By The Honorable William Houston Brown (Retired)
Bankruptcy courts lack equitable authority to disallow exemptions or amendments based on debtor’s bad faith. The Sixth Circuit held that Law v. Siegel, even if in dicta, “prohibits bankruptcy courts from disallowing the debtors’ claimed exemptions because of their alleged bad faith and fraudulent conduct.” Precedent in the Circuit requires lower courts to follow Supreme Court dicta, “particularly where there is not substantial reason for disregarding it.” The trustee argued that Law v. Siegel applied only in bankruptcy cases that have never been closed . . .
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