In today’s email inbox came this message:

Message from UST Regarding Necessary Documentation for Chapter 7 Section 341 Meetings of Creditors

The Chapter 7 Panel Trustees for the District of Nebraska have standardized the documents that they will request in every chapter 7 case. The following documents must be submitted to the appointed trustee prior to the section 341 meeting of creditors by email or the trustee’s system for receiving documents:

  1. The most recently filed Federal and State Tax Return with all schedules. Tax transcripts will not be accepted. Social Security Numbers should not be redacted from the tax return provided to the trustee. If the debtor is not required to file tax returns, counsel shall notify the trustee by email. Tax returns are required to be sent to the trustee at least seven days prior to the scheduled meeting of creditors.
  2. Bank statements and electronic debit card statements covering ninety days (90) of activity up to and including the petition filing date on all accounts listed in the schedules, including checking and savings accounts. Bank statements should be provided to the trustee at least seven days prior to the scheduled meeting of creditors.
  3. If the debtor is a business or owns an interest in a business (corporation, LLC, PC, partnership etc.), the debtor shall provide a current Balance Sheet and Profit and Loss Statement and detailed inventory and accounts receivable lists at least seven days prior to the scheduled meeting of creditors.

In any given case, the appointed trustee may request additional information.  The list above, however, pertains to all cases.

Every person who files bankruptcy must attend a court meeting before the Trustee appointed to review their case. We call these “341 Meetings” because they are required under Section 341 of the Bankruptcy Code, and they are also called “creditor meetings” because creditors may attend the meetings (although creditors rarely attend).

Over time the amount of information requested by the Trustees to supplement the bankruptcy petition has grown larger, and this notice is largest demand for documents yet. At some point the Trustees will probably demand a video of a person’s home! (Shoot, they already look at Google Earth and Maps to get pictures of the outside.)

  • Tax Returns:  We already send Trustees copies of a debtor’s last two tax returns, but what is different about this request is that the trustees will no longer accept Tax Transcripts provided by the IRS.  This is strange.  How exactly are we to supply tax returns that have been lost? Providing trustees with an official tax transcript from the IRS which contains all the information that appears on the tax return itself appears to meet the trustee’s requirements.  What does a debtor do if there is no available copy of an electronically filed return?  I would guess they will have to get a transcript, prepare the return again, and print a copy of the copy.  Yeah, this is a stupid rule.  There is no valid reason for trustee to refuse to accept tax transcripts when a copy is not available. Good grief, tax transcripts are provided by the federal government. Does the US Trustee not trust the records of its own government?
  • Bank Statements and Debit Card Statements: Years ago we provided no bank statements to the trustee unless requested. Then, a few years ago we had to start providing statements showing the balance on the day the case was filed. Recently we had to start supplying statements for the past 90 days so the trustee’s could track down Preference Payments.  (A preference payment is a payment made to a creditor in excess of $600 made within 90 days of filing bankruptcy, and trustees have special powers to reclaim those payments.)  Now they are adding the requirement to provide Debit Card statements for the past 90 days.  Many debtors do not use traditional bank accounts and rely on the use of prepaid debit cards, and those same debtors generally lack access to their online accounts.  This is going to be a nightmare to produce all these records.  It’s already a mess, but at least this requirement makes sense.
  • Balance Sheets, Profit & Loss Statements and Accounts Receivable Lists.  Self-employed debtors and their attorneys will be faced with additional paperwork production burdens. The trustees are trying to figure out what a business is worth, and these documents will help inform them of the business value.  But what is also true is that this almost requires the preparation of two bankruptcy cases–one for the individual debtor and one for their business–and that extra burden will significantly increase the cost of filing bankruptcy for the business owner. No guidelines have been provided for the preparation of these financial statements.  Are these statements submitted under penalties of perjury as are the bankruptcy schedules? Is the debtor’s attorney liable for the accuracy of the business schedules?

