In plain terms and for most debtors the State in which you resided between 2 years and 2 years six months prior to your filing is going to be the State for which you can claim an exemption in bankrupcy.  Some states have only state exemptions, others allow you to choose either the state exemption or a federal exemption.  Some States exemptions are valid outside the State and some are not.  Texas is a state that allows you to choose one or the other (state or federal) but its exemption is limited to property within the State.  The question is where do you easily go to determine what exemption scheme to claim and what applies?   Two very good sources for information on claiming an out of state exemption are http://www.exemptionsexpress.com/ “Exemption Express” and http://www.bankruptcyaction.com/bankruptcyexemptions.htm.

An additional must read for cases with these issues in the Southern District of Texas is Bankrupcy Judge Marvin Isgur’s opinion in In re Dean C. GARRETT, Caroline M. Garrett, Debtor(s). No. 09-34633. United States Bankruptcy Court, S.D. Texas, Houston Division. Aug. 18, 2010, 435 B.R. 435.   In Garrett Judge Isgur tackled the issue of whether or not the Garrett’s who lived in North Carolina from December 2006 until February 2008 but in March 2008 moved to Texas and subsequently filed a joint chapter 7 petition on July 2, 2009 in Texas get a North Carolina or Texas exemption.  Between 2 years and 2 years six months prior to the filing the debtors lived in North Carolina and so the Court ruled the Debtors were eligible for North Carolina’s exemptions under § 522(b)(3)(A) but more interestly Judge Isgur ruled that Federal law preempted  State law.  This is important because North Carolina is like Texas.  It’s exemptions have no extraterritorial effect, that is they cannot be applied to property located outside that state. So Judge Isgur ruled that even though North Carolina exemptions would not otherwise apply to property outside the state due to preemption they could be used to protect property in Texas.

The Supreme Court’s opinion answered the narrow question of whether an above-median income debtor, who has no loan or lease payment, may take the “ownership” deduction in determining his projected disposable income. In reaching its conclusion, the Court interpreted the phrase, “applicable monthly expense amounts,” in §707(b)(2)(A)(ii)(I). Such expenses are determined with reference to the IRS’s National and Local Standards which provides for both “Ownership Costs” and “Operating Costs.” The Court found that “Ownership costs” referred to payments on loans or leases relating to the vehicles; an expense not actually incurred by debtors who own their vehicles outright. Debtors with ownership of their vehicles would instead be entitled to the “Operating Costs” deduction. The Court found that this decision harmonized with the “context and purpose” of the Bankruptcy Code to require debtors to pay creditor the “maximum they can afford.”

This case is a win for the consumer credit industry and its allies in the United States Trustee Program. But the narrow scope of the opinion still leaves many unanswered questions. Though the Court specifically declined to answer the question of what happens when the debtor has an expense but it is lower than the amount stated in the table, a fair reading of the opinion would allow debtors who pass through the “gateway” to take the full amount of the expense. The reasoning of the decision makes it difficult to see how anything but the amount in the IRS table is to be used once the ownership allowance is found to be “applicable”. The statute refers to the “amount specified” in the standards and the court’s decision described the standards as “tables that the IRS prepares listing standardized expense amounts for basic necessities.” Although the creditor in Ransom argued that this amount serves as a cap, the relevant language in the decision refers to treating the standards as a cap as “IRS practice” rather than any result dictated by the IRS standards. Since the IRS also has discretion deviate from the standards in other ways if it chooses, including upwards, it is clear that IRS practice cannot be simply imported wholesale into the section 707(b)(2) means test.

The Internal Revenue Service and the United State Trustee have allowed an additional operating expense allowance for older or high mileage car of $200. Nothing in the Court’s opinion limits debtors’ continued use of this deduction. While this allowance does not appear in the tables of IRS expense standards, the Internal Revenue Manual refers to it as an operating expense that is allowed. The court of appeals decision affirmed in Ransom expressly permitted the $200 expense. Ransom v. MBNA Am. Bank, N.A. (In re Ransom), 577 F.3d 1026, 1031 (9th Cir. 2009). In circuits that ruled contrary to Ransom, we will likely see an increase in the use of this deduction as the additional ownership deduction is eliminated.

Importantly, the Court notes that if car payments end during the life of the plan unsecured creditors may move to modify the plan. Consumer advocates have long argued that chapter 13 plans should be confirmed based on the debtor’s financial circumstances at the time of confirmation and not future events. This Court’s opinion today confirms that the mechanism for increasing plan payments after car payments cease or 401K loan repayments end is for the creditor or trustee to seek a modification based on the changed financial circumstances. Any amended plan may also take account of any other changed circumstances affecting the debtor’s financial situation. This is contrary to the position that some courts have taken in which debtors must propose stepped up payments in their original plans to account for such future circumstances.

In the chapter 7 context, this should mean that a court cannot assume that, just because a debtor’s payments for amounts allowed by the means test will cease after a year or two, the debtor will then have more income available to pay debts that can be considered under the means test or section 707(b)(3).

