551, 522(g)(1), and 510(c): Equitable subordination of
Posted: Sat Jul 05, 2014 12:38 pm
Michael, BOTH have to be satisfied to claim the exemption: involuntary
transfer and not concealed.
On Saturday, July 5, 2014, Michael Avanesian michael@avanesianlaw.com
[cdcbaa] wrote:
>
>
> Now that your client is going forward in a Chapter 13, the only place this
> matters is the best interest of creditors test/liquidation analysis, is
> that correct? If so, why don't you amend her exemptions and proceed as if
> she is entitled to the homestead (ahead of the estate) and address this
> issue only if it's brought up by the Chapter 13 Trustee?
>
> With the facts as you have now presented, I doubt the Chapter 13 Trustee
> gives you much trouble over this issue.
>
> I didn't really write to address the above issues but I thought I'd chime
> in on them since I'm already replying.
>
> What I don't like is the quoted language from Judge Riblet because it's
> logically wrong. In the BAP opinion, he wrote:
>
> "a debtor may claim an exemption where the trustee has recovered property
> under 510(c)(2), 542, 543, 550, 551 or 553 only if (1) the property
> was involuntarily transferred, *and* (2) the debtor did not conceal the
> transfer or an interest in the property." I added the emphasis. That and
> should be an OR because 522(g)(1) is conjunctive, meaning both (A) and (B)
> have to be satisfied so either A OR B not satisfied means the Debtor can
> claim the exemption.
>
> While the circuit opinion does not address this issue, if you look at
> footnote 5, they imply the result could be different if transferred assets
> are listed in the schedules. I did not do further research on the matter. I
> don't know how much this help you since listing the transfer on the
> schedules is a prerequisite for the type of fraud being committed.
>
> Sincerely,
> Michael Avanesian
>
> On Sat, Jul 5, 2014 at 8:47 AM, Holly Roark hollyroark22@gmail.com
> [cdcbaa] cdcbaa@yahoogroups.com
> > wrote:
>
>>
>>
>> There was an evidentiary hearing on the conversion motion. The judge said
>> he wasn't going to impute to the debtor any bad actions of her prior
>> attorney, who was the one who put the fraudulent liens on the house (in his
>> girlfriend's name). Debtor signed the liens, but not "voluntarily". He
>> bullied her into signing them (she's elderly), and we have witnesses to the
>> fact that he bullied her into signing them. The judge did not specifically
>> make any findings with respect to the execution of the liens, but the
>> debtor's prior attorney took the 5th when asked about the liens, and he had
>> a criminal defense attorney representing him at his deposition. The court
>> drew an inference from this that probably, in general, the Debtor was not
>> responsible for the bad things that happened in this case.
>>
>> Holly Roark
>> Certified Bankruptcy Specialist*
>> *and Sports Lawyer*
>> holly@roarklawoffices.com
>> **primary
>> email address**
>> www.roarklawoffices.com
>> Central District of California
>> Consumer Bankruptcy Attorney
>> 1875 Century Park East, Suite 600
>> Los Angeles, CA 90067
>> T (310) 553-2600
>> F (310) 553-2601
>>
>> *By State Bar of California Board of Legal Specialization
>>
>>
>> **For a quicker response, email me at holly@roarklawoffices.com
>> .
>> I only use gmail for my listservs, and am likely to miss private emails
>> directed to my gmail account.**
>>
>>
>>
>> On Fri, Jul 4, 2014 at 6:55 PM, 'Wesley H. Avery' wavery@rpmlaw.com
>> [cdcbaa] > cdcbaa@yahoogroups.com
>> > wrote:
>>
>>>
>>>
>>> A strange fact pattern. Was there a hearing on the conversion
>>> motion, and if so were any findings made? Contact me offline to discuss.
