Saturday, December 1, 2012

In re Palidora case brief

 In re Palidora (Bankr. D. Ariz. 2004)
Facts: Debtors filed for Chapter 7 and had $2,194 in their bank accounts. Trustee moved for turnover less the $300 exemption by Ariz law for fund in a joint debtors’ bank account. The debtor’s objected on the grounds that all the monies came from either husband’s wages or from a $1,000 check for child support paid to the wife and deposited in her account.

Issue: Are these funds exempt?

Holding: Arizona wage exemption ceases to apply upon the debtor’s receipt of those wages. However, under §541, child support payments are held in trust and are not property of the estate. Also, under Arizona law payments for child support extend to the deposit so long as they are traceable to the exempt source.

Analysis: Arizona law exempts 75% of a debtor’s disposable earnings. They are defined as compensation for his personal services. Includes only what is payable or what has been paid or deposited into a debtor’s account. State law determines the exemption. Arizona law does not extend to monies disbursed to the debtor’s bank account. Arizona law was modeled after the FCCPA and the garnishment exemptions under that law do not extend to earnings disbursed to a debtor’s bank account.
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