Finally, going forward it will be important for debtors to ensure that they have reliable transportation that will carry them through the life of the plan because, under Ransom, the chapter 13 means test formula will not allow them to save for a replacement car. “[A]dvice to refinance a mortgage or purchase a reliable car prior to filing because doing so will reduce the debtor’s interest rates or improve his ability to repay is not prohibited, as the promise of enhanced financial prospects, rather than the anticipated filing, is the impelling cause.” Milavetz, Gallop & Milavetz, P.A. v. United States, 130 S. Ct. 1324, 1339n.6 (2010). Under Ransom, debtors who had previously saved money to purchase a car will not be able to claim that expense under the means test during a chapter 13 plan. A chapter 7 debtor will have difficulty obtaining financing after a bankruptcy case is filed.

As a lone dissenter, Justice Scalia stated: “In my judgment the ‘applicable monthly expense amounts’ for operating costs ‘specified under the . . . Local Standards,’ are the amounts specified in those Standards for either one car or two cars, whichever of those is applicable.”

Supreme Court Rules on Meaning of Projected Disposable Income – Hamilton v. Lanning
The Supreme Court has ruled on one aspect of how to compute a chapter 13 debtor’s projected disposable income under section 1325(b). In Hamilton v. Lanning, the court held that the word “projected” gave the bankruptcy court the flexibility to adjust the debtor’s current monthly income to take into account changes in the debtor’s income that are known or virtually certain at the time of confirmation. The court found that the ordinary meaning of the term “projected” encompassed more than simply multiplying the debtor’s current monthly income by the number of months in the applicable commitment period and had a meaning that could take into account known or virtually certain changes in income.
However, the court made clear that such adjustments to the statutory formula for computing disposable income should be made “only in unusual cases” where there is known or virtually certain information about changes in the components in the formula that are based on actual income. There is no suggestion in the decision that a bankruptcy court can rely on the term “projected” to otherwise deviate from the formula by, for example, including income that the definition of current monthly income excludes, such as social security benefits, or altering expense allowances permitted by the statute.
In the wake of Lanning courts will no doubt adopt a variety of approaches to the issue of how much discretion they have. It seems clear that debtors who have reductions in their income will be able to argue that their payments should be lower than if they were computed based on the definition of current monthly income in Code section 101. Trustees will undoubtedly argue that when income has increased the payments should be higher.
Although the facts of Lanning concerned only a change in the debtor’s income, the final paragraph of the decision states that the court can also take into account known or virtually certain changes in expenses. Chapter 13 trustees can be expected to argue that Lanning prevents above median income debtors from counting as expenses payments on property that is to be surrendered. However, because the decision is based on the term “projected disposable income”, which does not appear in section 707(b), a different treatment of payments on surrendered property may be reached in chapter 7 dismissal motions.

Schwab v. Reilly
The Supreme Court issued its decision in Schwab v. Reilly on June 17. While technically a win for the trustee, the opinion really represents a victory for debtors. The court’s ruling turned on the narrow issue of whether the trustee reasonably could interpret the debtor’s schedules as exempting only an interest of a specific dollar amount in her kitchen equipment, rather than all of the equipment. The debtor in her schedules listed the same amount for the property in the columns labeled “Value of Claimed Exemption” and “Current Market Value of Property without Deducting Exemptions.” The court accepted the trustee’s argument that it was reasonable for him to infer from this that the debtor only intended to exempt an interest in the equipment worth the amount listed, rather than her entire interest in the equipment. Therefore, the court held, the trustee did not have to object to that exemption, which on its face exempted no greater amount than the statute permitted. In so doing, the majority rejected the conclusion of the courts below and the three dissenting justices that by listing the same amount in both columns the debtor manifested an intent to exempt the entire property.
However, by ruling in this narrow manner – focused on how this particular debtor’s schedules could be interpreted by the trustee – the court also addressed a main concern which was that if trustees did not have to adhere to the objection deadline they could wait for months before acting and the question of whether property is exempt would remain in limbo. The court set forth a very simple solution to this problem: The debtor need only make absolutely clear the debtor’s intent to exempt the entire asset by listing the exempt value as “full fair market value (FMV)” or “100% of FMV.” (Slip Opinion at 20-21). Then the trustee will know that she must object within the time set by Rule 4003 or else the entire asset will be exempted.
This result should not present any problem for debtors represented by competent counsel, who should use the suggested language whenever there is any doubt about whether an exempted asset is within the amount of exemption allowed (assuming, of course, that there is a good faith argument the asset can be completely exempted.) Some attorneys may want to include this language for every asset exempted. Unfortunately, pro se debtors such as Ms. Reilly are not likely to know they should do this. Amendments to Schedule C of Official Form 6 to provide an easy way to claim assets as entirely exempt, perhaps with a box to be checked, would help standardize the process for all involved.
The Supreme Court’s decision also should resolve the problem raised by cases like In re Chappell,  where the trustee attempts to keep a case open waiting for an asset like a debtor’s home to increase in value beyond the exemption amount. If the debtor clearly indicates an intent to exempt the entire asset, the trustee must file a timely objection, based on the value at the outset of the case, or the entire asset will be exempt.

http://texasbarbooks.net/books/bankruptcy-road-map/ .

My Hitler video was a hit at the Seminar and Youtube pulled it due to copyright concerns.  My believe is that parodies are a protected use so I will attempt to upload it here.  It is probably not funny for anyone who does not practice bankruptcy law but you may want to take a look.

The link http://video.yahoo.com/watch/7632552/20266450