Bankruptcy Law

Editor:
James Cole, Esquire

“Chapter 20” case appealed to Eighth Circuit.  The Bankruptcy Appellate Panel opinion in Fisette v. Keller (In re Fisette), described in the November Bulletin, was appealed to the Eighth Circuit Court of Appeals and is pending there under case no. 11-3119.

Incompetent person is not disqualified from bankruptcy relief under chapter 13 when guardian/conservator files voluntary petition for her.  In re Sapp, 2011 WL 2971048, case no. 10-20580 (Bankr. E.D. Mo. 7/20/11).  Creditor moved to dismiss incompetent person from chapter 13 case filed jointly with competent spouse.  Husband filed on wife’s behalf as court-appointed guardian and conservator.  Motion was denied by reason of powers of guardian and conservator under Missouri law and precedent from around the country.

Court determines chapter 13 debtors’ interest in jointly-held CD’s, mutual funds, and corporate stock when all were purchased by non-debtor third party for estate planning purposes.  In re Foresee, case no. 11-60155 (Bankr. W.D. Mo. August 4, 2011).  Chapter 13 Trustee objected to confirmation of plan because it did not account for one debtor’s interest in corporate stock, certificate of deposit, and mutual fund held jointly with other family members.  Debtor’s mother had contributed 100% of the funds for each asset for the purposes of allowing debtor and sibling’s access to the assets for mother’s care and to ensure non-probate transfers on her death.  The CD was held by mother, debtor, and one sibling as joint tenants with right of survivorship.  The Court found that pursuant to Missouri law, until death of one of the joint tenants, the presumption of equal ownership of the CD could be rebutted by evidence including the proportion of contribution and intent of the joint tenants.  In this case, such evidence indicated debtor owned no interest in the CD.  However, the mutual fund and stock were held jointly by debtor and one sibling, without mother.  No argument being advanced that the assets were held in an equitable trust for mother (the Court offering a footnote on the Court’s previous rulings concerning equitable trusts in such situations), the Court found that each sibling owned an equal share of those assets.  The debtor’s plan did not account for her share of the stock and mutual fund to assure payment to creditors of at least as much as they would obtain under chapter 7.  Therefore, confirmation was denied under section 1325(a)(4).