Assets and Exemptions

Tutorial on entering asset and exemption information in BkAssist®

Scope of Tutorial

• This tutorial covers how you enter asset and exemption information in a consumer case

• Prerequisites: You should already have viewed these tutorials:– How to Use BkAssist– Setting Up a New Case

• Who should view this tutorial: anyone who will prepare a bankruptcy case using BkAssist

• In this tutorial, we’ll continue preparing the case of Sarah & Sammy Sample that we first created in the Setting Up a New Case tutorial.

– If you want to follow along, download the file Sample_Sarah_Sammy_Basic.bkv to the BkAssist home directory and use the File/Receive menu command to load it into BkAssist (the Receive password is BkAssist). Then perform each of the steps illustrated during the tutorial.

– If you instead want to see the end result from following these steps, download and receive Sample_Sarah_Sammy_Complete.bkv instead.

The Assets Screen

• This is the assets screen as we left it after providing the basic level of detail in the Setting Up a New Case tutorial.

• We’ve adjusted the window size and width of the data columns to suit our fancy. BkAssist will remember these settings the next time we open this screen.

• The caret in the Category column label shows that the display has been sorted in ascending order by category. Schedule A assets (real property) are first, followed by Schedule B assets (personal property) in the same order as the schedule.

• We can reverse the order of the sort by clicking on the header that has the caret.

• We can sort on a different column by clicking on the column header.

• We’ll discuss some other basic things in the next few slides.

Multiple Screens

• You can have as many of the Schedules and Forms information screens open at once as you wish. With multiple high-resolution monitors you can really spread out.

• Changes to one screen are immediately reflected in the other visible screens.

Multiple Assets

• You can also have as many of the Asset dialogs open at once as you wish.• Here, we’re looking at an asset screen for the debtors’ 2012 Trabant Sports Couple (a

mythical beast) and for a new asset that we created by clicking on the Insert button on the Assets screen.

Asset Category• Select an asset category from the drop-down list.• The personal property categories (1-35)

correspond to the lines on Schedule B.• The “primary residence” category is for the

debtor’s primary residence (duh!).– When joint debtors are separated, use the check

boxes on the asset dialog to tell BkAssist which “primary residence” asset is for the debtor and which is for the spouse. Otherwise, BkAssist can’t properly allocate the mortgage payments on Schedule J or the means test.

• The “real property” category is for real estate that is not the primary residence for one of the debtors.

– When you import a case from another software product, you will need to change the category of the debtors’ home from “real property” to “primary residence” because other software products don’t differentiate between these two kinds of real property assets.

New Assets

• Clicking on Insert creates a new asset whose description is incomplete.

• If you decide you made a mistake by creating the asset, use the Delete button to delete it. Otherwise, a later “check” (Check button on the Schedules & Forms Page) will complain about it.

Asset Description• Describe the asset in some meaningful way.• “Plus-size” the description (if you want) by

clicking on the “+” button (or by typing Alt + “+”).

– In this example, we’ve added some descriptive text. [Note that a real Trabant would have been in poor condition relative to any other European car even when brand new.*]

– All lines of the description appear on Schedule B. Only the first line appears in other places, such as Schedule C, the liquidation analysis for a Chapter 13 plan, etc.

* I often tell my clients that I missed my law school course on “Suppressing Your Sense of Humor”.

Nature of Interest

• For any kind of real-estate asset, Schedule A requires disclosure of the debtor’s interest in the property.

• In this example, Sarah & Sammy are tenants in common with Susie Single, Sarah’s sister.

Location of Asset

• You can supply a location for any asset, which is especially useful for real-property assets.

• In this example, BkAssist will append the words “[at 79 Wistful Vista, Boston]” to the schedule description of this asset.

Value and Ownership• “Value” is the value of the interest held by the people

filing this bankruptcy case.• “Who owns” pertains to the people filing this

bankruptcy case.• When a non-filer has an interest, compute the value so

as to share the equity after deducting encumbrances.• Examples:

– Property worth $100,000 owned 50-50 by debtor and spouse, encumbered by $200,000 mortgage: list the value as $100,000, select Joint from the Who-owns list, leave debtor % at 50.

– Property worth $100,000 owned by spouse only, encumbered by $200,000 mortgage: list the value as $100,000, select Spouse from the Who-owns list, leave debtor % at 0.

