Robert Weed has the best rate of bankruptcy dismissed in Northern Virginia Just finished checking on the number of my law firm bankruptcy cases dismissed the first three months of this year. (“Dismissed” means thrown out; the opposite is “discharged” which means successfully completed.)   We had 4 dismissals and 90 cases filed—that’s 4.4%. One […] The post Lowest rate of bankruptcy dismissed in Northern Virginia by Robert Weed appeared first on Robert Weed.

Robert Weed has the best rate of bankruptcy dismissed in Northern Virginia Just finished checking on the number of my law firm bankruptcy cases dismissed the first three months of this year. (“Dismissed” means thrown out; the opposite is “discharged” which means successfully completed.)   We had 4 dismissals and 90 cases filed—that’s 4.4%. One […]The post Lowest rate of bankruptcy dismissed in Northern Virginia by Robert Weed appeared first on Robert Weed.

The Bankruptcy Code puts specific demands upon the debtor seeking to eliminate debt through a bankruptcy filing. It is important for clients to realize that these demands are inherent in the bankruptcy code and are not needless demands from their bankruptcy attorney. In many cases, debtors will wrongfully assume that the demand is coming from+ Read More The post Requesting Documents Required For Filing Bankruptcy The Right Way appeared first on David M. Siegel.

In a blow to creative lawyering, the Supreme Court ruled today that a structured dismissal which allocates value contrary to the priority scheme of the Bankruptcy Code may not be approved.   Czyzewski v. Jevic Holding Corp., No. 15-649 (U.S. 3/22/17).   You can find the opinion here.What HappenedThe case arose out of a leveraged buyout gone wrong.   Sun Capital Partners acquired Jevic Transportation Company with money borrowed from CIT Group.   When Jevic closed its business and filed bankruptcy, two lawsuits ensued.   First, a group of truck drivers brought suit under the WARN Act against both Jevic and Sun.    Second, the Official Committee of Unsecured Creditors sued Sun and CIT to unwind the leveraged buyout as a fraudulent transfer.     The Bankruptcy Court granted summary judgment against the Debtor (but not Sun) on the WARN Act claim resulting in a priority claim of $8.3 million plus an unsecured claim of $4.1 million.   Meanwhile, CIT and Sun reached a settlement with the Committee.   CIT agreed to fund $2.0 million to pay the Committee's legal fees and administrative expenses.   Sun agreed to transfer $1.7 million in cash upon which it held a lien to pay taxes and administrative expenses with the balance to be paid to unsecured creditors on a pro rata basis.   However, none of the funds would go to the priority claims of the WARN Act claimants.   Apparently Sun did not want to contribute funds to the WARN Act claimants which they could use to further their case against Sun.   The case would then be dismissed in a structured dismissal.Subsequently the Third Circuit ruled that Sun was not liable on the WARN Act claims because it was not the drivers' employer.   If this ruling had come earlier, Sun would have had no reason to subvert the priority scheme of the Code and this case would never have made it to the Supreme Court.    The Court's RulingThe Court answered two questions.   First, it found that the drivers had standing under Spokeo, even though Sun claimed that they were irreversibly out of the money.   Second, the Court ruled that structured dismissals can not bypass the Code's priority scheme absent consent any more than such result could be reached in a case under Chapter 7 or a Chapter 11 plan.    Justice Thomas, joined by Justice Alito, dissented on the basis that cert was improvidently granted.    StandingOn the standing issue, Sun argued that the settlement was based on bypassing the WARN Act claimants and that without the settlement there would not be any funds for any of the creditors.  However, the Court sagely noted that since the WARN Act claimants failed in their suit against Sun, there would be no reason to discriminate against them if the case was remanded.  Further, the Court found that if CIT and Sun were willing to pay $3.7 million to settle that the fraudulent transfer action clearly had value.    Even if the case was not settled in chapter 11, the Court found that it could be pursued by a chapter 7 trustee or that the creditors could pursue the action following a dismissal.   The Court remarked:Consequently, the Bankruptcy Court’s approval of the structured dismissal cost petitioners something. They lost a chance to obtain a settlement that respected their priority. Or, if not that, they lost the power to bring their own lawsuit on a claim that had a settlement value of $3.7 million. For standing purposes, a loss of even a small amount of money is ordinarily an “injury.”  And the ruling before us could well have cost petitioners considerably more.  A decision in petitioners’ favor is likely to redress that loss. We accordingly conclude that petitioners have standing. (internal citations omitted). Opinion, p. 11.   