Estimated read time: Less than a minute
This archived news story is available only for your personal, non-commercial use. Information in the story may be outdated or superseded by additional information. Reading or replaying the story in its archived form does not constitute a republication of the story.
WASHINGTON (AP) — The Supreme Court says a bankruptcy court may not go after property or funds that are legally exempt from creditors.
The justices in a unanimous opinion ruled Tuesday in favor of a California man who declared Chapter 7 bankruptcy. The man claimed $75,000 of the value of his home was covered by California's homestead exemption and was therefore exempt from the bankruptcy estate.
The man was later found to have fraudulently shielded some of his assets from creditors. A federal bankruptcy court said the exempt funds could be used to defray the attorney fees associated with uncovering the fraud, and a federal appeals court agreed.
But the Supreme Court reversed. It ruled that a bankruptcy court may not tap into exempt money to punish debtor misconduct.
Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
