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socrateaser
socrateaser, Attorney
Category: Bankruptcy Law
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Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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Potential settlement Bankruptcy v. Family Law My husbands

Resolved Question:

Potential settlement
Bankruptcy v. Family Law

My husband’s ex-wife filed a motion to reopen her Bankruptcy Chapter 7 on Feb 10, 2012
She did a Voluntary Petition Chapter 7 on May 8, 2010
She entered a Final Decree and it was closed on August 10, 2011

She is asked to reopen her Bankruptcy Chapter 7 to include her interest in my husbands Vars plan Value Appreciate Rights Units in his old company that recently vested and she claim is community property. These VARS vested and were terminated and paid out in 2011. She was fully aware of the Vars but is claiming that they were non-disclosed assets in the Material Agreement in 2006.

We are currently also in Family Law courts fighting over her claim to these assets as community property and her claim that they were non-disclosed. It was an uncontested divorce, we settled.

Bankruptcy filed a motion against both my husband and I for all the money he received from the VARS.

No one has taken the time to look at the contracts regarding the VARS plans-Employee Incentive plan, but one contract was made and signed in June of 2006. Date of separation was August of 2005.

We are about to enter into an agreement to purchase the right to my husband’s ex-wife’s bankruptcy the claims. Were thinking it would be about $25,000, but the trustee’s counsel is going to give us a firm number. Were told that this would put an end to all litigation and we would own ex-wife’s right to claim, if any, that exists.
In April 2011 Family Law viewed those VARS as my husband’s gross wages and granted her
a % of VARS which came to $11,973.78 why hasn’t the trustee asked her for that money if that was community property assets and not gross wages and she filed to report the money to the trustee.

My attorney wrote a letter to the U.S. Trustee’s office to inform them of Laura inaccuracies and failure to disclose assets and give them a copy of the cancelled check plus discrepancies between the family law documents and the bankruptcy court documents, plus proof of service of the disclosure of assets at the of the martial settlement agreement. She was aware of the VARS Plan they just were not worth anything at the time of the martial settlement agreement.

My questions is will she be allowed to offer to purchase it as well? And if we settle is the Family Law case and over. Family Law would not move forward with case because they needed a release from stay from the Bankruptcy courts and it does not look like that’s going to happen.

Will it be a done deal or will she be allowed to still fight in Family Law after the settlement in Bankruptcy Court?
Submitted: 2 years ago.
Category: Bankruptcy Law
Expert:  socrateaser replied 2 years ago.
My questions is will she be allowed to offer to purchase it as well?

A: The right to the VARS should have been disclosed during bankruptcy. Ex-spouse has a community interest in that property, which means that the bankruptcy estate has that same interest, and the bankruptcy court is authorized to divide the community property, if it wishes to do so. Because of this, the trustee, who is authorized to liquidate the ex-wife's estate, can decide to sell the ex-wife's interest in the VARS to your husband.

Theoretically, the sale could be made to the ex-wife, as a means of generating a bidding war -- but, the value of the claim would be exactly the same amount as the ex-wife would receive were she to prevail in family court, so there would be little point in making that transaction, since it would result in a net-zero result for the ex-wife.

So, the answer here, is "yes," but almost no probability of it occurring.

And if we settle is the Family Law case and over. Family Law would not move forward with case because they needed a release from stay from the Bankruptcy courts and it does not look like that’s going to happen.

A: The family law case is over, because the bankruptcy court has jurisdiction to distribute the ex-wife's community property, and if it sells it to your husband, then that is the end of the matter, because it will be his separate property -- not community.

Will it be a done deal or will she be allowed to still fight in Family Law after the settlement in Bankruptcy Court?

A: It's a done deal, unless the family court judge doesn't know the law (which, in my experience, is a 50/50 bet). I can promise at least one fairly contentious hearing in family court to dismiss the action as preempted by federal court order, and to try to explain to the court why there is no longer any community property to divide.

Hope this helps.

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socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 33810
Experience: Attorney and Real Estate Broker -- Retired (mostly)
socrateaser and other Bankruptcy Law Specialists are ready to help you
Customer: replied 2 years ago.

I like this answer.... :-0 If the Bankruptcy courts approve the settlement.


What happens if she objects?

Expert:  socrateaser replied 2 years ago.
After thinking about this a bit more, I don't think that the wife can purchase the VARS, because while she has the right to a distribution of an employer's restricted asset, she cannot own it outright, as she is not the employee. This means that the only available buyer is the husband.

It's a difficult issue -- I would have to review the prospectus or employer plan associated with the VARS. Very complicated, and I doubt that anyone, including the bankruptcy judge wants to go down that road.

Hope this helps.

NOTICE: My goal here is to entertain while educating the public about the law. I hope my answer is useful and informative to you. During our conversation, the website may ask you to rate my answer. If you rate my answer lower than the middle rating, then the website retains your entire payment, and I receive nothing. It is entirely your choice as to how you rate my answer. However, because your payment to me is in the nature of a donation/gift, rather than as compensation for any services rendered, you are entitled to know how your rating affects the final distribution of your donation.

If you need to contact me again, please put my user id at the beginning of your question ("To Socrateaser"), and the system will send me an alert. Please Click the following link for IMPORTANT LEGAL INFORMATION. Thanks and best wishes!

socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 33810
Experience: Attorney and Real Estate Broker -- Retired (mostly)
socrateaser and other Bankruptcy Law Specialists are ready to help you
Customer: replied 2 years ago.

If she is allowed to out bid us what does that mean for us?


How does that work, because we were told that we had to have the money right then and there?


 

Expert:  socrateaser replied 2 years ago.
Usually, this sort of sale "outside the course of ordinary business" requires a noticed motion and court approval. So, it could be that the trustee is treating the sale as within the course of ordinary business, in which case he/she is free to do whatever he/she wants.

But, it also means that without a court order, there could be a family court challenge to the disposition of the asset. So, you may want to talk to the trustee about that, because in my opinion, you need a court approval of the sale in order to prevent any collateral attack on the disposition of the VARS.

In my opinion, the trustee's sale is still final, because he/she has authority to sell under the bankruptcy code. However, knowing that family court judges frequently do whatever they want, I can see how a dispute could be resolved in an unfavorable manner to you, and then you would have to continue fighting in the California District Court of Appeals, or the bankruptcy court, in order to try to reverse the family court order making a community property division.

Hope this helps.

NOTICE: My goal here is to entertain while educating the public about the law. I hope my answer is useful and informative to you. During our conversation, the website may ask you to rate my answer. If you rate my answer lower than the middle rating, then the website retains your entire payment, and I receive nothing. It is entirely your choice as to how you rate my answer. However, because your payment to me is in the nature of a donation/gift, rather than as compensation for any services rendered, you are entitled to know how your rating affects the final distribution of your donation.

If you need to contact me again, please put my user id at the beginning of your question ("To Socrateaser"), and the system will send me an alert. Please Click the following link for IMPORTANT LEGAL INFORMATION. Thanks and best wishes!


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