This  ruling is consistent with many decisions coming down which have rejected Spokeo challenges in specific circumstances.PriorityWhile the Court's ruling on the priority issue takes up eight pages, it can be succinctly summarized in its first paragraph.Can a bankruptcy court approve a structured dismissal that provides for distributions that do not follow ordinary priority rules without the affected creditors’ consent? Our simple answer to this complicated question is “no.”Opinion, p. 14.    The Court went on to explain that the Bankruptcy Code's priority scheme "constitutes a basic underpinning of business bankruptcy law."   Ordinarily a dismissal restores the parties to the status quo.    While 11 U.S.C. Sec. 349(b) states that the Court may order otherwise for cause, this is not carte blance to ignore the Code's system of priorities.   Rather, it exists to "give courts the flexibility to “make the appropriate orders to protect rights acquired in reliance on the bankruptcy case.”The Court distinguished several precedents raised by the Respondents.   In discussing Judge Harlin Hale's  decision in In re Buffet Partners, LP, 2014 WL 3735804 (Bankr. N.D. Tex. 2014), the Court noted that no party with an economic interest had objected.    I wrote about the Buffet Partners case here.     Thus, a structured dismissal is still possible absent objection.The Court also noted that there were other instances in which bending the Code's priority scheme would work for the common good and would be permissible.We recognize that Iridium is not the only case in which a court has approved interim distributions that violate ordinary priority rules. But in such instances one can generally find significant Code-related objectives that the priority-violating distributions serve. Courts, for example,have approved “first-day” wage orders that allow payment of employees’ prepetition wages, “critical vendor” orders that allow payment of essential suppliers’ prepetition invoices, and “roll-ups” that allow lenders who continue financing the debtor to be paid first on their prepetition claims.  In doing so, these courts have usually found that the distributions at issue would “enable a successful reorganization and make even the disfavored creditors better off.”  By way of contrast, in a structured dismissal like the one ordered below, the priority-violating distribution is attached to a final disposition; it does not preserve the debtor as a going concern; it does not make the disfavored creditors better off; it does not promote the possibility of a confirmable plan; it does not help to restore the status quo ante; and it does not protect reliance interests. In short, we cannot find in the violation of ordinary priority rules that occurred here any significant offsetting bankruptcy-related justification. (internal citations omitted).Opinion, pp. 18-19.    Thus, the court is not shutting the door on common practices in chapter 11 cases.  Indeed, by referencing critical vendor orders, the Court may have implicitly expanded what is permissible.    Instead, the Court found that the structured dismissal here was more like a sub rosa plan under In re Braniff Airways, Inc., 700 F. 2d 935, 940 (5th Cir. 1983) in that it worked a final resolution of creditors' claims.   The DissentJustice Thomas, joined by Justice Alito cried foul.   They pointed out that the Court had granted cert  to answer the question of "whether a bankruptcy court may authorize the distribution of settlement proceeds in a manner that violates the statutory priority scheme."   However, the issue that the Petitioners actually briefed was  “whether a Chapter 11 case may be terminated by a ‘structured dismissal’ that distributes estate property in violation of the Bankruptcy Code’s priority scheme.”  While the change in wording may appear slight, Justice Thomas argued that there was a circuit split on the broader question of settlements that violated the priority scheme but not as to structured dismissals.   As a result, he wrote:Today, the Court answers a novel and important question of bankruptcy law. Unfortunately, it does so without the benefit of any reasoned opinions on the dispositive issue from the courts of appeals (apart from the Court of Appeals’ opinion in this case) and with briefing on that issue from only one of the parties. That is because, having persuaded us to grant certiorari on one question, petitioners chose to argue a different question on the merits. In light of that switch, I would dismiss the writ of certiorari as improvidently granted. Dissenting Opinion, p. 1.What Does It Mean?The case seems to have three main take-aways:A structured dismissal which allocates property outside of the statutory priority scheme over the objection of a dissenting creditor may not be allowed.The priorities probably can be bypassed if no party objects.Interim actions which bend the priority scheme may be allowed so long as they are not a final resolution and advance a purpose under the Code.

