All items from A Texas Bankruptcy Lawyer's Blog

The plight of the non-filing spouse who stands to lose an interest in the homestead is a trap that is easy to overlook.   Under 11 U.S.C. Sec. 541(a)(2), when one spouse files bankruptcy, all joint management community property enters the bankruptcy estate.    This means that if the filing spouse elects not to claim the homestead as exempt in favor of selecting other property or is subject to a cap, the non-filing spouse may lose her interest in the property without having any say in the matter.     
I have previously written about the Odes Ho Kim case here.   In the Kim case, an involuntary petition was filed against Mr. Kim.    The creditors then sought to impose a cap upon his homestead exemption.  Mrs. Kim intervened asserting that she had an independent interest in the homestead.   The Bankruptcy Court and the District Court ruled that Mr. Kim was subject to a cap on the homestead exemption and that Mrs. Kim had no separate interest in the property.    If both spouses had filed, they would have been entitled to two times the amount of the cap.   However, with Mrs. Kim sitting outside of bankruptcy, her interest in the homestead was completely divested by the bankruptcy filing.

A debtor avoided losing her home in a recent case illustrating the perils of do it yourself legal forms.    Lowe v. Vazquez, No. SA-12-CV-00399-DAE (W.D. Tex. 3/28/13).    
The Debtor paid $10 to download a living trust form while she was living in Nevada.   When she moved to Texas, she conveyed her homestead to the trust.   Her stated reason for setting up the trust was: The one and only reason I created the Living Trust after my divorce was to be sure my son could have access to any assets I owned at the time I die and to avoid probate, so I named my son as Successor Trustee. Probate proceedings in Nevada are lengthy and costly and I only wanted to make things easier for him when I die. When she filed bankruptcy in Texas, the trustee objected to her exemption on the basis that title to the home was vested in the trust.   The Bankruptcy Court denied the objection.    In re Vazquez, 2012 Bankr. LEXIS 642 (Bankr. W.D. Tex. 2012).    

The case of a creditor who did not want to acknowledge that its debt had really and truly been paid received little sympathy from the Fifth Circuit which rejected a panoply of defenses and affirmed the Bankruptcy Court ruling that "The Senior Loan Has Been PAID!!!"   Fire Eagle, LLC v. Bischoff (Matter of Spillman Development Group, Ltd., Case No. 11-51057 (5th Cir. 2/28/13), which can be found here.   I previously wrote about the Bankruptcy Court decision from Judge Frank Monroe here.   The decision is significant because it shows that Stern v. Marshall is not a silver bullet for parties seeking to avoid bankruptcy court decisions.   As discussed below, it also rejects a magical approach to bankruptcy law.
What Happened

I have previously written about Crystal Cox, a self-styled investigative blogger, who found herself on the receiving end of a judgment for $2.5 million after she posted caustic comments about a bankruptcy trustee.  You can find the prior post here.   One aspect of the District Court's opinion which raised my eyebrows was the court's stingy application of the media privilege.    Under the District Court's view, most bloggers would not be entitled to some of the protections available to the professional media.   
Apparently I was not the only one who thought this to be a strange result.   UCLA Professor Eugene Volokh, who blogs at the Volokh Conspiracy is representing Ms. Cox on a pro bono basis in her appeal to the Ninth Circuit.   Scotusblog.com, the leading Supreme Court blog, and the Reporters Committee for Freedom of the Press have weighed in with amicus briefs.