Are the Bankruptcy laws really always changing?

You often hear over and over again “the laws are changing” and because of that “act fast”. Well this is somewhat true, but those advertisements are preying on those who are not legally or Bankruptcy savvy.

All laws are always changing. It is a common misconception that Bankruptcy is just a fill in the blanks, fill in the form no brainer thing that people do. Bankruptcy is just like any other area of law. There are motions, trials, judges the whole gambit of all the legal stuff that is in any other area of law. The thing with Bankruptcy is that many individuals do not have to see that side of it because they hired an attorney, and if attorneys think that Bankruptcy is that basic  – they likely are not familiar with Bankruptcy, and you should run very quickly away if they are trying to practice Bankruptcy.

With that said, in California, Bankruptcy cases are heard by the District Bankruptcy Court, the United States District Court of California, the United States Court of Appeals, the Bankruptcy Appellate Panel and of course the Supreme Court of the United States. Often times the ruling in a case can alter how other courts or lower courts review each case. This in effect results in a “change” of law, which really is more of an interpretation of the laws. 

An example of this is the case of Drummond v. Welsh (In re Welsh) 711 F.3d 1120 (9th Cir. 2013). This case was heard by the United States Court of Appeals for the 9th Circuit (which covers California among other states). I will not go into a thorough discussion of this case, but one of the things this case discussed was whether or not debtors can keep “toys” such as boats or R.V.s in their Chapter 13 Bankruptcy case. Previously the courts had discouraged debtors from keeping toys. Now it appears that the U.S. Court of Appeals of the 9th Circuit has passed down the ruling that maybe in some cases you can keep them. This would be an example of a “change” or an interpretation of the law as a result of a ruling on a particular case.

Another example is the case of Law v. Siegel, No. 12-5196, ___ U.S. ___ (2014). This case was heard by the United States Supreme Court, the highest court in the United States governing all jurisdictions. In a nutshell this case said that Chapter 7 trustees cannot surcharge a debtor's Bankruptcy estate for the Chapter 7 trustee's expenses in administering the estate, even if the debtor acted in bad faith. So if there is unprotected equity that was distributed to creditors, protected equity cannot be used to pay the Chapter 7 trustee's fees even if the debtor acted in bad faith in some way. This is obviously a very complicated issue, and one that any debtor or attorney would like to avoid learning first hand. Nevertheless, it is yet another example of how the laws are always changing, developing and heard before more than just the Bankruptcy Court of your jurisdiction.

In addition to new case law, the laws also change, and they change on a semi-regular basis. For example, the laws changed on April 1, 2013. The timing just begs the joke of “no joke, the laws changed!” On April 1st when the laws changed, some of the exemptions that are used to protect your assets increased like the “wild-card” exemption, while others decreased (there is no longer an exemption for pain and suffering proceeds from personal injury cases). Among many other changes, the median income changed as well. The exemptions and income requirements for Bankruptcy change frequently.

So to summarize, the laws are regularly changing in Bankruptcy, as in any other area of law. This is an example of where it can be very beneficial to have an attorney help you navigate the legal system. There are many laws and many cases to keep track of, and it is important to have an attorney that is familiar with Bankruptcy and familiar with how to work and research in the legal realm to help you through the process. 

Susan Turner has appeared in the Bankruptcy Court regularly fighting to protect her client’s rights and guiding them through the legal system. Let us help you review your case.

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