– Property worth $100,000 owned 50-50 by debtor and non-filing spouse, encumbered by $50,000 mortgage: list the value as $75,000 to reflect 50-50 division of equity and fact (if it is a fact) that both signed the mortgage (even if both aren’t liable on the note), select Debtor from the Who-owns list, leave debtor % at 100.

– Property worth $300,000 owned equally by debtor, spouse, and someone else, encumbered by $150,000 mortgage [this example]: debtor and spouse each have $50,000 equity, so value of their interest is $250,000, and debtor and spouse each own 50% of that.

Real Estate Income & Expenses• For a real-property asset (primary residence or not), click on

the Income & Expense button to specify income and operating expenses.

• Do not use the “other” blank for utility expenses incurred by the debtor: this dialog is for non-mortgage expenses related to ownership of the property.

– You’ll specify mortgage payments on the liability dialogs.

– You’ll specify utility expenses on the Monthly Expenses Screen.

– An example of an “other” expense would be the tenant’s portion of a utility bill the debtor pays.

Leases and Trusts• When the debtor has bare legal title or a mere

possessory interest under a lease, select “Another” from the Who-owns list.

• Supply the name and address of the true owner in the same way you supply creditor addresses. Refer to the tutorial on Creditor Names for the mechanics of specifying an owner.

• BkAssist will report this asset in the answer to Question 14 on the Statement of Financial Affairs.

• In this example, Sammy is driving a leased Corvette.

Liens• The Liens section of the asset dialog list liens

against the debtors’ interest, in priority order.

• Use the More Senior and More Junior buttons to reorder the priority of liens.

– You won’t have to do this if you enter liens in priority order on the Liabilities Screen.

• Double click on a lien (or click on the Edit button, or type Alt + E) to edit the liability information about the lien itself.

• Click on the Delete button to delete the currently selected lien from the list. The corresponding liability becomes unsecured.

Adding a Lien• Sometimes you will want to create the secured

liability while you’re entering information about the collateral asset.

• Click on the Add button next to the list of Liens to pop up an Add a Lien dialog.

– If the lien already exists as a liability, select the lienholder from the drop-down list.

– Otherwise, click on the New button. At that point, you’ll be back to the asset screen, where you should double-click on the lien item (or use the Edit button) to provide a description of the liability.

• If you ever see a debt for “New secured claim”, that’s a signal that you used the “New” procedure to add a lien but never finished defining the liability.

Post-Petition Assets (c. 13)• Assets acquired during a chapter 13 case become

property of the estate per § 1306(a)(1) but should be excluded from the liquidation analysis when modifying a plan per § 348(f)(1)(A).

• You would nonetheless want to add the asset to the case so you can provide for a § 1305 (post-petition) secured claim.

• Deal with this complication by checking the “exclude from liquidation analysis” box.

Importing a List of Assets (1)• In my own practice, I ask my clients to provide an itemized inventory of household goods. I enter the amounts for low-value (less

than the federal exemption threshold) on a spreadsheet that I import into BkAssist using the process I’m about to describe.

• Copy one of these Excel spreadsheets to your client directory:– http://www.oneylaw.com/bkassist/tutorials/Assets (Joint Petition).xls for a joint petition [ownership initialized to 50-50]– Assets (Sole Petition).xls for a non-joint petition [ownership initialized to 100%]

• Enter values into the columns starting with “F”. I just slavishly copy the values my clients give me into adjacent cells.

• Formulas for Column “C” add up the asset values automatically.

Importing a List of Assets (2)• Click on the Import button on the Assets Screen to launch the file import wizard.

• Select the spreadsheet you just filled out.

• Select the Assets range of cells in the spreadsheet

• Accept the default correspondence of column headings to import field names

• Click on Finish to import the data

Importing a List of Assets (3)• Review the list of imported assets to make any desired corrections.

Importing a List of Assets (4)• Admire the newly

populated list of assets

• Many of the line items in my spreadsheet are tailored for Massachusetts exemptions—Massachusetts debtors can exempt all beds & bedding, all wearing apparel, and one each computer, freezer, heating unit, hot water heater, sewing machine, stove, and television regardless of value.

• You may want to adapt the spreadsheet-import idea to your own practice.

Exempting a Single Asset (1)• Before you learn the shortcuts BkAssist provides for

exempting assets, you should learn how to exempt a single asset by hand.

• Begin by selecting an exemption basis—a statute or section of a statute that exempts an asset.

• Here, we have clicked on the down arrow to show the drop-down list of Massachusetts exemptions. We let the mouse hover over the Furniture choice to show the “tool tip” that pops up to explain the choice.

