Articles Posted in Supreme Court and Bankruptcy

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Charlotte Bankruptcy Lawyer Bryan W. Stone of Arnold & Smith, PLLC answers the question “Are my 401k and IRA protected in bankruptcy?”

A recent article in the Detroit News discussed the case of an attorney who had to advise a client not to file for bankruptcy despite a massive $400,000 mountain of debt. The reason? Because the man had recently inherited an IRA from his deceased mother. According to a recent U.S. Supreme Court case, the money contained in the IRA would not be protected during the bankruptcy process and would instead be forfeited to pay off creditors. Given the certain loss of the money, the man decided to avoid filing and continue struggling under an impossible debt burden.

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Charlotte Bankruptcy Lawyer Bryan W. Stone of Arnold & Smith, PLLC answers the question “Do I need an attorney to file bankruptcy?”

Bankruptcy attorneys and experts are cheering a recent decision by the United States Supreme Court that clarifies the authority of bankruptcy courts to entertain non-bankruptcy claims that arise in the context of a debtor’s bankruptcy.

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The United States Supreme Court has issued a decision favoring debtors who convert Chapter 13 bankruptcy proceedings into Chapter 7 actions, holding that funds collected by a bankruptcy trustee pursuant to a debtor’s Chapter 13 plan belong to the debtor at the moment the debtor converts a case to a Chapter 7 proceeding.

Change sign Charlotte Chapter 13 Lawyer Mecklenburg Bankruptcy Law FirmThe debtor, Charles Harris, filed for bankruptcy in 2010, seeking protection under Chapter 13 of the Bankruptcy Code. The bankruptcy plan established for Harris enabled him to keep his home and catch up on tardy mortgage payments over time. The “bargain” of a Chapter 13 plan, according to Scotusblog.com, is that a debtor gets to keep one’s assets, but current and future earnings must be used to pay creditors. Chapter 13 repayment plans typically last from three to five years.

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Charlotte Bankruptcy Lawyer Bryan W. Stone of Arnold & Smith, PLLC answers the question “Do I need an attorney to file bankruptcy?”

 

Thought your legal bills were high? Copper-mining company Ascaro LLC has litigated its $5 million legal tab with law firm Baker Botts all the way to the United States Supreme Court. The high court will decide if and how much Ascaro has to pay.

Dollar signs Mecklenburg Debt Lawyer Charlotte Chapter 7 AttorneyThe dispute between Ascaro and Baker Botts, at its essence, is about whether Baker Botts can be compensated for defending its own fees.

Bankruptcy courts have the final say on how much advisers called in to work out financial restructuring details in a bankruptcy case get paid. Since the money used to pay advisers could be used to pay creditors, anyone—including debtors and creditors—can challenge fee awards.

Baker Botts represented Ascaro in what the Wall Street Journal called a “contentious Chapter 11 case” that ended with a $6 million judgment against Ascaro for improperly transferring a high-value asset to a parent company shortly before it declared bankruptcy. After the judgment, Ascaro agreed to pay its creditors in full.

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Charlotte Bankruptcy attorney Bryan W. Stone answers the question: “Are my 401k and IRA protected in bankruptcy?”

 

The Supreme Court recently made waves in the bankruptcy world when it released an opinion in Clark v. Rameker, a case concerning the exemption for inherited IRAs. In Clark, the justices agreed unanimously that the inherited IRA Ms. Clark received from her mother was not eligible for protection from creditors.

 

Supreme Court 2 Charlotte Debt Lawyer North Carolina Bankruptcy Law FirmThe case began back in 2010, when the Clarks filed for Chapter 7 bankruptcy. Ten years before filing, Ms. Clark had received the IRA from the estate of her deceased mother. At the time of the bankruptcy filing, Ms. Clark and her husband listed the IRA as an asset, valued at around $300,000, but said that it was exempt from the overall bankruptcy estate. The couple argued that the money should be protected against claims by creditors, something that the trustee disagreed with.

 

The bankruptcy trustee overseeing the case, as well as the Clarks’ creditors, fought the couple over the claimed exemption. The creditors argued that because the money was not the actual retirement money of Ms. Clark it should not be exempted under the usual retirement fund heading.

 

The case eventually made its way to the Supreme Court where Justice Sonia Sotomayor pointed out several ways in which the inherited IRA differs from a person’s personal IRA savings. The Court noted that in traditional IRAs, a person can continue to invest money in the account, whereas those with inherited IRAs cannot. Most importantly, those who hold inherited IRAs are allowed to withdraw any or all of the money in the account for any reason without ever incurring a penalty. Those with traditional IRAs face a 10 percent penalty for early withdrawals.

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