Unfortunately, bankruptcy and tribal benefits issues sometimes arise together. Tribal benfits can add complication to a normally straight forward bankruptcy. Often, with income and tribal benefits, the bills cannot get paid. Typically tribal benefits come twice a year and your bills are coming every month. Filing chapter 7 bankruptcy or chapter 13 bankruptcy can be the answer to your problems. When you consider bankruptcy and tribal benefits the question arises – Are tribal benefits income or an asset? The benefits are considered assets rather than income for bankruptcy purposes. There are two major cases on point.
In RE Hutchinson – Bankruptcy and Tribal Benefits
In RE Hutchinson 354 B.R. 523 (Bankr. D. Kan. 2006) states the following:
This Court is simultaneously issuing a decision in In re McDonald, Case No. 02-42350-7, which is a Chapter 7 case also dealing with per capita distributions from the Prairie Band Potowatomi Tribe. The Court incorporates by reference the general discussion contained in that opinion concerning the background of per capita distributions that are being derived from gaming revenues arising out of the operation of a casino on Potowatomie tribal land, and other tribal lands, located within Kansas.
The Court must here decide four issues: (1) whether the per capita distributions are property of the estate, (2) if the distributions are property of the estate, whether they are exempt under 11 U.S.C. § 522(d)(10)(A) or 25 U.S.C. § 410, (3) if they are a non-exempt asset of the estate, whether Debtors’ plan meets the “best interest of the creditors” test, and (4) whether the motion for turnover should be granted while this case proceeds in Chapter 13.
A. The per capita distributions are property of the estate.
The first issue the Court must determine is whether the per capita distributions, including the right to receive them in the future, constitute property of the *528 estate. Debtors do not appear to contest this issue, instead focusing on the exemption issues and their right to use the property during the pendency of the Chapter 13. Nonetheless, the Court finds it useful to state, for the record, that it finds that the per capita distributions do constitute property of the estate, as the Court has more fully explained in the opinion issued today in In re McDonald. This issue was thoroughly addressed in In re Kedrowski,[9] albeit concerning distributions from a different tribe, and the Court adopts the holding and reasoning of the Kedrowski opinion as it relates to the issue of whether per capita distributions constitute property of the estate.
B. The per capita distributions are not exempt under 11 U.S.C. § 522(d)(10)(A) or 25 U.S.C. § 410.
Debtors’ second Amended Schedule C claims that the per capita distributions are exempt pursuant to 11 U.S.C. § 522(d)(10)(A) and 25 U.S.C. § 410. Section 522(b) of the Bankruptcy Code[10] specifies that a debtor can take the exemptions enumerated in § 522(d) unless applicable state law specially provides otherwise, in which case debtors are restricted to the exemptions found in state and local law, as well as exemptions found in federal law other than the Bankruptcy Code. Kansas has opted out of the federal exemptions, and has enacted its own set of exemptions.[11]
1. 25 U.S.C. § 410 is inapplicable in case.
Although the parties do not address this issue in their briefs, Debtors’ second Amended Schedule C claims that the per capita distributions are exempt under 25 U.S.C. § 410. That section states that “[n]o money accruing from any lease or sale of lands held in trust by the United States for any Indian shall become liable for the payment of any debt of, or claim against, such Indian contracted or arising during such trust period, or, in the case of a minor, during his minority, except with the approval and consent of the Secretary of the Interior.”
2. The per caper distribution are not exempt under § 522(d)(10)(A).
Although the exemptions found in § 522(d) are generally inapplicable to Kansas debtors pursuant to K.S.A. 80-2312(a), Kansas law contains a specific exception that allows debtors to claim those exemptions found in § 522(d)(10). Subsection 522(d)(10)(A), upon which Debtors rely, provides an exemption for a debtor’s right to receive “a social security benefit, unemployment compensation, or a local public assistance benefit.” Debtors argue that the per capita distributions are exempt pursuant to § 522(d)(10)(A) because they constitute “a local public assistance benefit.”
In RE Johnson 259 B.R. 125 (2000) – Bankruptcy and Tribal Benefits
Johnson’s right to receive the monthly payments from the Tribe was a property right in existence when he filed for bankruptcy. Louisiana law recognizes intangible property, including an interest in the future income from a trust, a right to receive an annuity, and a share of ownership or the right to receive payments from an entity such as the Tribe. See La.Rev.Stat. Ann. § 10:9-106 (general intangibles); La. Civ.Code art. 461 (corporeals and incorporeals); La. Civ.Code Ann. art. 473 (West 2000) (incorporeal movables); La. Civ.Code Ann. art. 473 cmt. (e) *131 (incorporeal movables and juridical entities); La. Civ.Code art. 475 (immovables); In re Howard Marshall Charitable Remainder Annuity Trust, 709 So. 2d 662 (La.1998) (beneficiary’s property interest in income from trust).
Additionally, Johnson’s right to receive the payments is freely transferable. There are no restrictions on his ability to assign the payments to another person. Other recipients of such payments use them to secure debts. They cannot be devised to someone else because they last only for the life of the Tribe member. This characteristic does not prevent the payments or the right to receive them from being recognized as property.
Johnson has not demonstrated that any exemption or exclusion available under state or federal law prevents the per capita payments from treatment as property of the estate. See 11 U.S.C. § 541(b) (exclusions); Patterson v. Shumate, 504 U.S. 753, 756, 112 S. Ct. 2242, 119 L. Ed. 2d 519 (1992) (exemptions). The bankruptcy court’s finding that future payments from the Tribe were part of the bankruptcy estate was correct.
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