On February 28, in Cohen v. Sikirica (In re Cohen), 478 B.R. 615 (W.D. Pa. 2013), the U.S. District Court for the Western District of Pennsylvania affirmed the decision of the U.S. Bankruptcy Court for the Western District of Pennsylvania, which held that direct deposits of a debtor’s paycheck into an entireties account held jointly by the debtor and his wife constituted fraudulent transfers under Pennsylvania law. The debtor and his wife appealed the bankruptcy court ruling, but the district court affirmed the decision of the bankruptcy court.
The Facts
David I. Cohen filed for bankruptcy protection under Chapter 7 of the Bankruptcy Code on October 14, 2005, after a verdict was entered against him and certain other defendants in a state-court action pending in the Allegheny County Court of Common Pleas. During the course of the debtor’s bankruptcy case, the Chapter 7 trustee, Jeffrey J. Sikirica, commenced an adversary proceeding against the debtor and his wife, Elaine Cohen, alleging that certain portions of the debtor’s deposits into an entireties account held jointly by the Cohens were fraudulent transfers under Pennsylvania law. Specifically, Sikirica asserted that those portions of the debtor’s paycheck that were directly deposited into the account, but that were subsequently spent on items other than necessary living expenses for the Cohens, constituted fraudulent transfers under the Uniform Fraudulent Transfer Act (UFTA). The UFTA has been adopted in Pennsylvania in all relevant respects.
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