September 28, 2020

Gifts vs. Loans – Big Differences in Bankruptcy Court

I recently ran across an interesting blog post from Mark Markus, a bankruptcy lawyer in Los Angeles, who noted that the characterization of a your receipt of money as a gift is significantly different from characterizing that receipt of money as a loan.

If the funds received are a gift, the funds would count as income for means test purposes and these funds (assuming they are not yet spent) would be an asset of your bankruptcy estate and potentially reachable by a bankruptcy trustee.

By contrast, if funds received are treated as a loan, these funds would not count as income for means test purposes, although cash still on hand would be an asset.

Mr. Markus also notes that if you pay back the lender before filing, the repayment could have bankruptcy implications.  He is referring to the issue of preferences, which are provisions of the Bankruptcy Code that allow trustees to recover money from lenders in certain situations.

Your lawyer can advise you regarding the preference issues and about the means test as well as exemptions that can allow you to protect cash and other property from the trustee’s reach.  However, as Mr. Markus points out a threshold question is whether funds received are a gift or a loan.  What are the differences? [Read more…]

Clark and Washington Attorney Wins Confimation Hearing Over Trustee Objection

May a debtor include payments due secured creditors (house payment and car payment) for Chapter 13 means test calculation purposes if the debtor’s plan provides for the surrender of the collateral?  Attorney Mary Beth Ausbrooks, managing attorney of Clark and Washington’s Nashville office recently argued this issue before Judge Marian Harrison in Nashville (Middle District of Tennessee) bankruptcy court.

Opposing Mary Beth was the Nashville Chapter 13 trustee, Henry Hildebrand.  The trustee argued that if the debtor was planning on surrendering her house and her car, she could not deduct the monthly payments for these items when calculating the means test.  Without these deductions, the debtor would show over $1,000 more in “disposable income” which would result in a much higher Chapter 13 payment.

In a brief published decision, Judge Harrison sided with the debtor and Clark and Washington.  The judge focused on the language of Section 1325 of the Bankruptcy Code which looks to payments contractually due in the 60 months following the filing of the case.  The statute does not provide that surrendered items result in the disallowance of the deduction so the trustee cannot demand as much.   Click here to read Judge Harrison’s decision in the case of Brenda Sue Ray.

New Median Income Numbers for Tennessee Bankruptcy Filers on February 1, 2008

The office of the United States Trustee has released new median income numbers for bankruptcy cases filed in Tennessee as of February 1, 2008 and thereafter.  We expect that these numbers will remain in effect until around October 1, 2008.  Here are the current numbers:


Tennessee Median Income Numbers
1 person household 2 person household 3 person household 4 person household

each additional

person add…

$36,380 $46,039 $53,337 $61,856 $6,900

You can review the full median income chart at the U.S. Trustee’s web site.