  One of the most vexing issues in bankruptcy is the continued liability for post-petition homeowners assessments on property the debtor is attempting to surrender, when the mortgage company refuses to timely foreclose on the property.  A court in Indiana has ruled that if a chapter 13 debtor surrenders the property in the plan, and has surrendered possession of the property before the case is filed, effectively all incidents of ownership are given up, thus even if the assessments are a covenant running with the land, the debtor is no longer personally liable for such assessments.  In re Hovious, No. 10-03917-JMC-13, 2017 WL 627370, at *4 (Bankr. S.D. Ind. Feb. 15, 2017).     The matter came on before the court on a complaint for violation of the discharge injunction against the association for post-discharge collection efforts against the debtor.  The Court denied this relief, finding that as the issue was novel and the association's position supported by a good faith interpretation of applicable law, there was no willful violation.   The Court also examined the dischargeability of the debt, noting that 11 U.S.C. §523(a)(16) makes  “a fee or assessment that becomes due and payable after the order for relief to a membership association with respect to ... a lot in a homeowners association” nondischargeable, however, that provision is not included in the exceptions to discharge under §1328(a).   Some courts have responded to this argument asserting that the homeowners association assessments are covenants running with the land, and therefore the debtor remains liable so long as title remains in the debtor's name.   River Place East Hous. Corp. v. Rosenfeld (In re Rosenfeld), 23 F. 3d 833, 837 (4th Cir. 1994) and Foster v. Double R Ranch Ass'n (In re Foster ), 435 B.R. 650, 660–61 (B.A.P. 9th Cir. 2010), as well as Beeter v. Tri–City Prop. Mgmt. Serv., Inc. (In re Beeter), 173 B.R. 108 (Bankr. W.D. Tex. 1994).    The Judge in Hovious rejected this argument, instead adopting the position of In re Heflin, No. 09–18642–SSM, 2010 WL 1417776 (Bankr. E.D. Va. Apr. 1, 2010) and In re Colon, 465 B.R. 657 (Bankr. D. Utah 2011) that where the debtor, as here, intended to surrender all ownership interests to a mortgagee and no longer occupied the property, the debtor has “no consequential interest” in the property and therefore even if the covenant “runs with the land”, it should not impose personal liability on the debtor.  In re Hovious, at *4.  The association may continue to assert its rights in rem, but not against the debtor personally.Michael Barnett, www.tampabankruptcy.com

Medical Debt and Bankruptcy A recent study confirmed what every bankruptcy attorney already knows. Despite the mortgage crisis and rising credit card debt, medical debt is the leading cause of bankruptcy in America. Sadly, this type of debt doesn’t just happen to people without insurance. High deductible plans leave many families with medical debt they cannot pay off. There is a glimmer of hope, however. The Bureau of Consumer Financial Protection (CFPB) recently called on Congress to implement the infrastructure that will provide consumers with greater protections relating to medical debt. Role of the CFPB The role of the CFPB is to implement rules that regulate creditors and collectors. However, legally the CFPB is limited in its authority over health care providers and facilities. Debt from medical procedures is grouped as a non-financial instrument or non-voluntary expense. The CFPB’s authority over debt due to medical problems is only enacted once the health care provider transfers the debt to a third-party collection agency. Fixing the Problem Regulation over health care provider’s debt collection practices falls into a crack with very little oversight. The CFPB recognizes this. While the organization is not sure how to approach the problem, they are taking steps to provide greater protection for consumers. This past summer, CFPB Assistant Director Corey Stone spoke to the Senate Subcommittee on Banking about this very subject. He emphasized that protections need to come from regulatory agencies. Congress has the authority to expand the scope of CFPB oversight to include health care providers. In the meantime, the CFPB is pursuing complaints regarding medical debts that have been passed to third-party collectors, as well as credit reporting problems stemming from medical debt. The organization says 10 percent of debt collection complaints submitted to them have to do with medical debt. For many consumers, federal help will come too late. If you are faced with mounting medical debt, talk to a Troy, Ohio bankruptcy attorney. The professionals at the Chris Wesner Law Office make it their priority to stay on top of all new regulations and laws, both state and federal, regarding bankruptcy. Everyone’s situation is different. Contact us to talk about the best strategy for relieving your medical debt. The post Medical Debt and Bankruptcy appeared first on Chris Wesner Law Office.

