SPOUSAL MAINTENANCE AND BANKRUPTCY IN MINNEAPOLIS

Section 541(a)(1) of the Bankruptcy Code provides that, at the commencement of a case, the bankruptcy estate is comprised of "all legal or equitable interests of the debtor in property." 11 U.S.C. § 541(a)(1). 

The Code allows debtors to exempt certain property from their bankruptcy estates. 11 U.S.C. § 522(b)(1). "'Exempt property is excluded from property of the estate available to satisfy debts.'" Nessan v. Lovald, 2012 WL 6029124, at 2 (8th Cir. Dec. 5, 2012) Exemption statutes are construed liberally in favor of the debtor.  This means that although all property of the debtor at the beginning of the bankruptcy filing becomes property of the estate, the debtor can exclude certain assets from the reach of the creditors. 

The federal exemption under section 522(d)(10)(D)  provides an exemption for "alimony, support, or separate maintenance, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor[.]" The Bankruptcy Code does not define the phrase "reasonably necessary for support." A party in interest may file an objection to the list of property claimed as exempt. Fed. R. Bankr. P. 4003(b)(1).  An objecting party carries the burden of showing by a preponderance of the evidence that an exemption is not properly claimed. Fed. R. Bankr. P. 4003(c).   

The federal exemption § 522(d)(10)(D) is necessary to exempt alimony from the bankruptcy estate. Section 522(d)(10)(D) also demonstrates Congress' ability to differentiate between types of property it wants a debtor to be able to preserve from the bankruptcy process. 

The state of Minnesota allows debtors to choose between federal exemptions and state exemptions. Congress has specifically created an exemption for spousal maintenance in the federal exemptions under § 522(d)(10)(D), but no such exemption exists under the state exemptions. It is generally presumed Congress acts intentionally and purposely. 

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It may seem that spousal maintenance is necessary for the support of the recipient and therefore cannot be part of the bankruptcy estate, however, Congress has made it clear by creating an exemption, that spousal maintenance is not automatically exempted from the bankruptcy estate. Debtors filing using state exemptions should be mindful of how a bankruptcy filing can affect their future spousal maintenance payments. Contact the attorneys at LifeBackLaw and see us at www.LifeBackLaw.com and let us help you get your life back