February 6, 2008
1st Circuit Rules on Limitation of Homestead Exemption Following a "Criminal act."
Larson v. Howell (In re Larson), --- F.3d ----, 2008 WL 186506 (1st Cir. Jan. 2008 (Mass.))
Issue: Should the homestead exemption be limited under Section 522(q)(1)(B)(iv) when the debtor was found guilty of a criminal act even though her “criminal” conduct was simple negligence?
Holding: Yes, “any criminal act” is sufficient to require a limitation of the exemption.
The debtor, age 69 at the time, was involved in an auto accident where she hit a motorcycle and the passenger on the bike was killed. “[The debtor] said she did not see the oncoming motorcycle, but admitted she caused the accident. The [criminal court] judge found facts sufficient to find Larson guilty of negligent vehicular homicide.” The survivors sued the debtor in a civil action which was settled for $1 million. The debtor then filed chapter 7 and claimed a $500,000 homestead exemption under Massachusetts law. The creditor and the trustee objected under Section 522(q)(1)(B)(iv) “which caps homestead exemptions claimed under state or local law at $125,000 if ‘the debtor owes a debt arising from ... any criminal act, intentional tort, or willful or reckless misconduct that caused serious physical injury or death to another individual in the preceding 5 years.’” The debtor argued that the accident was mere negligence and that the statute required an intentional injury. The bankruptcy court ruled against her and limited the exemption. The District Court affirmed.
The Court of Appeals affirmed also. “Under state law, she effectively pled guilty to the crime.” The plain language of the code says that the exemption is limited if the debtor owes a debt arising from “any criminal act.” The language about intentional torts, willful or reckless conduct are preceded by “or,” meaning that “any criminal act” is sufficient.
February 4, 2008
9th Circuit Court of Appeals to Hold Oral Argument at Stanford and Berkeley in February, 2008
The 9th Circuit Court of Appeals has announced that it will hold oral arguments at Stanford Law School on February 12, 2008 and University of California, Berkeley on February 13, 2008. The judges presiding will be different for each day.
February 3, 2008
Supreme Court rules that a non-disclosed asset remains in the estate - in 1905
Issue: When the debtor does not disclose an asset to the chapter 7 trustee, what happens to the asset when the case is closed?
Ruling: It remains with the estate.
Justice David J. Brewer:
The debtor had a claim against a bank for usury. Federal law at the time permitted him to collect two times the usurious interest paid to the bank. The debtor did not disclose the claim to the trustee and filed suit in federal court against the bank two months after the chapter 7 was closed. The district court gave judgment to the debtor/plaintiff.
The Supreme Court reversed and remanded. “It cannot be that a bankrupt, by omitting to schedule and withholding from his trustee all knowledge of certain property, can, after his estate in bankruptcy has been finally closed up, immediately thereafter assert title to the property on the ground that the trustee had never taken any action in respect to it. If the claim was of value (as certainly this claim was, according to the judgment below), it was something to which the creditors were entitled, and this bankrupt could not, by withholding knowledge of its existence, obtain a release from his debts, and still assert title to the property.”