Overruling a bankruptcy court decision, a District Judge in the Western District of Texas has ruled that proceeds from sale of a homestead can be recovered if not timely reinvested in a Chapter 7 case.   The Court ruled that the Frost decision applied equally in both a Chapter 13 and a Chapter 7 setting.   Lowe v. DeBerry, No. 5:15-cv-1135-RCL (W.D. Tex. 3/10/17).    The opinion can be accessed through PACER here.    The opinion raises serious questions about whether an exemption can ever be truly final. What HappenedThe Debtors filed for Chapter 7 bankruptcy relief on February 10, 2014 and claimed their Texas homestead as exempt.    No party in interest objected.   On September 12, 2014, the Debtor filed a motion for permission to sell the homestead.   The Court granted the motion but found that nothing prohibited the Trustee from seeking to claw back the funds to the extent that they were no longer exempt under Tex. Prop. Code Sec. 41.001(c).Rather than investing in a new homestead, the Debtor paid $50,000 to his criminal attorneys and deposited the remaining funds in accounts in the name of the Debtor's spouse.   When the funds were not reinvested in a new homestead within six months, the Trustee sued the Debtor, his spouse and the attorneys.   The Bankruptcy Court dismissed the action,  relying upon In re D'Avila, 498 B.R. 150 (Bankr. W.D. Tex. 2013).    The Bankruptcy Court's opinion can be found here.However, on appeal, Judge Royce Lamberth reversed.The District Court's RulingThe District Court found In re Smith, 514 B.R. 838 (Bankr. S.D. Tex. 2014), an opinion by Bankruptcy Judge Jeff Bohm, to be persuasive.   The Court wrote: This Court finds persuasive the reasoning of the Smith court and holds that Frost applies in Chapter 7 cases such as this one. First, nothing in Frost itself limits its holding to Chapter 13. Chapter 13 is not mentioned at all in the opinion, nor are any Chapter 13 provisions relied on by the court in coming to its conclusion. The only section of the Bankruptcy Code examined by the Frost court is Section 522, which applies to both Chapter 7 and Chapter 13 cases. The court found that interpreting Section 522(c) under Zibman to mean that "the failure to reinvest the proceeds within six months voided the proceeds exemption, regardless of whether the sale occurred pre- or post-petition" was in accordance with the policies underlying the Texas Proceeds Rule. See Frost, 744 F.3d at 388. There is no indication that Section 522 was or should be interpreted differently based on whether a case is brought under Chapter 7 or 13.In addition, the Frost opinion analyzes Section 41.001 of the Texas Property Code, finding that when the debtor "sold his homestead, the essential character of the homestead changed from 'homestead' to 'proceeds,' placing it under section 41.001(c)' s six month exemption. Because he did not reinvest those proceeds within that time period, they are removed from the protection of Texas bankruptcy law and no longer exempt from the estate." Frost, 744 F.3d at 387 (emphasis added). Again, there is no indication that this provision of Texas law should be applied differently in Chapter 7 cases.Furthermore, the Court finds that the snapshot rule, as explained in Zibman, directs the same outcome even where the homestead is sold post-petition. As explained by the Smith court, the Texas  homestead exemption contains an explicit exception: although the homestead is exempt, and the proceeds from a sale of the homestead retain that exemption temporarily, the sale proceeds lose their exempt status if not reinvested within six months. See Smith, 514 B.R. at 847-48.Zibman instructs that "it is the entire state law applicable on the filing date that is determinative" and that "[c]ourts cannot apply a juridical airbrush to excise offending images necessarily pictured in the petition-date snapshot." In re Zibman, 268 F.3d at 304. The state law here Section 41.001 of the Texas Property Code contains the following "inextricably intertwined" and "integral component": if the homestead sale proceeds are not reinvested in another homestead within six months, they lose their status as exempt. See Id. at 300, 304. At the time of the petition "snapshot" in this case, the debtor had claimed the Texas homestead exemption, which necessarily includes the six month sale proceeds limitation. As the Smith court found, "on the date of the filing of the [d]ebtor's Chapter 7 petition, the property of his bankruptcy estate included a non-exempt asset that was both prospective and contingent; namely, all proceeds from any future sale of [his homestead] that the [d]ebtor did not use within six months of the sale to purchase a new homestead." Smith, 514 B.R. at 848 (emphasis