August, 2014
Kansas Bankruptcy News
A monthly publication for the non-bankruptcy attorney prepared by the Law Office of
Donald C. Astle, Donald C. Astle Attorney at Law.
345 Riverview Suite 730,Wichita, KS
... More on Exemptions

One of the fundamentals of bankruptcy is that the debtor can keep property needed for a fresh start. The debtors can keep a car to go back and forth to work, but they do not need a boat.
If a debtor has not lived in Kansas for the two years prior to filing bankruptcy then the debtor probably can not use Kansas exemptions. The exemptions of the state that the debtor lived in before moving to Kansas must be used. But if that state’s exemptions do not have extra territorial effect outside that state (most do not) then the default federal exemptions are used.
The federal exemptions have a “wild card” exemption that allows the debtor to exempt anything, including a boat, up to a certain value. The purpose of this “wild card” exemption is to allow debtors that do not have their own homes, and thus have no home equity asset to survive bankruptcy, be allowed to exempt other property. Basically, the federal “wild card” exemption allows a debtor who is a renter and has no homestead exemption to exempt up to $12,725 in any property.
Most of us are quite familiar with the typical Kansas exemptions: house, car, household goods and furnishings,
tools of the trade, and most pension plans. If the debtor has a boat then that should be disposed of properly. Sell it for fair market value and spend money on exempt things. There are some things that are not exempt that the debtor may not be able to dispose of. For example, bankruptcy trustees are looking closely at “health savings” accounts and “flex spending” accounts. Often, these are small amounts and the debtor just forgets about them; but, they can be hard to spend down prior to filing bankruptcy due to the restrictions on how the funds can be used.
Also, 25% of wages earned, but not yet paid, are not exempt. This comes from the wage garnishment law, KSA 60-2310. See statute of the month. So, if the debtor has earned wages, say the pay period ended the Friday before the debtor files bankruptcy, then the following week the debtor has wages owed to him. But, under KSA 60-2310 25% of those disposable earnings are non-exempt. So, basically the trustee can claim the 25% of the disposable earnings. It is just about the only non-exempt asset the debtor can’t get rid of prior to filing. But, most trustees will not take this money unless it is substantial.
Statute 60-2310:
Wage garnishment; definitions; restrictions, exemptions; (a) Definitions. As used in this act and the acts of which this act is amendatory, unless the context otherwise requires, the following words and phrases shall have the meanings respectively ascribed to them:
(1) “Earnings” means compensation paid or payable for personal services, whether denominated as wages, salary, comission, bonus or otherwise;
(2) “Disposable earnings” means that part of the earnings of any individual remaining after the deduction from such earnings of any amounts required by law to be withheld;
(b) Restriction on wage garnishment. Subject to the provisions
of subsection (e), only the aggregate disposable earnings of an individual may be subjected to wage garnishment. The maximum part of such earnings of any wage earning individual which may be subjected to wage garnishment for any workweek or multiple thereof may not exceed the lesser of: (1) Twenty-five percent of the individual’s aggregate disposable earnings for that workweek or multiple thereof;
Spend your health savings before filing bankruptcy or just cash it and take the “hit” on taxes or other penalties. On wages: Be ready. The trustee may want 25% of that first pay check.
Serving Kansas since 1984, The Law Offices of Donald C. Astle practices exclusively in consumer bankrupcy and collection law.
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Donald C. Astle
Washburn University, 1984