UST Says Some Chapter 13 Stimulus Payments May NOT Protected

[justbroke]

It appears that, on April 7, 2020, the Executive Office of the United States Trustee (OUST) made a substantial remark regaridng whether the CARES Act stimulus payments are property of the bankruptcy estate.

The most interesting part, is that that OUST opines that "In rare chapter 13 cases filed on or after March 27, 2020, the recovery rebate may be relevant to the confirmation standard contained in 11 U.S.C. § 1325(a)(4)." The OUST goes on to say that the stimulus payment is "not available" to be seized to pay creditors if the case was filed before the CARES Act became law (March 27, 2020).

Clearly, the OUST is putting it out there that certain Chapter 13 cases filed on or after March 27, 2020 may allow the Chapter 13 Trustee to recover the stimulus payment on behalf of creditors!

NOTICE TO CHAPTER 7 AND 13 TRUSTEES REGARDING RECOVERY REBATES PAID TO CONSUMER BANKRUPTCY DEBTORS UNDER THE CARES ACT OF 2020

https://www.justice.gov/ust/file/car...e.pdf/download

[flashoflight]

justbroke It actually applies to both 7 and 13 equally since for a 13 it refers to a hypothetical 7. It is pretty rare that trustees in either chapter will grab the stimulus for post 3/27/20 filings. The normal rule is to spend your cash down via normal household spending prior to the filing date. There is a threshold where ch7 and ch13 trustees won't take non-exempt cash as part of the estate due to the hassle, expense, and the lack of a meaningful distribution to creditors. If the stimulus money is still there along with a lot of other non-exempt cash, then it will be well worth it for the ch7 or ch13 trustee to grab it all for the BK estate.

[justbroke]

I am 100% sure that the OUST put this out there because Trustees were asking the question.

And, yes, it does apply to both and the OUST did mention that it would be protected had the individual filed for Chapter 7/13 "after" March 27, 2020. The opinion was more about those active Chapter 13s filed before March 27, 2020.

I don't think, just as I wrote in the other thread, that any "smart" (Chapter 13) Trustee would go after the CARES Act stimulus. But Chapter 13 Trustee have gone after stimulus in the past and won in court. It's interesting that the OUST is asking any Chapter 13 that wants to try this, to contact the OUST first!

There is a threshold where ch7 and ch13 trustees won't take non-exempt cash as part of the estate due to the hassle, expense, and the lack of a meaningful distribution to creditors.

I personally know and have seen both Chapter 7 and Chapter 13 Trustees in Florida go after less than $1,000. When it's cash, it's already liquidated and there really is no major effort. If it were tangible property, other than cash, then the effort of trying to recover and then liquidate can be a real problem, just as you mention. So there is no threshold; it's more a tolerance for the individual Trustee. Some enterprising Trustee could also take it on, at cost, to send a message. I think they call that gamesmanship.

A Chapter 7 Trustee can't get to the CARES Act stimulus money (period). That's pretty much codified by both what constitutes the definition of "income" in bankruptcy, and that any post petition (Chapter 7) stimulus would not be part of the bankruptcy estate just because of 11 USC 541. It's the Chapter 13s that are active at the time of the stimulus (filed before March 27, 2020). The fact is that the OUST would need this to be litigated because they do reference that they don't know the affect of confirmation, either.

It's just interesting. I wanted to put it there... just in case some Chapter 13 Trustee tries to grab the cash... just as Chapter 13 Trustees successfully went after the 2008 stimulus payments.