added).Finally, the Court finds that the policy goals underlying the Texas statute direct this result. Although the Texas homestead exemption seeks to prevent homelessness, the six month period during which the proceeds remain exempt is meant "solely to allow the claimant to invest the proceeds in another homestead, not to protect the proceeds, in and of themselves." England, 975 F.2d at 1174-75  emphasis added). The termination of exemption after six months thus "reflects the Texas legislature's attempt to balance two competing public policies the need to minimize homelessness versus the need to afford creditors the opportunity to collect on their debts." Smith, 514 B .R. at 843. Allowing a Chapter 7 debtor to retain the proceeds of a homestead sale in direct contravention of Section 41.001(c) would defeat such a policy and produce inequitable results, particularly when Chapter 13 debtors in identical situations are not permitted to retain such proceeds. It would effectively read the six month limitation out of the statute in Chapter 7 cases.For these reasons, the Court finds that Frost applies to Chapter 7 cases and that where a debtor claims his homestead as exempt under Section 41.001 of the Texas Property Code, then sells that homestead post-petition and fails to reinvest the proceeds in another homestead within six months, the homestead proceeds lose their exempt status and become part of the bankruptcy estate reachable by the trustee. The Court therefore finds that the Bankruptcy Court erred in holding otherwise and will reverse the decision of the Bankruptcy Court. Opinion, pp. 17-20.Why I Think the Court Got It WrongGenerally, I try to explain decisions and how they fit within the law without editorializing.   I make an exception when I think that a case has gone terribly wrong and this is one such case.   I will start by deconstructing the District Court's reasoning.     1.    Frost never says that it only applies to chapter 13 cases.   The Court is absolutely correct here.  However, the Frost decision only makes sense in light of Section 1306 which provides that after-acquired property becomes property of the Bankruptcy Estate.   In chapter 7 cases, there is a clean break between pre-petition and post-petition.   Property acquired post-petition can never be property of the estate unless it is an inheritance acquired within 180 days after the petition or proceeds from property of the estate.So, why wouldn't proceeds from sale of a homestead fit within the exception for proceeds from property of the estate?   This is because when property is exempted, it is no longer property of the estate.  See Law v. Siegel, 134 S.Ct. 1188, 1192 (2014); Rousey v. Jacoway, 544 U.S. 320, 325 (U.S. 2005);  Taylor v. Freeland & Kronz, 503 U.S. 638, 645 (U.S. 1992).   Section 541(a)(6) does not apply to proceeds from exempt property.   Once property becomes exempt, it can't come back into the estate.   Or, in the words of Neil Young, "once you're gone, you can't come back, when you're out of the blue, and into the black."     2.   When proceeds are not re-invested within six months, they are removed from the protection of Texas bankruptcy law.  No.  In is in and out is out.   Once an asset leaves the estate, it can't be yanked back in.   Let's look at other ways that property can leave the estate.   If the Trustee abandons an asset and the notice becomes final and non-appealable, the Trustee cannot say King's X, I made a mistake.  The Trustee could possibly move to set the abandonment aside under Rule 60(b).   However, that is not available with exemptions because of the 30 day period to exempt.    If property is sold under section 363, the Trustee can't change his mind and claw the property back.   Why should exempt property be any different?3.   Under Texas law, proceeds are only exempt on a temporary basis.   This argument really misunderstands the Texas exemption.   The exemption for proceeds is an expansion of the homestead exemption, not a limitation.   Most exempt assets lose that status immediately when they are converted into another form.   For example, my paycheck is exempt as current wages until the moment it is deposited into my bank account.   At that point, it becomes non-exempt cash.   If I sell my car instead of trading it in, the proceeds are not exempt.   Proceeds from sale of a homestead receive extra protection under Texas law.  Further, the asset that was exempted here was the homestead and not its proceeds.  If the asset claimed as exempt was proceeds, as in the Zibman case,  I think it's appropriate to apply the limitation.   However, if the asset claimed as exempt was the homestead itself, this asset is not time limited and is forever removed from the estate.  