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Fritz
Fritz, Attorney
Category: Bankruptcy Law
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Experience:  Florida attorney with extensive experience in Chapter 7 and Chapter 13 consumer bankruptcy cases
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In Pennsylvania, It s my understanding anything bought during

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In Pennsylvania, It' s my understanding anything bought during a marriage between husband and wife is automatically TBE property. So below is my question(s), with the understanding that only one spouse (wife) will be likely be filing bankruptcy (chapter7) and there are no joint debts other than the home and vehicles, which will remain current and in good standing.
The debts of the spouse(wife) likely filing chapter 7,are all debts in that are in the wifes name only.

1. Can the husband and wife buy business property* jointly under TBE protection, of the wifes failing Incorporated business with money they received from their joint tax return refund?
The tax return refund/overpayment money was deposited in the joint account of the husband and wife, and remains there to this very day. Also, is it safest to keep the joint tax refund/overpayment in the marital joint account of the husband and wife, or should it be moved into the husband's name only? There is a good chance somebody may confess judgement on the wife individually before she files chapter 7 in PA. Wife will be filing using the state exemptions to get the benefit of TBE law in PA


*Note: equipment will be purchased at fair market value, appraised by an auctioneer licensed in PA., and also with Ebay sold item pricing as a comparison)

*Note: all funds from husband and wife to purchase the equipment will be given directly to the bankthat has the UCC's on the equipment starting with the bank in first place, on all business assets

*Note: joint tax refund is more than $20K

Just trying to understand if husband and wife can buy business equipment under TBE law and keep it protected. Again, the wife will be filing chapter 7 with PA state Exemptions at some point, but may let confession of judgenment happen before filing.

If you can't answer with certainty please do not answer. Please understand PA TBE law(s)
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  Fritz replied 1 year ago.

Fritz :

1. Can the husband and wife buy business property* jointly under TBE protection, of the wifes failing Incorporated business with money they received from their joint tax return refund?

Fritz :

A: Yes, however, if this is being done pre-petition, the Bankruptcy Trustee may seek to avoid the transfer as a preferential transfer if this is done within one year of the bankruptcy filing (Sec. 547) or as a fraudulent transfer if this is done within two years of the bankruptcy filing.

Fritz :

Fraudulent transfer is Sec. 548

Fritz :

Such a transaction would be heavily scrutinized by the Bankruptcy Trustee (which doesn't mean you can't necessarily do it), but it must be done correctly so it cannot be avoided after your wife files for bankruptcy.

Fritz :

Also, is it safest to keep the joint tax refund/overpayment in the marital joint account of the husband and wife, or should it be moved into the husband's name only?

Fritz :

A: Joint account

Customer:

Fritz,hat's the difference

Customer:

Fritz,

Fritz :

So the bank with the UCC's on all of the equipment will be paid off in full?

Customer:

Fritz, Your allowed to turn non-exempt property into exempt property correct? As long as it's purchased at fair market value and the money goes to pay off the secured lender of the purchased property correct? We plan to use Ebay (sold completed sale values) and a licensed appraiser in the state of PA for fair market value. Is there some law as to how we can spend the money in the joint account? Thanks!

Fritz :

Possibly, if it's done correctly and with enough lead time prior to filing the bankruptcy.

Fritz :

To be safe, you should do what you're contemplating (i.e. purchase business property with joint funds) at least two years and one day before the wife files for bankruptcy.

Fritz :

Make sure you didn't co-sign or execute any personal guarantees as to your wife's individual debts.

Fritz :

Also, keep in mind that creditors could still attach judgment liens to TBE property. Post-bankruptcy, these creditors would not be able to foreclose or replevy the property, but they would be the first in line to be paid should the property ever be sold.

Customer:

What if property is sold and the money stays in the possession of theTBE? Can a lien be placed on our home or vehicles titled in TBE

Fritz :

The proceeds of the sale would go to satisfy whatever joint creditors held the judgment lien before any money would come back to you.

Fritz :

Here's a quick blog link from "QC Attorney" that explains this succinctly: http://qcattorney.blogspot.com/2011/11/tenancy-by-entirety.html

Fritz :

Please let me know if you have any other questions. Thank you.

Expert:  Fritz replied 1 year ago.
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Customer: replied 1 year ago.

I'm a bit unsure of your last post, not saying it is incorrect, just unsure after reading another law site here in PA. "Fritz : The proceeds of the sale would go to satisfy whatever joint creditors held the judgment lien before any money would come back to you "


 


I was under the impression property of the TBE in PA can't be encumbered and money can't be taken from the sale of a home when only one person has debt. I was reading this (link below) after I read your link. Still confused, honestly sill unsure about the TBE being encumbered or lien added for the debts of only one person. Would like a follow up. Gladly pay though.


 


http://palawblog.stark-stark.com/2011/03/articles/business-corporate/pennsylvania-a-debtors-paradise-for-the-married/

Expert:  Fritz replied 1 year ago.

After reviewing caselaw on the issue, I believe you are correct in that "property of the TBE in PA can't be encumbered and money can't be taken from the sale of a home when only one person has debt," although there are some limits to the protection provided by TBE. TBE will not provide protection if the bankruptcy filer has tax debts, or if both spouses are liable for a debt (i.e. a joint credit card or joint business debt).

 

 

See, e.g. State Farm Mut. Automobile Ins. Co. v. LINCOW, Dist. Court, ED Pennsylvania 2009 (finding Eagles Season Tickets exempt from execution as entireties property), here: http://scholar.google.com/scholar_case?case=2732141048868111193&q=2007+Pa.+Super+348+&hl=en&as_sdt=2,10

 

 

 

See also Plastipak Packaging, Inc. v. DePasquale, 2007 PA Super 348 - Pa: Superior Court 2007 (the case holding that "Courts in Pennsylvania view the proceeds of sale of property held as a tenancy by the entireties to be exempt from execution, even after deposited into the bank account titled only in the name of the debtor spouse," which the article you found above surprisingly failed to cite), here: http://scholar.google.com/scholar_case?case=16420633875323172845&hl=en&as_sdt=2,10

Fritz, Attorney
Category: Bankruptcy Law
Satisfied Customers: 302
Experience: Florida attorney with extensive experience in Chapter 7 and Chapter 13 consumer bankruptcy cases
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