Back when Congress was about to pass the “Cares Act” — the response to the Covid 19 pandemic — I emailed a couple of US senators asking them to exclude the proposed $1200 per person payments from being swept up in bankruptcy cases.
Unfortunately, the Congress seems to have ignored my suggestion. Humpph.
Fortunately, however, the United State Trustee (which is an agency within the Department of Justice that oversees bankruptcy) has in effect told bankruptcy trustees: “Hands Off” by issuing the following notice:
Regardless of whether the rebate is property of the estate, the United States Trustee expects that it is highly unlikely that the trustee would administer the payment after consideration of all relevant circumstances, including: the modest amount of the recovery rebate; the applicability of state and federal exemptions; any interest of a non-debtor spouse in the recovery rebate; the cost to the estate of recovering and administering the recovery rebate, including litigation with debtors who may seek a judicial determination; and the extent to which recovering the recovery rebate will enable creditors to receive a meaningful distribution. In rare chapter 13 cases filed on or after March 27, 2020, the recovery rebate may be relevant to the confirmation standard contained in 11 U.S.C. § 1325(a)(4). For chapter 13 cases filed before March 27, 2020, the recovery rebate is excluded from that analysis because it would not have been available for payment to creditors in a chapter 7 case. Trustees are directed to notify the United States Trustee prior to taking any action to recover recovery rebates or objecting to a chapter 13 plan based on the treatment of recovery rebates.
So this is moderately good news. I don’t know if Congress will give any more stimulus payments later, but if they do I hope that bankruptcy trustees will “ignore” the existing $1200 payments and any future payments. Sam Calvert, St. Cloud MN