The chapter 7 debtor’s change of beneficiary in his life insurance policy from his employer to his wife was not an avoidable property transfer where the debtor retained his interest in the policy and the transfer did not diminish the bankruptcy estate. Harden v. Harrison (In re Harrison), 2021 WL 739533, No. 19-5730, Adv. Proc. No. 20-113 (Bankr. E.D. N.C. Feb. 22, 2021). [Read more…] about Change of Beneficiary Not Avoidable Transfer
Debtor May Avoid County Tax Foreclosure Sale
A county’s tax sale of the debtor’s farm was avoidable as constructively fraudulent under section 548, where the debtor was insolvent at the time of the title transfer and the tax debt was substantially less than the fair market value of the property. DuVall v. County of Ontario, No.19-20179, Adv. Proc. No. 19-2011 (Bankr. W.D. N.Y. Feb. 18, 2021). [Read more…] about Debtor May Avoid County Tax Foreclosure Sale
Transfer of Funds Divided between Creditor and Creditor’s Agent Fully Avoidable
Garnished wages divided between the creditor and his agent in accordance with their fee agreement were an avoidable transfer in their entirety even though the creditor never received the portion withheld by the agent. Hooker v. Wanigas Credit Union, No. 20-2252 (6th Cir. Jan. 26, 2021) (unpublished).
During the ninety-day preference period,Wanigas Credit Union, through its agent, Shek Law Offices, garnished $884.13 from the debtor’s wages in satisfaction of a judgment Wanigas had against the debtor. Shek retained $452.60 of the garnished wages and sent the remaining $431.53 to Wanigas. After filing for bankruptcy the debtor sought turnover of the funds under section 547(b)(1) as a preferential transfer. Wanigas turned over only the funds it received. It argued that the portion retained by Shek was not subject to turnover because Wanigas never received the funds, and in the alternative, because the funds were subject to an attorney-charging lien. The bankruptcy court denied Wanigas’s motion for summary judgment and ordered the turnover of the funds. The district court granted leave to appeal and affirmed. [Read more…] about Transfer of Funds Divided between Creditor and Creditor’s Agent Fully Avoidable
Proceeds from Sale of Fraudulently Transferred Property May Be Recovered from Third Party
The chapter 7 trustee may “recover money from the entity who received the proceeds from the sale of fraudulently transferred property, but to whom the property itself was never transferred.” Rajala v. Husch Blackwell LLP, No. 08-20957, Adv. Proc. No. 18-6016; Rajala v. Spencer Fane LLP, Adv. Proc. No. 18-6020 (Bankr. D. Kans. Aug. 14, 2019).
Three couples started GRHC, a company designed to explore the possibilities of wind-generated electricity. GRHC initiated a wind-energy project in Pennsylvania called Lookout Windpower. The three couples then created the Lookout Windpower Holding Company (LWHC) and transferred Lookout Windpower from GRHC to LWHC rendering GRHC insolvent. LWHC then sold Lookout Windpower to Edison Mission Energy for over $6.7 million, and GRHC filed for chapter 7 bankruptcy. From the Lookout Windpower sale proceeds, LWHC paid the law firms of Husch Blackwell over $1.3 million and Spencer Fane over $700,000. The trustee in GRHC’s bankruptcy case successfully avoided the transfer of Lookout Windpower from GRHC to LWHC and sought to recover the funds paid to the law firms out of the proceeds from LWHC’s subsequent sale of the property. The law firms moved to dismiss the adversary complaints.
[Read more…] about Proceeds from Sale of Fraudulently Transferred Property May Be Recovered from Third PartyLien Avoidance Four Years after Discharge
How late is too late to amend schedules to include a secured creditor and claim a homestead exemption for purposes of section 522(f) lien avoidance? The BAP for the Ninth Circuit addressed the question in the case of Green v. HAPO Community Credit Union (In re Green), No. 12-1486 (Aug. 12, 2013), in which it reversed the bankruptcy court’s dismissal of the debtor’s motion to avoid lien and ordered that, upon remand, the lower court grant the motion. [Read more…] about Lien Avoidance Four Years after Discharge
Traverse v. DeGiacomo, No. 13-9002 (1st Cir.)
Type: Amicus
Date: July 10, 2013
Description: Whether trustee steps into shoes of debtor upon avoidance of lien and can sell debtor’s residential property.
Result: Judgment reversed and remanded, May 23, 2014
Debtor’s Standing to Avoid Lien
The Sixth Circuit BAP found that the debtor has derivative standing to exercise the trustee’s strong-arm powers under section 542 by seeking avoidance under section 544 of an unperfected lien on his manufactured home. U.S. Bank Nat’l Ass’n v. Barbee, No. 10-8074 (B.A.P. 6th Cir.) The court identified certain realities that supported its finding: the trustee’s lack of resources to pursue every legitimate avoidance claim, the requirement that the plan conform to section 1325(a)(4), and the possibility of the debtor’s being accused of bad faith if he proposes a plan that does include avoidance of a clearly avoidable lien. In so deciding, the court agreed with the holding in Countrywide Home Loans v. Dickson, 427 B.R. 399 (B.A.P. 6th Cir.), aff’d on other grounds, 655 F.3d 585 (6th Cir. 2011).
Opinion
NJ Appellate Court Sets Aside Sheriff’s Sale
A New Jersey intermediate appellate court set aside a sheriff’s sale and vacated summary judgment originally granted in favor of foreclosing entity because it failed to prove it had standing on the day that the foreclosure complaint was filed. An amended complaint filed after plaintiff received an assignment of mortgage did not cure the defect.