A recent opinion from Judge Michael Kaplan offers valuable insight into a pair of issues that haunt many Chapter 13 debtors.
Funding a Chapter 13 Plan
In Re Andolino began when Christopher Andolino filed Chapter 7 Bankruptcy in April 2013. About a month later, he converted to a Chapter 13. Although the record makes no mention of the reason for this switch, it is fair to speculate that Mr. Andolino had some property he wanted to keep – perhaps a house – and he and his attorney though they saw a way for him to keep it.
Mr. Andolino was unemployed, and according to the Bankruptcy Code, the debtor must have “regular income” to fund the repayment plan. Regular income is almost always defined as either employment income or well-established self-employment income. But, at some point, Mr. Andolino’s girlfriend stepped forward and agreed to assume responsibility for the plan payments.
The Trustee objected to this arrangement, and indeed, many courts are skeptical when anyone other than a non-filing spouse agrees to shoulder the plan payment burden. But the Court ruled that the debtor only needed to prove that the contributions would be “stable and regular.” In this case, Mr. Andolino’s girlfriend made a formal, written promise to pay and there was evidence that she had the means to make good on her promise.
Sometimes, the numbers on a Chapter 13 repayment plan initially do not work, but your attorney can look for creative solutions to fill in the gap.
In his original petition, Mr. Andolino declared an IRA. He later amended his schedules to state that he had an inherited IRA, which was still exempt. The Trustee objected in light of Clark v. Rameker, the 2014 Supreme Court decision which held that an inherited IRA was not exempt under the Bankruptcy Code.
Judge Kaplan correctly reasoned that the Supreme Court decided Clark based on state law, and the New Jersey statute essentially defers to IRS guidelines on this matter. So, under New Jersey law, an inherited IRA is still exempt property. Mr. Andolino got to keep every dime of his deceased mother’s $120,000 IRA, and the same ruling may very well apply in your case.
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