Bankruptcy Rule 9011

Debtor attorneys must verify the accuracy of the documents they submit to the court. Bankruptcy rule 9011 provides the following:

By presenting to the court (whether by signing, filing, submitting, or later advocating) a petition, pleading, written motion, or other paper, an attorney or unrepresented party is certifying that to the best of the person’s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances,—

(1) it is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation;

(2) the claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law;

(3) the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery; and

(4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on a lack of information or belief.

Does Rule 9011 apply to Balance Sheets, Profit & Loss Statements and Account Receivables Lists emailed to the trustees? If so, it would appear that the debtor’s attorney now must undertake the burden of verifying the accuracy of the balance sheets, profit and loss statements and accounts receivable lists of the non-debtor business entity, and that burden is going to be very, very expensive.

Bankruptcy Code 707(b)(4)(C)

Section 707(b)(4)(C) of the Bankruptcy Code states that “[t]he signature of an attorney on a petition, pleading, or written motion shall constitute a certification that the attorney has – (i) performed a reasonable investigation into the circumstances that gave rise to the petition, pleading or written motion; and (ii) determined that the petition, pleading, or written motion – (I) is well grounded in fact; and (II) is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law and does not constitute an abuse under paragraph (1), [i.e., an abuse of the provisions of Chapter 7 of the Bankruptcy Code]”.

Does Section 707(b)(4)(C) apply to this new rule of emailing the trustee the business records of a non-debtor corporation? Must the debtor’s attorney now perform a “reasonable investigation” into the debtor’s corporations?


These new rules were promulgated without seeking any input from the attorneys who prepare the cases. What are debtors to do if they cannot reproduce copies of the electronic tax returns they actually filed?  Are they prohibited from filing bankruptcy even though they fulfilled their legal duty to file returns and even though the Internal Revenue Service can provide detailed transcripts of what they actually filed? And why do Chapter 7 trustees believe that an unverified copy of a tax return is superior to a transcript provided by the federal government? What is the duty of a debtor’s attorney to verify the accuracy of corporate records of a company owned by the debtor that is not actually involved in the bankruptcy case? Does Bankruptcy Rule 9011 and Bankruptcy Code Section 707(b)(4)(C) apply?  Gosh, I wonder if this rule might have benefited from just a little bit of input by the people who actually prepare the cases? Are debtor attorneys the enemy?


Image courtesy of Flickr and Alexander Baxevanis.





Are trailer homes, pull-behind campers, and RVs protected in Nebraska bankruptcy cases?

Homes are protected in bankruptcy by a law called the Homestead exemption, and traditionally that exemption applies to homes built on land a debtor owns. But what about portable homes and RVs sitting on rented lots?

Case #1: Foley: A Tent of Cloth

In a 1951 court opinion (In re Foley) the debtor and his family lived in a Glider trailer house parked on a lot rented from the Garden Valley Trailer Court.  The question in that case was whether a debtor could claim a Homestead exemption when the ground the trailer home sat upon was merely leased by the debtor.

If a tent of cloth can have the essential attributes of a homestead, there is no apparent reason why a trailer house cannot.

The Nebraska bankruptcy court ruled that a debtor need not be the absolute owner in fee in order to establish a homestead right in land, but that any interest in land, coupled with the requisite occupancy by the debtor and his family, is sufficient to support a homestead exemption. The court in Foley ruled that an oral month-to-month lot rent agreement was enough to invoke the homestead exemption, but the court pointed out that a Tenancy at Will was not sufficient. (A Tenancy at Will is where there is no agreement to pay rent or a situation where someone is basically a squatter.)

The Foley opinion makes it clear that a debtor does not have to own land to claim a homestead exemption. But what about the nature of the home?  Does it have to be a home built on a foundation or can it be a movable home, camper or RV?  The Foley court answered that question as well.  “It may be a ‘brown stone front,’ all of which is occupied for residence purposes, or it may be a building part of which is used for banking or business purposes, or it may be a tent of cloth. If a tent of cloth can have the essential attributes of a homestead, there is no apparent reason why a trailer house cannot.”

