Academic journal article Missouri Law Review

The Eighth Circuit Allows a Child Tax Credit Exemption in Bankruptcy Proceedings: A Minty Fresh Start or Abuse of the System?

Academic journal article Missouri Law Review

The Eighth Circuit Allows a Child Tax Credit Exemption in Bankruptcy Proceedings: A Minty Fresh Start or Abuse of the System?

Article excerpt

Hardy v. Fink (In re Hardy), 787 F.3d 1189 (8th Cir. 2015).


Between 2014 and 2015, bankruptcy filings across the country decreased over ten percent. (1) In the Eighth Circuit, bankruptcy filing rates have dropped from 57,746 in 2014 to 51,301 in 2015. (2) The decrease in filings in the Eighth Circuit is telling when compared to the filing statistics from 2008 and 2009 in the same circuit: in 2008, bankruptcy filings in the Eighth Circuit reached 73,677, and in 2009, filings reached 90,539. (3) During the height of the economic downturn in the United States, bankruptcy filings nationwide increased almost thirty-two percent from 2008 to 2009. (4) Even though filings rates are slowly decreasing across the nation, American citizens are still feeling the effects of the economic crisis that occurred between 2007 and 2009. While there are numerous reasons debtors file for bankruptcy, the market crash in 2008 and the subsequent economic downturn can be attributed to many individuals' financial problems.

With money problems still pervasive in American society, and bankruptcy filing rates still so high, there are few ways in which debtors can recover from such drastic economic situations. Bankruptcy protection is one of the most common ways debtors facing insurmountable economic difficulties can pull themselves out of debt. The bankruptcy code is designed to give a fresh start to those in near financial ruin by ensuring they are unencumbered by past debt. One way to accomplish this fresh start is by a discharge of debts that are not paid in bankruptcy proceedings. (5) Another way to achieve this fresh start is through the exemption scheme.

Exemption schemes vary from state to state, but they generally allow debtors to keep their assets to continue a socially acceptable standard of living. (6) This Note addresses a common source of relief that most debtors take advantage of when filing for bankruptcy: exemption statutes and its applicability to low-income debtors who qualify for "public assistance benefits" and income-based tax credits. One exemption that commonly appears in federal and state exemption schemes is the public assistance benefit. (7) While commonly included in exemption statutes, public assistance benefits are not often defined within these statutes; however, the most basic definition of a public assistance benefit is a form of financial aid for the "needy." (8) The scope of public assistance benefits has been a subject of scrutiny for years. (9) Currently, there is a hopeless split among bankruptcy courts across the country in determining whether the Child Tax Credit constitutes a public assistance benefit or not. The Eighth Circuit is the first appellate court to take up this issue.

Part II of this Note examines the issues presented in the instant case, Hardy v. Fink, in which the Eighth Circuit became the first circuit court to include the Child Tax Credit as a "public assistance benefit" under the Missouri exemption statute in a bankruptcy proceeding. Part III explores the applicable laws, legislative history, and recent case law that addressed these issues. Part IV explores the Hardy decision's in-depth examination of the legislative history surrounding the Child Tax Credit and the underlying purpose behind including public assistance benefits in both state and federal exemption schemes. Part V offers a framework for analyzing exemption schemes across the country by examining the Missouri exemption scheme and attempting to provide clarity in the current statute for debtors and courts in the future.


Pepper Minthia Hardy, sole provider for a family of four, (10) filed for Chapter 13 bankruptcy in October 2012. (11) As part of her filing, she was required to complete an array of forms, each setting out her assets, debts, and income. (12) On her Schedule B, (13) she indicated that she was expecting an income tax refund, part of which was to be from a Child Tax Credit ("CTC"). …

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