Consumer Bankruptcy

By: Jenny J. Huang

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

 

In bankruptcy, “one of the most controversial and frequently litigated of the avoidance powers” is the debtor or trustee’s ability to recover preferential transfers under 11 U.S.C. § 547(b).[1] The twin purposes of section 547(b) are to “prevent[] individual creditors from dismembering the assets of the debtor in a manner that negatively impacts other creditors, and [to allow] all creditors to obtain a more equitable distribution of the assets of the debtor.”[2] Recently, in Parks v. FIA Card Services (In re Marshall), the Tenth Circuit addressed how courts should adhere to these twin purposes in a landscape where nearly instantaneous electronic transfers pose a new problem for the court’s analysis.[3] 

 

By: Jacklyn A. Serpico

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

 

Federal law continues to have a disparate impact on same-sex couples filing bankruptcy petitions. In In re Roll,[1] the debtors, Roll and Currie, were a same-sex couple that filed separate bankruptcy petitions under chapter 7. They were residing together in the same household, along with Roll’s adult niece. The United States Trustee moved to dismiss the debtors’ separate petitions pursuant to section 707(b)(1) of the Bankruptcy Code based on the presumption of abuse of chapter 7.[2] The United States Trustee argued that, despite filing separate petitions noting their own individual finances, the couple’s finances were in fact shared, and thus, the debtors “should be treated as a single economic unit.”[3] The United States Trustee argued that the debtors’ combined income was sufficient to pay off their debts, and as such, their individual petitions listing insufficient separate finances constituted an abuse of chapter 7.[4] Yet, the Bankruptcy Court for the Western District of Wisconsin denied the motion to dismiss because the United States Trustee failed to meet the evidentiary burden demonstrating the debtors’ income and expenses to support a finding of abuse.[5] The court further discussed that the totality of the circumstances did not support a finding of abuse merely because the couple lived together, shared certain resources, and together had the potential ability to pay creditors.[6] More importantly, in emphasizing that only married persons may file joint petitions,[7] the court noted that same-sex marriages are prohibited under the Wisconsin Constitution and that federal law prohibits a federal court from recognizing any such marriage.[8] Consequently, the court reasoned that Roll and Currie had no choice but to file separately, and thus, have their income assessed independently of one another for purposes of determining abuse under chapter 7.