Question about wildcard in Ohio

[bk2009]

Our lawyer advised us that exempting our tax return with our wildcard exemptions (in Ohio) was perfectly fine. I do not work, as I am a student and now the trustee is arguing that I shouldn't be eligible for the exemption because I don't work. I am spitting nails mad at the lawyer who is completely unworried and stating "you can make payments". Jerkwad knows that we have to watch every single penny every month or we won't have enough money to pay all the bills. The money is for my kid's schooling, so if I have to pay the trustee, my kids can't attend that school - the only reason I haven't paid it yet is because we're waiting to see how much financial aid the school gives us, though it will likely be in about the same ballpark as last year, so it will wipe out every penny, plus some of that money the trustee wants. He's going to ask the trustee, but thinks the trustee will tell us that it doesn't matter what we're doing with the money.

The lawyer said he was going to look into it to see if we have an argument for the exemption despite the trustees wanting it. I feel like the lawyer should have known this, that's why I paid him all that money, when I was fine with waiting until the trustee wouldn't give a moments thought to the tax return.

[keepsmiling]

This sounds like bs to me. A wildcard is a wildcard. Period. An exemption is an exemption.
I don't blame you for being po'ed.
Hopefully this tt is just picking at straws. Good luck! Keep up the good fight.

[justbroke]

Listen to your attorney. Let the Trustee go blah blah blah... sorry... wah wah wah, about how a "wild" card should not be used for a specific type of property. The only thing your attorney needs to do is show that a tax refund is not characterized as anything other than a tax refund, even if it is from refundable credits where the debtor had no earned income.

What should happen is that your attorney gets more... litigious and tell the Trustee that there is nothing in the Ohio bankruptcy exemptions stating that a tax refund is only exempt if it came from earned income.

Remember, Trustees like to poke at exemptions all the time. This is their job. While this particular poke seems to be disingenuous and makes no sense... it is what they (Trustees) do. You and your attorney's job is to use your poker face, look the Trustee dead in the eyes and tell them that a.) they are wrong, and b.) we'll see you in court.

Please do not feel like the attorney "should" have known this. This is just bizzare. The Ohio exemptions clearly allow.

Ohio's wildcard... (18) The person's aggregate interest in any property, not to exceed one thousand seventy-five dollars, except that division (A)(18) of this section applies only in bankruptcy proceedings.

I can't seem to find where it says "for tax refunds, the person must have earned income". Unless the Trustee is trying to re-define what a tax refund is? Even so, the Ohio statute clearly reads "any" property. I must be missing something. Where are my glasses...

[LadyInTheRed]

Yeah, I can't find where applying an exemption to your tax refund depends on you being employed. Even in the description of the cash exemption where tax refunds are specifically mentioned, there is nothing about being employed.

Here's a link to the law http://codes.ohio.gov/orc/2329.66

Don't assume it is your attorney who is wrong. The exemption isn't invalidated just because the trustee says it is. If push comes to shove, it is the judge who decides. Has the trustee even filed an objection to your exemptions? If your attorney recommends you pay the trustee, make sure you understand his reasoning and don't be afraid to ask for the authority for his recommendation. His reasoning could be that it isn't worth paying him to fight an objection by the trustee, which is a valid reason. But, it is ultimately your decision to make. If the trustee has no valid basis for an objection and hasn't even filed one, I think I'd want to call his bluff. But, that's without knowing all the facts.

[LadyInTheRed]

I can't seem to find where it says "for tax refunds, the person must have earned income". Unless the Trustee is trying to re-define what a tax refund is? Even so, the Ohio statute clearly reads "any" property. I must be missing something. Where are my glasses...

My glasses are on and newly cleaned and I can't find anything!

[bk2009]

Thank you all. I can't seem to find anything either. Our attorney is telling us that we can go into a payment plan - he actually said that $100/month isn't that bad to discharge the rest of your debt. I replied (all through email at this point) that I was glad that he didn't think $100/month was anything, but for us (and he should know because he did our means test) that we don't have $100/month extra unless we start taking from the food budget. I made it apparently clear to him that I did not have it and do not want to go into a payment plan, so he is looking into it. I'm angry at him right now, so he best get into gear and fix this. I think he honestly thought we'd be okay with it, um, wrong. He also says that it makes sense, which I do not think that it does. Our refund did not come to only my husband, it came to use jointly, as the federal gov't considers it to be both of our monies, and not just his money.

[justbroke]

I do not know why your angst and frustration is with your attorney! This is clearly something out of the blue (or dark recesses of the abyss) which your attorney did not fathom the Trustee doing. Please realize that Chapter 7 Panel Trustees are regular attorneys who are appointed by the court to handle these cases. Some of them are "aggressive", some of them are very nice and know just what the low hanging fruit is, some are out to make a name for themselves, and then there is the bizarre! This is the latter... bizarre!