Case #2: McGinnis: A Trailer on Wheels

In the case of In re McGinnis decided in 2000, the Nebraska court was faced with an objection to the debtor’s claim of a homestead exemption in a 5th Wheel trailer. The debtor had an oral month-to-month lot lease in a trailer home park. The Chapter 13 Trustee objected to the homestead exemption because the trailer was not permanently annexed to the real estate–that is, the trailer sat on wheels and could be moved at any time. The debtor countered that the trailer was sufficiently connected to the land because it was connected to city water, sewer and electrical systems.

The Court observed that while the home was on the leased lot the trailer was not hooked up to any vehicle and the trailer was held in place by various braces in addition to being connected to utility services.  “The Trailer in the present case was permanently annexed to the land following the liberal construction encouraged in Foley. The Trailer was held in place by braces to the land and was connected to electricity, plumbing, sewer and water service. Therefore, according to the analysis in Foley , the Trailer was permanently annexed to the land.”

Case #3: Zeleny: Vehicles Pulling a Living Space

In 2006 the Nebraska Bankruptcy Court decided the case of In re Zeleny involving whether a debtor could claim a homestead exemption in the vehicle that pulled a 5th Wheel Trailer. In Zeleny the debtor had traded a motor home for a 5th Wheel Trailer and a pickup truck that pulled it. The debtor attempted to claim that both the trailer and the pickup truck were homestead protected since they were both purchased from the proceeds of selling an exempt motor home.

That power unit/pickup truck can be used for other transportation . . . I decline to stretch the statutory definition to fit the facts of this case.”

This time the bankruptcy court limited application of the homestead exemption an denied protection of the vehicle pulling the trailer. “The Nebraska homestead exemption statute at Neb. Rev. Stat. § 40-101, et seq., does not provide for a claim of a homestead exemption in a vehicle that pulls the living space, whether it be a fifth-wheeler or some other type of trailer. The power unit/pickup truck cannot be permanently affixed to the real estate and was not in this case. That power unit/pickup truck can be used for other transportation, in addition to its use as a tow vehicle for the fifth-wheeler. Considering the Nebraska statutory exemption for a homestead and the type of units claimed in this case as eligible for the homestead exemption, I decline to stretch the statutory definition to fit the facts of this case.”

Case #4: Bernhardt: A Temporary Home

In 2008 the court issued an opinion in the matter of Bernhardt regarding whether a debtor could claim a homestead exemption when they rented a motor home as a temporary residence on his farmland while repairs to his permanent home were being made. The debtor owned two traditional homes on his 160 acre farm but could not live in either since there were in a state of disrepair. In Bernhardt the issue was not whether the motor home was exempt since it was not owned by the debtor but merely leased.  Rather, the issue was whether the requirement that a debtor “reside” on the property was satisfied.

The Nebraska homestead law says the following: “A homestead not exceeding sixty thousand dollars in value shall consist of the dwelling house in which the claimant resides, its appurtenances, and the land on which the same is situated, not exceeding one hundred and sixty acres of land . . . .”

The bankruptcy trustee objected to the homestead exemption because the motor home was a “recreational vehicle” and the debtor was only temporarily residing in the motor home.

The court disagreed with the trustee and pointed to the fact that the motor home was connected to electrical and water systems and further stated that “given the homestead statute’s liberal construction, I find that Debtors’ actual occupancy on the Farm property in which they own an undivided one-fourth interest, coupled with their intent to occupy the dwelling house upon its repair, is sufficient to support their claim of a homestead exemption.”


The case law makes it very clear that trailer homes, pull-behind campers and recreational vehicles may be protected under the Nebraska homestead law, but important questions need to be asked.