The DeBerry Court and the Smith Court make two fundamental errors here.  First, they ignore the fact that once an exemption is final, the property leaves the estate for all purposes.   Second, they construe an expansion of an exemption as a limitation.    Under their rationale, a chapter 7 trustee could demand that a debtor turn over every paycheck received for the rest of his life because the paychecks ceased to be exempt once they were received.  4.  The policy underlying Texas law supports this result.   The policy may, but the law does not.  The Texas Proceeds Rule allows a debtor who is not in bankruptcy carte blanche to use the proceeds for six months or until he acquires a new homestead.   If the debtor deposits the proceeds into the bank and does nothing for six months, then his creditors could attach them.   However, let's say the debtor spends the money on lottery tickets and a round the world cruise.  Those funds do not become non-exempt at the end of six months; they are simply gone.    Texas could have written a law that that proceeds from sale of a homestead are exempt, but only if they are invested in another homestead, but they did not.  Instead, it said that the proceeds themselves were exempt for six months or until the debtor acquired a new homestead.   This is an important distinction.What Happens Next?The District Court's order reversed and remanded the case.   If the defendants wish to appeal further, they will need to request permission for an interlocutory appeal.   I hope that they do so because the Fifth Circuit needs to clean up the mess that it has made of Texas exemption law.  If the Fifth Circuit finds that it cannot distinguish Frost, then it needs to reverse the decision on the en banc level because it is just wrong when applied outside of the chapter 13 context.    If the case goes up to the Fifth Circuit, I suspect there will be multiple amici willing to help them sort through the issues.

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After filing for Chapter 7 or Chapter 13 bankruptcy, you’ll need to meet with your creditors about a month after the filing date in what’s called a 341 meeting.  It’s important to be prepared for the 341 meeting and comply with the requests made by your bankruptcy trustee so that the bankruptcy process proceeds as it should. Make sure you attend your 341 meeting; missing it could mean a dismissal of your bankruptcy case.  There are some exceptional circumstances where you are permitted to miss it; for instance if you’re seriously ill or are experiencing some other emergency, let your trustee know ASAP.  For any other reason, your trustee isn’t obligated to reschedule.  You will need to show up on time.  Double check the address and give yourself time to arrive. You’ll need to arrive at the meeting with the proper identification on you.  This includes a valid photo ID and also proof of your Social Security Number.  An up-to-date state driver’s license and social security card would satisfy these requirements. Your trustee could also require you to bring copies of a number of other documents related to the bankruptcy process.  These include tax returns, bank statements, and documents related to your mortgage.  Also check what you need to give to the trustee prior the 341 meeting.  For example, at least seven days prior to the meeting, the trustee would want your most recent federal tax return. Prior to the meeting, you should also look over your bankruptcy documents to make sure there aren’t any errors; if there are, you’d want to submit an amendment ASAP. Usually, as long as all the paperwork is prepared properly in advance, these meetings are a formality. But sometimes creditors or trustees do challenge parts of the bankruptcy plan.  Other times there may be problems with one or more of the documents that are a part of the bankruptcy process.  In any case, residents living in or around Troy, Ohio would benefit from the assistance of a Troy, Ohio bankruptcy attorney throughout the process, to make sure that every hurdle is cleared, all errors are avoided or corrected, and no details are overlooked.  Contact us to discuss your case and enlist our assistance. The post Bankruptcy Attorney and Your 341 Meeting appeared first on Chris Wesner Law Office.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA") capped the amount of a homestead exemption which could be claimed by a debtor that acquired a homestead within 1,215 days prior to bankruptcy.    Currently, the amount of the cap, as set by 11 U.S.C. Sec. 522(p), is $160,375 in equity per debtor.  This cap has resulted in a seismic shift in Texas where the unlimited homestead exemption is part of the State Constitution.   