If the refund is from a joint tax return and the Trustee wants the entire return... that another thing. Are you using a "seasoned" bankruptcy attorney, or one of those jack of all trades (does "family" law as well)?

[LadyInTheRed]

Try not to focus on anger. That won't help you resolve the problem. You need to understand your attorney's reasoning.

Has the trustee actually filed an obection to your exemptions? Or, has he informally raised the issue with your attorney.

Since you are communicating with your attorney by email, perhaps your next email should say something like:

I have reviewed Ohio Revised Code 2329.66 and fail to see how the trustee's position make sense. Is there case law or a local court rule establishing a reqiurement that I be employed in order to apply the wildcard exemption to a tax refund? Could you please explain to me why the trustee's position makes sense and provide me with legal authority? If I am going to have to make payments to the trustee for an asset that appears to be exempt under the language of Ohio law, I need to understand why.

[LadyInTheRed]

Are you using a "seasoned" bankruptcy attorney, or one of those jack of all trades (does "family" law as well)?

I wondered that too. If the trustee thinks the attorney is inexperienced in BK, he could be trying to get away with things he wouldn't try against an experienced BK attorney that he deals with on a regular basis.

[bk2009]

Our lawyers latest response to us:

"Joint debtors, such as you and Jen, are entitled to $850 exemption for cash on hand. You are getting your $425 exemption in the refund and you are getting your $1,150 exemption in the refund.

(XXXXX) cannot take an exemption in property in which she has not requisite property interest. She can't take the $425 or the $1,150 exemption in the tax refund because she didn't earn the income from which the refund was derived. The trustee appears to be right and I was wrong. There is a case that discusses the issue, In re Gazvoda out of the N. Dist. of Ohio. It says "Even if spouses jointly file tax a return in order to enhance the tax refund and also jointly file a bankruptcy petition, the tax refund remains the property of the wage earning spouse. Only the spouse whose over-withheld earnings resulted in the refund has the requisite property interest to claim exemptions in that refund." We would have had to deal with this issue whether we waited to file or not. That is, unless you waited until next year to file. At that point, we would be potentially dealing with 2013 tax refund. Tax refunds are a tough issue to navigate. I've seen some people lose all of their tax return because they don't have any EIC or Addl. child tax credit."

He goes on to say that we used the amount in question for certain expenses but maintains that we should just pay it if push comes to shove. I think that is BS as it was his mistake.

He does practice more than just BK, but he gave all the same answers as the other place (big BK firm) and we liked that we actually met and talked with him, instead of a paralegal.

[LadyInTheRed]

That makes it more clear. The issue is not that you are unemployed. It is that the tax refund is a refund of your husband's earnings and therefore belongs to him since you are not in a community property state. Your husband has a $425 cash exemption and a $1150 wildcard exemtpion. Either the refund is more than $1,575, or at least a portion of your husband's exemptions were used on his other property. It sounds like the trustee is right.

But, the lawyer is trying say his error did not harm you because your 2013 refund would have been an issue if you waited to file. Not a very good argument. If you waited to file BK until you received your 2012 refund, you could have spent it and still been able to file pretty early in 2013. So, you might have only 6 months or less worth of refund as an asset instead of an entire year.

[bk2009]

He specifically pointed out that I would be able to claim the exemption, but now he's trying to weasle out of that.

[justbroke]

Very interesting. The decision was based on underlying Ohio dissolution laws which are about property in a dissolution. I am glad I'm not an attorney because I don't know how they jumped "there" to find that the non-working spouse has no entitlement to any part of the refund. Albeit strange, it is an interesting case (Gazvoda 10-20715-aih). It is definitely a very thought out case (in Gazvoda) on marital property rights.

As LITR wrote, it would appear that your husband does not have enough exemptions to cover the entire refund. I thought they were only going after your "portion" of the refund, but you are joint bankruptcy filers. In that case, they are attacking the exemptions applied and you (based on Gazvoda) are not entitled to an exemption on the (working) spouse's property.

I thought Florida was tough!

[LadyInTheRed]

He specifically pointed out that I would be able to claim the exemption, but now he's trying to weasle out of that.

It sounds like he was wrong, which he has acknowledged. So, now you have two issues: How you are going to handle the fact that you need to pay the money to the trustee and how your are going to deal with the fact that your attorney gave you incorrect advice. Sounds like you need to have a frank (but polite) conversation with the attorney letting him know that you believe you were harmed by the incorrect advice.

[justbroke]

The only issue I see is that the attorneys advice would not have mattered, unless the debtor waited another year, spent their refund, and then filed. Sometimes, it just is what it is upon filing. In many cases, it also depends on just which Trustee you get! (I can speak from experience in Florida where we have very aggressive Chapter 7 Panel Trustees and some that are very caring and understanding. However, they still apply the law as it is. Some are just more savvy at obtaining "property" for the Estate for distribution! For example... the so-called "carve out" for underwater homes!)