National Consumer Bankruptcy Rights Center

Protecting The Rights Of Consumer Debtors In Bankruptcy

bankruptcy

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Payments to Senior Lienholder Avoidable as to Junior Lienholder

Payments made to a senior lienholder within 90 days of bankruptcy were avoidable as a preferential transfer in favor of the junior lienholder. Gladstone v. Bank of America (In re Vassau), No. 09-9536, AP 11-90280 (Bankr. S.D. Cal. Sept. 25, 2013). [Read more…] about Payments to Senior Lienholder Avoidable as to Junior Lienholder

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Debtor has Standing to Move to Avoid Statutory Lien

A debtor has standing under section 522(h) to bring an action to avoid a statutory lien under section 545(2). In In re McCarthy, No. 13-6042 (B.A.P. 8th Cir. Oct. 28, 2013), the debtor filed an adversary proceeding seeking to avoid an attorney fee statutory lien as impairing his homestead exemption under Minnesota law. The bankruptcy court dismissed the proceeding on the basis that, under section 545(2), the debtor “lacks the authority and ability to exercise the strong-arm powers of the trustee to defeat a statutory lien.” The BAP found that, while section 545 does provide that the “trustee may avoid the fixing of a statutory lien on property of the debtor,” the bankruptcy court’s inquiry should not have stopped there. Section 522(h), in conjunction with section 522(g)(1), provides an avenue for the debtor to avoid a lien that is avoidable by the trustee under section 545. Under these sections the BAP set forth five requirements that must be met to allow a debtor to avoid a statutory lien: “(1) the debtor’s transfer of property must have been involuntary; [§ 522(g)(1)(A)] (2) the debtor must not have concealed the property [§ 522(g)(1)(B)]; (3) the trustee must not have attempted to avoid the transfer [§ 522(h)(2)]; (4) the debtor must seek to exercise an avoidance power enumerated under § 522(h); and (5) the transferred property must be such that it could have been exempted if the trustee had avoided the transfer under the provisions of § 522(g) [§ 522(h)(1)].” Finding that section 522 gives the debtor the power to avoid the statutory lien, despite section 545’s limitation to the trustee, the court reversed and remanded to allow the bankruptcy court to address the merits of the debtor’s lien avoidance action.

McCarthy opinion

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Absolute Assignment of Rents Precludes Turnover

This case centered on whether rent collected by the debtors becomes part of the bankruptcy estate even though the right to collect the rents had been absolutely assigned to their lender PHH Mortgage (“PHH” or “assignee”). Relying on In re Jason Realty, 59 F.3d 423 (3d Cir. 1995), the bankruptcy court found that PHH, as assignee, was the owner of the right to collect rents and, therefore, the debtor had no ownership interest to augment the bankruptcy estate. The district court affirmed. In re Cordova, No. 13-810 (D. N.J. Oct. 22, 2013). [Read more…] about Absolute Assignment of Rents Precludes Turnover

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Trustee’s Abandonment of Property Does Not End Court’s Jurisdiction

The BAP for the First Circuit determined that the bankruptcy court erred when it found that it lacked jurisdiction over a motion to avoid a lien under section 522(f). In re Rosado-Ramos, No. 13-5 (Oct. 22, 2013). [Read more…] about Trustee’s Abandonment of Property Does Not End Court’s Jurisdiction

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Inheritance Received more than 180 Days Post-Petition Part of Chapter 13 Estate

The Fourth Circuit found that an inheritance acquired after section 541(a)(5)’s 180 day look-back period but prior to termination of the chapter 13 case, becomes part of the bankruptcy estate under section 1306(a)(1). Carroll v. Logan (In re Carroll), No. 13-1024 (Oct. 28, 2013). [Read more…] about Inheritance Received more than 180 Days Post-Petition Part of Chapter 13 Estate