March, 2014
Kansas Bankruptcy News
A monthly publication for the non-bankruptcy attorney prepared by the Law Office of
Donald C. Astle, Donald C. Astle and Sheila Maksimowicz Attorneys at Law.
345 Riverview Suite 730,Wichita, KS
Earned Income Tax Credit

     Line 38a on the Federal 1040A. Line 16 on the State of Kansas K-40. Called “EIC” for short. Effective April 14, 2011 this part of the bankruptcy debtor’s tax refund is exempt. Note that this exemption only applies to a bankruptcy debtor. This is codified in KSA 60-2315. (See statute of the month.)
     Other states have had this exemption for some time. It’s new in Kansas. And, it slipped through rather quickly in the 2011 legislative sesion. It immediately started the all too familiar controversy concerning the constituionality of state specific bankruptcy exemptions under the Supremacy Clause and bankruptcy clause of the U.S. Constitution. Bankruptcy trustees immediately objected to the exemption starting numerous appeals processes.
     The constitutionality of the EIC exemption has been upheld by bankruptcy judges Robert Nugent of Wichita, Karen Karlin of Topeka, and the Bankruptcy Appellate Panel for the Tenth Circuit. Those cases decided the trustees’ constitutional challenges to the EIC exemption on a number of grounds, including whether it is ran afoul of the Supremacy Clause, the Uniformity Clause, and other provisions of the U.S. Constitution. The remaining argument is that the EIC violates the Uniformity Clause of the Kansas Constitution found in Article 2, Section 17 which provides that “All laws of a general nature shall have a uniform operation throughout the state...”
     In a recent case decided by Robert Nugent, U.S. Chief Bankruptcy Judge for Kansas, on February 13, 2014, In Re: Myers, et al, Case No. 11-12155, the parties basically took the position that the U.S. District Court certifies the question of the EIC exemption’s validity to the Kansas Supreme Court. In another nail in the coffin of the trustees’ arguments against the EIC exemption, Judge Nugent recommended that the certification of the question to the Kansas Supreme Court be denied and that the U.S. District Court order of the Bankruptcy Court to refrain from certification to the Supreme Court of the State of Kansas and this question remain with the Bankruptcy Court.

Hot off the press! The U.S. Supreme Court in the case of Law v. Siegel ruled 9-0 in an opinion filed March 4, 2014 that a debtor’s homestead exemption retains its exemption even if the debtor’s deceptive conduct results in hundreds of thousands of dollars in expenses for the bankruptcy trustee. More about this next month.
Bankruptcy proceedings; earned income tax credits.
     An individual debtor under the federal bankruptcy reform act of 1978 (11 U.S.C.§ 101 et seq.), may exempt the debtor’s right to receive tax credits allowed pursuant to section 32 of the federal internal revenue code of 1986, as amended, and K.S.A. 2012 Supp. 79-32,205, and amendments thereto. An exemption pursuant to this section shall not exceed the maximum credit allowed to the debtor under section 32 of the federal internal revenue code of 1986, as amended, for one tax year. Nothing in this section shall be construed to limit the right of offset, attachment or other process with respect to the earned income tax credit for the payment of child support or spousal maintenance.
JP...The Legal Cartoon
Copyright David Carter used with permission.
The Kansas Earned Income Credit Exemption for bankruptcy debtors is here to stay. It will take a legislative change to eliminate this exemption. Once an exemption is granted it is rarely taken away.
Serving Kansas since 1984, The Law Offices of Donald C. Astle practices exclusively in consumer bankrupcy and collection law. No other cases are accepted.

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Sheila C. Maksimowicz
University of Kansas, 1980
Donald C. Astle
Washburn University, 1984