Now debtors' attorneys must learn how to count to 1,215 and calculate the allowable equity before filing a bankruptcy petition. However, what of the case where only one spouse files?   The short answer is that all community property enters the bankruptcy estate and that the cap is based on the one spouse that filed.   This means that the non-filing spouse can be involuntarily divested of her otherwise sacrosanct homestead interest.    The Fifth Circuit has now ruled on three different variations of this scenario and in each case, including the recent decision in Wiggains v. Reed  (Matter of Wiggains), No. 15-11249 (5th Cir. 2/14/17), which can be found here, the non-filing spouse has come up short. The Prior Cases The first case of the trio was Kim v. Dome Entertainment Center, Inc. (Matter of Kim), 748 F.3d 647 (5th Cir. 2014).   In that case, an involuntary petition was filed against Mr. Kim so that Mrs. Kim did not have a choice to file.    When the homestead was sold, Mrs. Kim argued that she was entitled to compensation for the value of her homestead interest.   However, the Fifth Circuit ruled that under Texas law, a spouse had a possessory interest in the homestead but not an economic interest.   Once the homestead was sold, the non-filing spouse lost the benefit of the possessory interest and was not entitled to compensation.    Next up was Thaw v. Moser (In re Thaw), 769 F.3d 366 (5th Cir. 2014) in which the non-filing spouse claimed that she was entitled to compensation under the Takings Clause of the Fifth Amendment.    The Fifth Circuit rejected that argument for cases in which the homestead was acquired after the adoption of BAPCPA.   In other words, because BAPCPA was the law at the time the homestead was acquired, the homestead was acquired subject to that limitation and there was not a taking of a legal interest from the non-filing spouse.    Wiggains and the 11th Hour PartitionThe most recent case, Wiggains, was published on Valentines Day 2017 but offered no love to the non-filing spouse.    Mr. and Mrs. Wiggains purchased an expensive home in a Dallas suburb in 2012.   In the summer of 2013, they began marketing the house which they had improved.   Prior to a sale taking place, Mr. Wiggains filed bankruptcy.   One hour before filing bankruptcy, he and his wife recorded a partition agreement in which they sought to convert their community property homestead into the separate property of each of them.    The Chapter 7 Trustee sold the home, which netted equity of $568,000 and paid Mr. Wiggains his exemption in the amount of $130,675 (which was the amount of the cap at the time the case was filed).   Mrs. Wiggains then filed an adversary proceeding seeking a determination that she was entitled to one-half of the equity due to the partition agreement.    The Trustee counterclaimed, seeking to avoid the partition as a fraudulent transfer.   At trial, Mr. Wiggains testified that he executed the partition agreement on advice of counsel in order to maximize the couple's allowable exemption.    The Bankruptcy Court ruled in favor of the Trustee.    It found that Mr. Wiggain's "sole actual intent in entering into the Partition Agreement was to avoid the effect of the limitation placed on his homestead exemption by section 522(p) of the Bankruptcy Code."    However, the Court did not determine whether Mrs. Wiggains was entitled to a share of the proceeds under 11 U.S.C. Sec. 363(j) which requires that a co-owner whose property is sold in bankruptcy be paid the amount of its interest.   However, at the second hearing, the Bankruptcy Court found that the non-filing spouse was not entitled to any interest in the proceeds.Mrs. Wiggains and the Trustee then requested that the Fifth Circuit allow a direct appeal to the Fifth Circuit which was granted.The Partition Was a Fraudulent Transfer The Fifth Circuit affirmed the Bankruptcy Court's rulings.    The Court found that it was not necessary to engage in a contextual analysis of the circumstances surrounding the Debtor's intent in making the transfer when he had provided direct evidence of his intent.    The Court said:We agree with another court that held:  "When a debtor admits that he acted with the [necessary] intent . . . there is no need for the court to rely on circumstantial evidence or inferences in determining whether the debtor had" that intent.Opinion, p. 9.    When asked whether his intent was to keep property out of the bankruptcy estate, the Debtor had testified:"I guess that's semantics.   At the time we honestly felt like it was more preserving [Mr. Wiggains's] own rights."Based on this testimony, the Fifth Circuit said "Keeping property in the hand of his wife is the mirror of keeping property out of the hands of creditors."   