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Debtor's beneficial interest in self-settled spendthrift trust reachable by trustee. Under California law, Chapter 7 debtor's beneficial interest in selfsettled spendthrift trust was not protected from the trustee or hypothetical lien creditors; since the debtor had power to invade the trust corpus, under state law, "any spendthrift provisions are invalid when the settler is a beneficiary." Cutter v. Vujic (In re Cutter), 398 B.R. 6 (B.A.P. 9th Cir. 2008).
Economic stimulus payment is property of estate. Economic stimulus payment received by the Chapter 7 debtor postpetition is property of the estate without need for proration between pre-and postpetition periods. Since stimulus payment is federal, court looks to federal rather than state law. The trustee argued that the stimulus was tied to a prebankruptcy tax filing, which triggered the debtors' eligibility for stimulus, while the debtors argued that the payment was an advance on their postpetition tax refund. Without specifically deciding that issue, the court holds that the estate is entitled to the entire stimulus, noting that after the debtors filed their prebankruptcy 2007 tax return they had a contingent interest as of the bankruptcy filing in the entire stimulus payment. The court doesn't apply the typical proration theory for a tax refund to see how much of the refund is related to the tax year that expired before the bankruptcy filing, since the stimulus payment has no relationship to the timing of the bankruptcy filing. In re Schwinn, 400 B.R. 295 (Bankr. D. Kan. 2009).
Settlement of prepetition cause of action by attorney not employed by trustee is void. The Chapter 7 debtor had been injured prepetition in an automobile accident, and the attorney representing the debtor in that action settled the cause of action without moving to be employed to represent the trustee. The bankruptcy estate was never that attorney's client. Under Rule 9019, court approval of a settlement involving property of the estate is necessary, and no approval was sought. The Chapter 7 trustee was not a party to the settlement. The settlement by the attorney acting without authority and employment is void ab initio. Since the settlement funds had been paid, they must be turned over to the trustee, who must then return the funds to the party that paid. Nickless v. McGrail & McGrail (In re Dooley), 399 B.R. 340 (Bankr. D. Mass. 2009).
Disability credit insurance is not property of estate. Until entire balance of debt is paid by credit insurance payable on disability, that insurance doesn't vest in debtor and debtor's estate has no claim to insurance on theory that debt is bifurcated. In re Gladwell, 2009 WL 140098 (Bankr. C.D. Ill. Jan. 21, 2009).
Supreme Court grants certiorari on exemption objection. Granting certiorari from the Third Circuit, the Supreme Court accepted two issues: may the trustee pursue sale of an asset that was claimed as exempt in a specific amount that was the same amount placed by the debtor on value of the asset, and is the
©2010 Keith M. Lundin
