wife were both liable to pay three mortgages. The third mortgage is effectively unsecured because of the declining value of their home in today’s real estate market. The couple has no joint debts other than the three mortgages on their home. The husband is considering Chapter 7 bankruptcy. The issue is whether his joint financial accounts are exempt as tenants by entireties property.

Negotiating With Car Lenders

I had a conversation with some bankruptcy attorneys at the bankruptcy court building. The attorneys told me that their own bankruptcy clients have had increasing success negotiating with automobile finance companies to modify terms of car loans after the clients filed Chapter 7 bankruptcy. Apparently, the declining value of used cars in a weak economy has made car lenders more flexible. The attorneys told me that their clients reported that automobile lenders are willing to modify interest rates, payment amounts, and even reduce loan balances to entice the borrower/debtors to reaffirm car debt. The lenders are less interested in repossessing used cars. Lenders are more likely to renegotiate with debtors who are behind on car payments at time of filing.

Social Security Income in Chapter 13

I received an email about the treatment in Chapter 13 bankruptcy of money received for basic social security and for social security disability. Social security payments do not count as income for computation of means test eligibility under the new bankruptcy law.. Yet, once someone wants to, or is forced into, a Chapter 13 bankruptcy instead of a Chapter 7 there is a separate income issue. The issue in a Chapter 13 is the amount of the debtor’s disposable income. Debtor’s must pay all disposable income to the Chapter 13 trustee. If the social security payments count as disposable income then the debtor would have to pay more money to his creditors and the trustee during the Chapter 13. I had thought that social security disability money counted for disposable income but that basic social security receipts did not count as income because it was not part of the income definition under the means test.

Homestead Accounts Not Applicable For Sale After Filing Bankruptcy

I spoke with a person currently involved in a Chapter 7 bankruptcy and is involved in a dispute with the Trustee over her homestead exemption. Prior to filing bankruptcy the debtor listed her house for sale. She filed Chapter 7 bankruptcy, on day of filing, she still resided in her house. She claimed the house as exempt homestead. After filing bankruptcy she sold the house. The Trustee is arguing that the house is not homestead because either the debtor intended to abandon home by putting it on the market or because the proceeds from the sale were not reinvested in another homestead.