  • Is the mobile home your primary residence?  If you live in a trailer home and pay lot rent or own the land it sits on, there is a good chance the home is protected by Nebraska’s homestead exemption, but you must live in the home full time and this cannot be a trailer used for a few months each year. This must be your full-time home on the day the bankruptcy is filed.
  • Is the trailer home connected to real estate?  A portable home that is pulled by a truck and is not connected to the ground will not be considered a homestead under Nebraska law.  The home must be connected to the ground and be somewhat immovable because of those connections.  The home should be  connected to utility services for electricity, water and sewers.  The presence of braces connecting the home to the ground is a strong indicator that the home is sufficiently affixed to the ground to qualify for the homestead exemption.
  • Does the home sit on land you rent or own?  To qualify for Nebraska’s homestead exemption, the debtor must have some legal interest in the land the home sits upon.  A month-to-month written lease agreement is sufficient to claim an “interest” in the real estate and outright ownership of the land is not required, but a Tenancy at Will is not sufficient.
  • Vehicles pulling a camper are not protected by the homestead exemption.  Although a pull behind camper may be protected by the homestead exemption, the truck pulling it is not.
  • RVs have questionable protection.  It is likely that a trustee will question whether a RV qualifies for the homestead exemption unless you reside in the RV full time and the RV must be connected to utility services and perhaps braces should be present. If a RV is unhooked from utility services frequently and is driven on a routine basis, it starts to resemble a vehicle more and a homestead less.


Image courtesy of Flickr and Albuquerque Film Office.


Saundra Latham writes a good review of the best credit counseling agencies of 2018 in The SimpleDollar website.  She correctly points out that the best credit counseling firms to handle a Debt Management Plan are:

Generally speaking, if you are signing up for a Debt Management Plan to consolidate your debts into a payment plan managed by a certified credit counselor that provides lower interest rates and financial counseling, you want to go with an agency certified by the National Foundation for Credit Counseling (NFCC).  The NFCC has the toughest certification standards in the credit counseling industry and it is simply unwise to go with an agency not certified by them. Continue Reading Best Debt Management Companies 2018 Reviewed

I continued to be amazed at the inability of banks to produce a copy of the actual credit card agreement signed by their customers when suing on a defaulted account.  The inability or unwillingness to produce a signed agreement is truly astounding. How can a bank obtain a judgment for a debt on a written contract without production of the contract itself?

The answer to that question is that banks are allowed to rely on the monthly billing statements they send their customers as proof of the debt without having to produce a signed copy of the written agreement. This action is called an Account Stated lawsuit, and for the first time the Nebraska court system has issued a ruling specifically allowing these lawsuits to proceed in the case of American Express Centurian Bank v. Scheer, 25 Neb. App.784 (2018). Continue Reading American Express v Scheer: Account Stated Nightmare Comes to Nebraska

The 8th Circuit Bankruptcy Appellate Panel has issued a new opinion that is really causing a lot of anxiety and uncertainty about the exemption status in bankruptcy cases of retirement accounts awarded to debtors during a divorce case.

If a debtor is awarded a portion of their ex-spouse’s retirement account in a divorce proceeding, is that account protected in bankruptcy? Until a few months ago the majority opinion was yes, but that is all changed since the BAP issued the Lerbakken opinion.

In Lerbakken, the debtor was awarded one-half of his wife’s 401(k) retirement account in a divorce proceeding. He subsequently filed Chapter 7 and the bankruptcy trustee claimed his interest in the retirement.  The bankruptcy judge ruled in favor of the trustee citing the United States Supreme Court’s opinion of Clark v Rameker, a case involving inherited IRA accounts.

Continue Reading Retirement Accounts & Divorce: Lerbakken Opinion Puts Accounts at Risk

A “Suggestion of Bankruptcy” is a document filed in a lawsuit to notify the court that the defendant has filed bankruptcy. Filing such notices with the court is very helpful to the court and to opposing parties so they may cancel upcoming court hearings or pending garnishment orders. Many courts automatically place a pending lawsuit on hold until further order of the bankruptcy court and take affirmative steps to release garnished funds.

Our office files bankruptcy cases electronically and in the next moment we electronically file Suggestions of Bankruptcy with the Nebraska court system. The system is efficient and quick. The goal is to “put out the fire” of collection activity as quickly as possible, and filing Suggestions of Bankruptcy greatly facilitate that goal.

In most cases the bankruptcy results in a discharge of debts, but what happens if the bankruptcy case is dismissed without a discharge? Does the filing of a Suggestion of Bankruptcy mean that the debtor’s bankruptcy attorney has entered a general appearance on behalf of the debtor-defendant? Is the debtor’s attorney in a dismissed bankruptcy case now obligated to defend the debtor in the state court action?

