October, 2013 www.astlelaw.com
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
The Bankruptcy Debtor’s Homestead is Always Exempt. Right? Wrong!

Not always. One of the fundamentals of bankruptcy is for the debtor to be able to keep certain property for a fresh start. The bankruptcy code lists exemptions at 11USC522. It allows states to set their own exemptions and not use the federal exemptions of 11USC522. Most states opt out of the federal exemptions and require debtors to use that state’s exemptions. Kansas does, for the most part, opt out. Some states, like Texas, do not opt out.

The bankruptcy code requires the debtor to use the exemptions specified by that state in which the debtor was domiciled in the two years immediately before filing bankruptcy. For example, if the debtor has been living in Kansas for at least two years, then Kansas exemptions are used.

As we know KSA 60-2301 allows the debtor to exempt the homestead (though federal law may cap the equity at $155,675 in some circumstances). But what about the debtor that has not been domiciled in Kansas for the two years prior to filing bankruptcy? The exemptions used are, generally, the state’s exemptions from the state the debtor previously resided. But usually another state’s exemptions do not have extra territorial effect outside that state. So Kansas exemptions do not apply since the debtor has not lived in Kansas for two years. The other state’s exemptions do not apply because the debtor left that state. Thus the default federal exemptions apply. The federal homestead exemption is only $22,975!

Where this is a real problem is when the debtor inherits a house (grandma dies and leaves her $100,000 free and clear house to her favorite grandson). Grandson moves back to Kansas to live in Grandma’s house. Grandson needs to file bankruptcy as he had to take a pay cut to move back to Kansas. The bill collectors are after him. Bankruptcy is probably not an option because he has $100,000-$22,975=$77,025 of non-exempt property.

Sometimes using federal exemptions can be very beneficial allowing a debtor to exempt his boat, his jet ski, his three wheeler, and pop up camper. More about that next month.

Copyright The American Bankruptcy Institute. Used with permission.
It’s almost inevitable. A few weeks after filing bankruptcy, a creditor pops up that the client forgot. The bankruptcy needs to be amended. At our law office, the client can do this on-line through our secure website. No waiting for the mail, no shuffling of papers, just enter the missed creditor and click.  Used with permission. We do the rest.
11USC 522 (d)(1) Exemptions
The following property may be exempted under subsection (b)(2) of this section.
(1) The debtor’s aggregate interest, not to exceed $22,975 in value, in real property or personal property that the debtor or a dependent of the debtor uses as a residence, in a cooperative that owns property that the debtor or a dependent of the debtor uses as a residence, or in a burial plot for the debtor or a dependent of the debtor.
Grandson is between a rock and a hard place. If grandson files bankruptcy before he moves to Kansas then the bankruptcy trustee can take 100% of any property that grandson is entitled to receive by devise, bequest, or inheritance within 180 days after filing bankruptcy, under most circumstances. If grandson moves to Kansas to take advantage of a free house, the homestead is still 100% exempt outside of bankruptcy. So, grandson just needs to tough it out for two years after he moves to Kansas before he considers bankruptcy.
JP...The Legal Cartoon

Copyright David Carter used with permission.
Serving Kansas since 1984, The Law Offices of Donald C. Astle practices exclusively in consumer bankrupcy and collection law. No other cases are accepted.

Visit our website at www.astlelaw.com
Donald C. Astle
Washburn University, 1984
Sheila C. Maksimowicz
University of Kansas, 1980