Articles Posted in Bankruptcy

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Angie Moffo lived rent free for eight years in a home owned by her brother-in-law, Doug Rich. After Rich filed for Chapter 7 bankruptcy, the appointed bankruptcy trustee, Stephen Rupp, filed suit against Moffo for back rent under Utah’s Uniform Fraudulent Transfer Act, asserting that Rich had defrauded his creditors by allowing Moffo to live in the house rent free after he became insolvent. The district court concluded that Moffo was the recipient of a fraudulent transfer and entered a $34,200 judgment against Moffo. The Supreme Court vacated the judgment entered against Moffo, holding that Rich did not transfer an asset to Moffo within the scope of the Act because the home was fully encumbered by a mortgage, and any rents were not the property of Rich. Remanded with instructions to enter summary judgment in favor of Moffo. View "Rupp v. Moffo" on Justia Law

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Appellee claimed an exemption in bankruptcy for seventy-five percent of wages that he earned prior to filing his bankruptcy petition but that were either paid to or still owing to Appellee after the date of the petition. Appellee based his claim on section 1673 of the federal Consumer Credit Protection Act and, alternatively, on section 103 of the Utah Consumer Credit Code. The trustee of Appellee's bankruptcy estate (Trustee) opposed the claimed exemption. The bankruptcy court permitted the exemption, the district court summarily affirmed, and the Trustee appealed. The Tenth Circuit Court of Appeals held that section 1673 did not permit Appellee's claimed exemption. To resolve the state law question presented under section 103, the appeals court certified a question of law to the Utah Supreme Court. The Court answered that Appellee could not rely on section 103 to assert an exemption in bankruptcy, as section 103 does not create an exemption in bankruptcy and, instead, limits garnishment of a debtor's disposable earnings under narrow circumstances. View "Gladwell v. Reinhart" on Justia Law

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Utah's exemption statute provides that a retirement plan "that is described in" I.R.C. 401(a) is exempt from a debtor's bankruptcy estate. Upon filing for bankruptcy, Douglas Reinhart claimed that the funds in his Keogh retirement plan were exempt from bankruptcy proceedings. The bankruptcy court determined that the Keogh plan was not technically tax qualified under I.R.C. 401(a) due to certain operational defects. Although the Keogh plan was operationally in default, the bankruptcy court found the plan was described in section 401(a), and thus, the funds in the plan were exempt under the exemption statute. The bankruptcy court entered an exemption order, and the trustee of Reinhart's bankruptcy estate appealed. The U.S. district court affirmed. The Supreme Court accepted certification to answer the question of whether a retirement plan can be "described in" section 401(a) when it fails to fulfill that section's requirements for tax qualification. The Court held that a retirement plan is "described in" section 401(a) if it substantially complies with that section. View "Gladwell v. Reinhart" on Justia Law