Tuesday, April 5, 2005 | 8:52 a.m.
CARSON CITY -- The wealthy are using the federal bankruptcy courts to get ahead financially and are not paying their legitimate debts, bankruptcy trustees testified Monday.
Angelique Clark, a trustee for the bankruptcy court in Northern Nevada, urged the Assembly Judiciary Committee to approve Assembly Bill 428 to close loopholes that help the rich.
Clark said entertainer Wayne Newton, for example, was allowed to keep a large amount of memorabilia under the "keepsakes" exemption in the law.
The current law lacks any limit on keepsakes, and people get away with putting their golf clubs or expensive gun collections under this exemption, Clark said.
AB428 would put a $100 value limit on keepsakes.
The bill also would require a 180-day residency on property before it could be claimed exempt from bankruptcy proceedings as a homestead.
This change is intended to put a stop to cases such as the one in which a man moved a travel trailer onto a large piece developable property and then claimed a homestead exemption, Clark said.
The bill also calls for lowering the value of a vehicle allowed to be kept by a debtor under bankruptcy protection. Instead of allowing the exemption for vehicles worth up to $15,000, the bill would allow the exemption on vehicles worth up to $10,000 each.
Clark testified that under the present law, people in bankruptcy are allowed to keep such expensive vehicles as Hummers, top-end motorcycles and even "gold-plated golf cart" exempt from creditors.
Opposition was stirring against the proposed changes, however.
Assembly Majority Leader Barbara Buckley, D-Las Vegas, complained that the bill would take away cars from the middle class. Clark said the limit could be raised if necessary so long as the there was another way to clamp down on the abuses of the vehicle provision.
Clark emphasized that the bankruptcy trustees do not want to overhaul the law but want to "fine-tune" it.
Philip Goldstein, a Las Vegas attorney, complained that the bill "punishes the little guy" who files bankruptcy because he cannot pay his bills.
The $100 limit for retained keepsakes, for example, is ludicrous, he said.
"If you want to go after the Wayne Newton collection, go after the Wayne Newton collection, not the little guy," he said.
Goldstein also said the power already exists in the law to deal with the people who are guilty of abuses.
But Brigit Robb Peck, a lawyer from Reno, told the committee the bill will prevent abuses. For example, she said the wealthy, before filing bankruptcy, shift large sums of cash into a individual retirement accounts, which are protected from creditors.
Once the bankruptcy is discharged, the individual then cashes in the IRA or pension and pays a penalty but comes out ahead.
But Goldstein said the fees and fines of cashing out early constitute a 25-30 percent penalty.
The committee did not take any action on the bill.
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