It also noted that "If not for the creditors who could make claims on the net proceeds, there was no stated need for the partition."        As a result, the Fifth Circuit found that the Bankruptcy Court's factual finding that the Debtor had acted with intent to hinder or delay creditors was not clearly erroneous.The Spouse Was Not Entitled to Compensation Under Section 363(j) The Fifth Circuit also rejected the argument that Mrs. Wiggains was entitled to compensation under section 363(j), an issue not reached by the Kim or Moser cases.   At first blush, section 363(j) seemed to offer some hope to Mrs. Wiggains.   It states:After a sale of property to which subsection (g) or (h) of this section applies, the trustee shall distribute to the debtor’s spouse or the co-owners of such property, as the case may be, and to the estate, the proceeds of such sale, less the costs and expenses, not including any compensation of the trustee, of such sale, according to the interests of such spouse or co-owners, and of the estate. (emphasis added).However, there still had to be a right covered by section 363(g) or (h).   Section 363(g) relates to dower and curtesy, which are "inchoate rights that do not vest until a spouse's death."   Thus, they were not applicable.   Section 363(h) applies to “the interest of any co-owner in property in which the debtor had, at the time of the commencement of the case, an undivided interest as a tenant in common, joint tenant, or tenant by the entirety . . . .”    Had the partition not been set aside, section 363(h) would have entitled Mrs. Wiggains to a share of the proceeds as a co-tenant.   Unfortunately, under section 541(a)(2), all joint community property held by the couple entered the bankruptcy estate.   Because 100% of the joint community property interest entered the estate, Mrs. Wiggains was not a co-tenant and section 363(h) did not apply.Using a unique analogy, the Fifth Circuit explained why the non-filing spouse's homestead interest was not entitled to economic compensation.As previously stated, there is no doubt that a homestead interest “gives protective legal security rather than vested economic rights.” To explain the nature of this protection, we borrow from a common idiom of property law that describes property as a “bundle of sticks.” Rather than being another stick in the bundle, a party’s homestead interest “is a protective safe in which the bundle is put.”   If the safe is empty, as is the case here and in other community-property states where the entire homestead property is brought in as a part of the bankruptcy estate, it can hardly be argued that an otherwise voluntary sale of a homestead entitles a non-debtor spouse to compensation for the contents of her empty safe. (internal citations omitted).Opinion, pp. 18-19.    There you have it.  In community property states such as Texas, 11 U.S.C. Sec. 541(a)(2) operates to empty the safe, leaving the non-filing spouse without any sticks or any compensation.How to Maximize the HomesteadFollowing this string of cases, the score is Trustees 3 - Non-Filing Spouse 0.    So what is a couple with a valuable Texas homestead to do?   None of the options are wonderful.   One possibility is to partition the homestead at the time it is acquired and before financial distress has set in.  Unfortunately this option is generally not available by the time bankruptcy counsel has been contacted.  The parties could also get divorced and place an owelty lien against the debtor's interest, reducing the equity.   This only works if it is a real divorce and not a sham one.  A divorce finalized the day before the bankruptcy is filed might be a red flag.   Another option is not to file bankruptcy within 1,215 of acquiring a homestead subject to section 522(p).   If a debtor comes to see you 1,000 days after acquiring a homestead that would be subject to the cap, it would be malpractice to tell the debtor to do anything other than to wait.   However, that might not be within the debtor's control since creditors could file an involuntary petition as happened in the Kim case.  A couple could also down-size into a homestead fitting within the cap and use the excess proceeds to negotiate settlements with troublesome creditors.  If this option works, the couple avoids bankruptcy.  If it doesn't work, at least they have a home.   $320,000 won't buy a very fancy home in Austin or Dallas,  However, it would buy a 3 bedroom, 3 bath, 3,200 sq. ft. home in Tahoka or 100 acres in Commanche.   It would  even buy a nice condo on South Padre Island. Perhaps the only practical option is to maximize the capped exemption by having both spouses file and timing the case after the triennial adjustment of the cap (it last was adjusted in April 2016 so there are two more years to go).