Debtors Win EITC Appeal

207209564_86a48153bd_zThe new Kansas exemption law allowing a person to keep one year of earned income tax credit in bankruptcy is constitutional, a third court has ruled. This is good news for lower income working families with children who received EITC and who are struggling to make ends meet.

The Bankruptcy Appellate Panel for the Tenth Circuit affirmed the opinion of Judge Janice Miller Karlin of the Topeka Bankruptcy Court in Williamson v. Westby (In re Westby), BAP No. KS 12-027 (10th Cir. BAP, Feb. 4, 2013).

Judge Robert E. Nugent also has found the Kansas statute to be constitutional.  His decision in the Wichita Bankruptcy Court has been appealed to the Kansas District Court. Those appeals are pending.

“The issue presented on appeal is whether a recently enacted Kansas statute exempting tax refunds attributable to the earned income credit for bankruptcy debtors is constitutional. The Chapter 7 trustee objected to the debtors’ claimed exemption, arguing the Kansas bankruptcy-only exemption statute violates the Uniformity and Supremacy Clauses of the United States Constitution. The bankruptcy court concluded the exemption statute did not violate these constitutional provisions and overruled the Trustee’s objection. Having reviewed the record and the applicable law, we agree that the Kansas bankruptcy-only exemption statute passes constitutional muster, and therefore AFFIRM the bankruptcy court’s order.”

Judge Terry Michael of Tulsa, writing for the three judge appellate panel, praised the bankruptcy court’s “detailed analysis and reasoning” and incorporated by “reference the legal reasoning and conclusions set forth in the bankruptcy court’s [51 page] memorandum opinion.”

The trustee has publicly announced she will be taking the case to the U.S. Court of Appeals for the Tenth Circuit. She has 30 days from February 4, 2013, to file her appeal notice.
Photo: Attribution Some rights reserved by Two Roses

About Jill Michaux

Jill Michaux is a Kansas bankruptcy attorney. She can be found on Google+ and Bankruptcy Law Network where she shares information about consumer bankruptcy law issues.