SCHREIBER LAW OFFICE, LLC
RECENT DEVELOPMENTS IN BANKRUPTCY LAW
April 1, 2023
The income limits used to help determine chapter 7
eligibility were raised (see FAQ’s for more information).
July 7, 2021
A member of the Pokagon Band of Potawatomi Indians filed a chapter 7 bankruptcy.
She received monthly per capita gaming revenue payments. The trustee in her
bankruptcy case tried to argue that these future payments had to be turned over to the
bankruptcy estate. The Court ruled against the trustee and said these payments are
not property of the bankruptcy estate, and the person that filed for bankruptcy can
keep them. In re Musel.
March 27, 2020
In response to COVID-19, the C.A.R.E.S. act is signed into law. One of the provisions of the act is to provide $1,200 stimulus
payments to most adults and $500 for each child. The act specifies that these payments do not count as disposable income for
bankruptcy purposes. Separately, the act allows individuals in chapter 13 bankruptcy to extend their chapter 13 plans to up to 7
years if they choose to do so.
March 5, 2020
An individual filed for bankruptcy, and he listed as a creditor someone he had previously stabbed in an altercation at a restaurant.
The stabbing victim had been awarded damages in a civil lawsuit. The Court ruled that the debt owed to the stabbing victim
could not be discharged in the bankruptcy because it was a “willful and malicious injury.” In re Riehm.
February 4, 2020
An individual filed a chapter 7 bankruptcy, and while that chapter 7 was pending, he filed a chapter 13 bankruptcy. The Court
ruled this was a violation of the bankruptcy code’s automatic stay. Basically, you can’t have 2 bankruptcy cases active at the
same time. In re Benitez.
August 23, 2019
The HAVEN Act (Honoring American Veterans in Extreme Need) was signed into law today with bipartisan support from Congress.
Effective immediately, this law states that disability income benefits for veterans is no longer included in the disposable income
calculation for bankruptcy purposes.
February 1, 2019
The Eight Circuit Court of Appeals ruled that when a person files for bankruptcy, a judicial lien against the homestead can be
avoided. Because the judgment created a cloud on the property’s title, it impaired the homestead exemption and “fresh start”
that someone is entitled to when filing for bankruptcy. O’Sullivan v. CRP Holdings.
July 31, 2018
In a decision from the Minnesota Bankruptcy Court, the Court ruled that when someone files for bankruptcy, they can exempt and
keep life insurance proceeds of $34,000. This is true even if the money was deposited into an IRA before the bankruptcy was
filed. In re Jacklitch.
July 31, 2018
The person who filed for bankruptcy had sold her house, and had $51,860 from sale proceeds in her possession on the day the
case was filed. The Court recognized that under Minnesota law, these sale proceeds are exempt for 1 year. Because she filed for
bankruptcy within 1 year of the house sale, she could keep the money. In re Thomas.
May 3, 2018
Today a Minnesota law took effect that allows bankruptcy filers to exempt up to $25,000 for Health Savings Accounts and Medical
Savings Accounts. These accounts are becoming a popular way to save money tax-free for medical expenses.
December 17, 2017
The Bankruptcy Appellate Panel denied the discharge of a student loan. Student loans can only be discharged in bankruptcy when
repayment would constitute an “undue hardship,” and for various reasons no hardship existed in this case. Piccinino v. U.S.
Dept. of Education.
June 26, 2017
This involves a chapter 13 case. The chapter 13 plan provided that a leased vehicle with Ford Motor Credit would be paid
directly, outside of the chapter 13 bankruptcy. After the chapter 13 plan was confirmed by the Court, Ford filed a motion seeking
$3,600 in administrative expenses. The Court denied Ford’s request because the chapter 13 plan is binding on all creditors. In re
June 12, 2017
Generally speaking, repayments of loans to “insiders” within 1 year of filing for bankruptcy are considered preferences, and a
bankruptcy trustee may seek to have that repayment avoided. Insiders are typically relatives. Today’s case involved the
repayment of a debt to his ex-wife within that 1 year period. The trustee sought to avoid the repayment, but the Court ruled
that an ex-wife is not an insider, and the trustee’s motion was denied. In re White.
August 12, 2016
Today the Bankruptcy Appellate Panel ruled that a “pay to stay” jail fee is dischargeable in bankruptcy. In this case, an individual
filed for chapter 7 bankruptcy, and owed fees to Dakota County for room and board fees for time spent in jail. After the
bankruptcy was filed, Dakota County claimed that these fees should not be discharged in the bankruptcy because they were a fine
or penalty owed to a government unit. However, the Court concluded that this type of fee does not meet the standard to be
nondischargeable as a fine or penalty, and the debt owed to Dakota County was discharged as part of the chapter 7 bankruptcy.
Dakota County v. Milan.
March 15, 2016
An individual filed for chapter 7 bankruptcy, and at the time she filed she lived at her parents’ home. Within 180 after she filed
for bankruptcy, both of her parents passed away, and as a result she inherited an ownership interest in her parents’ home. The
Bankruptcy Code states that if someone becomes entitled to inherit property within 180 days after filing for bankruptcy, that
property becomes an asset of the bankruptcy estate, so she was subject to losing her interest in her parents’ house. So she
amended her bankruptcy schedules to list the new ownership interest, and exempted it under Minnesota’s homestead exemption,
even though didn’t own the house when she filed for bankruptcy. The trustee in her case objected to this, but the Minnesota
Bankruptcy Court ruled in her favor. The Court recognized that when someone files for bankruptcy, Minnesota law allows them to
keep up to $390,000 in homestead equity, assuming they are living at the house at the time. Because the individual in this case
was living in her parents’ house when she filed for bankruptcy, the Court ruled in her favor and allowed her to exempt her
inherited interest in the house as her homestead, even though she did not own the house when she filed for bankruptcy. In re
September 11, 2015
An individual filed for chapter 13 bankruptcy. As part of the chapter 13, she tried to have the second mortgage lien removed and
that debt wiped out (called “lien stripping”). This may be permissible in chapter 13 when the value of the house is worth less
than what is owed on the first mortgage, making the second mortgage completely unsecured. However, her ex-husband was also
obligated for the second mortgage. Because of this, the Minnesota Bankruptcy Court concluded that she could not obtain a
release of the second mortgage. In re Brown.
April 17, 2015
A husband and wife filed separate bankruptcy petitions because they wanted to claim different exemption laws that were
available to them. The Court said this was not permissible, and consolidated their 2 cases into one, and told them to pick 1
exemption law that would be applied to both of them. Boellner v. Dowden.
January 26, 2015
A married couple filed for chapter 7 bankruptcy. Included in their list of assets was a 529 college savings plan that the husband
inherited. The beneficiaries were their 2 children. 529 plans are generally not property of the bankruptcy estate, which means
they are not subject to being turned over. The trustee argued that because the person filing for bankruptcy was not listed as the
owner if the account (his deceased mother was still listed as owner), the funds should be forfeited. However, the Minnesota
Bankruptcy Court did not agree, and ruled because the person filing for bankruptcy had a legal ownership in the account via
inheritance, it was his, and was not subject to being turned over. In re Hennessy.
MINNESOTA BANKRUPTCY LAW FIRM