« Law - Read this for chuckles | Main | Ind. Decisions - Court of Appeals issues 0 today (and 2 NFP) »

Monday, August 02, 2010

Ind. Decisions - No Indiana cases from 7th Circuit, but a bankruptcy ruling

In In re Meyers, a 13-page opinion, Judge Wood writes:

This case involves a recurring question under the bankruptcy laws: what belongs in the bankruptcy estate? In general, assets that were acquired before the time when the bankruptcy petition is filed—so-called pre-petition assets—are available to satisfy pre-petition debts. Overgeneralizing, one can say that post-petition assets belong to the debtor and are not encumbered by any liabilities that were discharged in bankruptcy. By the same token, any liabilities incurred by the debtor post-petition may not be discharged in the bankruptcy proceeding, nor should the bankruptcy process compel the pre-petition creditors to bear any burden as a result of these post-petition obligations.

Allocating assets and liabilities to the correct side of the pre- and post-petition line is usually a straightforward task, but occasionally the job becomes challenging. Debtor Andrea Meyers’s case falls in the latter category. The question we must resolve in her appeal is how best to allocate post-petition tax refunds when the debtor filed her bankruptcy petition in the middle of the tax year. The bankruptcy court used a mechanical system known as the “pro rata by days” method to calculate the proportion of the refunds that belonged to the prepetition asset pool. Meyers filed her petition approximately 73% of the way through the tax year, and accordingly, using that method, 73% of her tax refund qualified as a pre-petition asset. In taking that approach, the bankruptcy court followed a well-trodden path. Meyers, however, thought that it was the wrong path and took an appeal to the district court. That court affirmed the bankruptcy court, and now Meyers is before this court seeking to persuade us that the estate received too much. While we recognize that the pro rata method may not be appropriate for all cases, we find that the bankruptcy court properly applied it here, and so we affirm.

Posted by Marcia Oddi on August 2, 2010 12:59 PM
Posted to Ind. (7th Cir.) Decisions