Continue Reading Do Suggestions of Bankruptcy Constitute an Appearance of Counsel?

The basic concept of the Life Sucks Budget is that for many of us there is just not enough money to pay the claims of bill collectors AND to pay the really important things of life, like retirement savings, emergency cash accounts, mortgage payments and modest family vacations. Something has to give, and too many of us put ourselves last and pay nothing towards our future needs and dreams so that we can just get by another month without receiving embarrassing phone calls or letters. The Life Sucks Budget is a call to rebalance this relationship and to put our legitimate financial and family needs first.

The fact is, many of you are already on the Life Sucks Budget but you don’t realize it or perhaps you are reluctant to confess that is what you are doing.

Spending 25 years interviewing clients about their financial habits reveals that at least half of the people I meet have no hope of being financially successful. They just want to get through the week and find a little peace in their day. They do not believe that they can win financially, and that mindset has a radical affect on their behavior.

Continue Reading Life Sucks Budget: Part II

Rule #1 of credit counseling is when you are trying to get out of debt you must forgo some expenses while paying off debt. The advice is universal. Decrease expenses. Increase income with a part-time job. Sell some stuff to raise cash. Get the debt snowball rolling. Suck it up and double down on the smallest debt and then the next smallest until all the debt is gone. Live like a crazy person until you can scream out loud I’M DEBT FREE!

And if your debt problem is that you spend money like a moron and you just need to grow up and cut expenses and work a pizza delivery job at night until you pay off the debt, that may be good advice. Dave Ramsey has built a 55 million dollar financial empire by giving out such advice.

Continue Reading Life Sucks Budget

In performing financial autopsies for my bankruptcy clients over the past 25 years I have noticed one common mistake people make. They fail to prioritize their money.

Priorities matter. Successful people have a common trait–they prioritize their day and do he most important tasks first. They write lists. They have WRITTEN goals for their day. They plan their day in advance, and then they go out an kick butt.

But when it comes to money, especially money in marriage, even organized people get messed up about how to set priorities with their money. Why is that?

I think part of the answer lies in those sappy marriage courses we take before our weddings.  You know, the ones that say how a man and women become one and cease to have separate identities. No secrets in marriage. Everything is shared. Mutual submission. Love is generous and we support one another give all that we have to each other. Sound familiar? And somehow out of this marriage class people conclude that in marriage you should have a single joint bank account that is shared and all money earned goes into it and all expenses are paid out of it. No secrets. Complete transparency. Mutual submission. Yeah, what could go wrong with this plan?

When all of your money sits in a single bank account you effectively have no money priorities.

It is moronic for a married couple to handle all of their finances out of a single bank account. This is pretend land. It’s crazytown. When all of your money sits in a single bank account you effectively have no money priorities. Buying pizza has the same priority as paying the mortgage or insurance or saving for emergencies because when money is not divided into separate accounts there is no priority to the spending, and that is just not true.

Some expenses are more important than others.  We all know that. Paying the mortgage or the insurance premium or saving for emergencies is vastly more important than paying for temporary needs, like a slice of pizza. And even if we verbally agree with this statement, if we just nod our head and do nothing more, then nothing has changed. Establishing priorities means taking action. It means dividing money into separate accounts based on their priority level.

Continue Reading Pay Yourself First Part II: How to implement it.

There is one simple habit that all financially successful people do–they pay themselves first.

That phrase has always annoyed me.  Pay myself first?  What exactly does that mean? I heard financial gurus say that phrase over and over, and it just came off as cocky and glib.

“Want to become rich boy?  Well, it’s simple. Just pay yourself first!”  What?  You can’t just pay yourself into wealth. You have to create the wealth.  Build the business. Land the great job. Earn the money, and THEN you save money and become rich.  Right?

Wrong. Want to get rich? Pay yourself first. Want to pay off the mortgage in retire with money in the bank? Then pay yourself first. Have financial problems? Pay yourself first.

In fact, the less money you earn the more important it is to pay yourself first.

Continue Reading Pay Yourself First