– The exemption descriptions are direct quotations from the statute.

– By default, BkAssist lists the exemptions this way. See the next slide to learn about another way.

More About Exemption Lists• As we said on the previous slide, the default way of listing exemptions is alphabetically by description.

• You can change to sort by statute instead using this option on the Legal Choices sheet (select Legal Choices from the Settings menu on the main window).

Exempting a Single Asset (2)

• Now you can allocate the available exemption between debtor and spouse.

• When an exemption scheme includes a wildcard, you can also use part of the wildcard exemption as shown here.

• In the example,– The debtor is using $50 of her furniture exemption

and $100 of her wildcard exemption.

– The spouse is using $50 of his furniture exemption and $75 of his wildcard exemption.

Automatically Apportioning an Exemption

• The first shortcut BkAssist provides is to automatically apportion the exemption you have picked based on the ownership percentages of the joint debtors.

• Select an exemption basis as before.

• Instead of picking the exemption amounts, click on the Auto Exempt button.

• In this example, BkAssist has used $137.50 of each debtor’s furniture exemption.

Automatically Selecting an Exemption

• The second shortcut BkAssist provides is to automatically select an exemption basis and then apportion it based on the ownership percentages of the joint debtors.

• Select “not exempt” as the exemption basis. Then click on the Auto Exempt button.

• In this example,– BkAssist selected Mass. Gen. L. c. 235, § 34, First,

the Massachusetts exemption that includes all wearing apparel without regard to value.

– Then BkAssist allocated $175 of each debtor’s exemption to the asset.

Automatically Exempting Everything• The most powerful shortcut is the Auto Exempt All button on the Assets Screen.• BkAssist applies the Auto Exempt method to each asset.• Since many exemptions are limited in amount, BkAssist has to prioritize assets:

– First, the Debtors’ residence (if they’re keeping it)– Second, any other collateral for a secured debt the debtors are keeping, in descending order of equity– Third, all other assets in descending order of value

• You’re not done! You must now examine each individual asset and make sure that the exemption basis chosen by BkAssist was appropriate.

– As one example of many possible examples, BkAssist will have applied the “furniture” exemption to the debtor’s computer because it’s categorized as a household good. This is arguably incorrect, but there is a specific exemption for one computer that should be assigned by hand.

Reviewing Exemptions (1)• Select the Exemption Summary choice from the Schedules & Forms Page to view a summary of the exemptions

that have been chosen.• The left-hand column lists exemption bases and the assets that have been wholly or partially exempted using each

basis.– Hover the mouse over an exemption basis to read an excerpt from the statute.– Double-click on an asset to pop up the asset dialog

• The first column shows:– For each exemption basis (in green) the maximum exemption for each spouse, separated by a slash– For each asset (in black) the equity each spouse has in the asset

• The second column shows:– For each exemption basis (in green) the headroom (unused amount) for each spouse, separated by a slash– For each asset (in black) the amount exempted for each spouse

• You’ll want to press the Report button…

Reviewing Exemptions (2)

• The Report button on the Exemptions Summary Screen generates a PDF report about exemptions.This will be a useful document to take to the 341 meeting.

• This slide shows an excerpt. The complete report for Sarah & Sammy is available by clicking on this link.

Custom Exemptions (Advanced)

• The Custom Exemptions tab on the Legal Choices sheet (select Legal Choices from the Settings menu on the main window) allows you to define your own exemptions.

• Use the Add, Edit, and Delete buttons to manage the list.

• Use the Import button to import custom exemptions another BkAssist user has given you. Use the Export button to send your custom exemptions to someone else.

Defining a Custom Exemption• This is an example of a custom exemption

definition.

• The check boxes control how BkAssist automatically apportions this exemption:

– One exemption per family means that the exemption can be claimed only once in a joint case.

– “Just once” means that the exemption can be used for just one asset. Unless the “family” box is checked, each spouse is entitled to this exemption.

– “Wildcard” means that the exemption should be used when other exemptions have been exhausted.

– “Homestead” means that the exemption applies to the debtor’s principal residence.

• In this example, we have invented a non-existent subsection of the Alaska Permanent Fund statute. You might define a custom exemption like this when you have to file a case after the legislature enacts an exemption statute but before we’re able to update BkAssist to include the exemption.

• BkAssist will include this exemption choice when the applicable state is Alaska. You can select any or all states from the list if you wish (which would be inappropriate in this example, which is obviously specific to Alaska).