>>>
>>>
>>>
>>> *Wesley H. Avery*
>>>
>>> * Wesley H. Avery, Esq. Bankruptcy Trustee*
>>> *wavery@rpmlaw.com*
>>>
>>>
>>>
>>>
>>> *28005 Smyth Drive, Ste. 117 Valencia, CA 91355-4023 (661) 295-4674
>>> (office) (661) 430-5467 (fax)
>>> (661) 618-7376 (cell) *
>>>
>>> [image: cid:part1.03050307.05030101@bklaw.com]
>>>
>>> * Certified Specialist*
>>> *Bankruptcy Law*
>>>
>>>
>>> *State Bar of California Board Certified*
>>> *Business Bankruptcy Law*
>>> *American Board of Certification*
>>>
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>>>
>>> *From:* cdcbaa@yahoogroups.com
>>> [mailto:
>>> cdcbaa@yahoogroups.com
>>> ]
>>> *Sent:* Friday, July 04, 2014 1:02 PM
>>> *To:* cdcbaa; Strictly Bankruptcy Issues
>>> *Subject:* [cdcbaa] 551, 522(g)(1), and 510(c): Equitable subordination
>>> of preservation of 551 in case converted to Chapter 13?
>>>
>>>
>>>
>>>
>>>
>>> Hello,
>>>
>>> This is a tricky case.
>>>
>>> In the Chapter 7 a creditor's $100,000 fraudulent lien against real
>>> property was avoided by the chapter 7 trustee. The case has now been
>>> converted to Chapter 13.
>>>
>>> The "fraudulent transfer" was not voluntary on the part of the debtor
>>> and she did disclose it in her bankruptcy papers, so under section
>>> 522(g)(1) the Debtor should be entitled to her homestead exemption. (Under
>>> 522(g)(1), a debtor may claim an exemption where the trustee has
>>> recovered property under 510(c)(2), 542, 543, 550, 551 or 553 only if
>>> (1) the property was involuntarily transferred, and (2) the debtor did not
>>> conceal the transfer or an interest in the property. *See* *Hitt v.
>>> Glass (In re Glass)*, 164 B.R. 759, 761 (9th Cir. BAP 1994), *aff'd*,
>>> 60 F.3d 565 (9th Cir. 1995).)
>>>
>>> However, I need to confirm that being able to claim her homestead means
>>> that her interest comes before that of the 551 recovered estate property,
>>> and I am unclear whether that is the case. Normally, if the Debtor had
>>> participated in the fraud and the trustee recovered the asset for the
>>> estate under 551, the trustee's interest would jump ahead of the homestead.
>>> (See In re Van de Kamp Dutch Bakeries, 908 F.2d 517 (1990). Here, we have a
>>> converted case (no more chapter 7 trustee), and the debtor did not do
>>> anything wrong.
>>>
>>>
>>>
>>> If the debtor is entitled to her homestead under 522(g)(1), does it
>>> trump the avoided fraudulent transfer, or do I need to make some equitable
>>> subordination argument under 510(c) to subordinate the 551 recovery?
>>>
>>> Your thoughts are appreciated!
>>>
>>>
>>>
>>> Holly Roark
>>>
>>> Certified Bankruptcy Specialist*
>>>
>>> *and Sports Lawyer*
>>>
>>> holly@roarklawoffices.com
>>> **primary
>>> email address**
>>>
>>> www.roarklawoffices.com
>>>
>>> Central District of California
>>>
>>> Consumer Bankruptcy Attorney
>>>
>>> 1875 Century Park East, Suite 600
>>>
>>> Los Angeles, CA 90067
>>>
>>> T (310) 553-2600
>>>
>>> F (310) 553-2601
>>>
>>> *By State Bar of California Board of Legal Specialization
>>>
>>>
>>>
>>> **For a quicker response, email me at holly@roarklawoffices.com
>>> .
>>>
>>> I only use gmail for my listservs, and am likely to miss private emails
>>>
>>> directed to my gmail account.**
>>>
>>>
>>>
>>>
>>
>
>
Holly Roark
Certified Bankruptcy Specialist*
*and Sports Lawyer*
holly@roarklawoffices.com **primary email address**
www.roarklawoffices.com
Central District of California
Consumer Bankruptcy Attorney
1875 Century Park East, Suite 600
Los Angeles, CA 90067
T (310) 553-2600
F (310) 553-2601
*By State Bar of California Board of Legal Specialization
**For a quicker response, email me at holly@roarklawoffices.com.
I only use gmail for my listservs, and am likely to miss private emails
directed to my gmail account.**
Michael, BOTH have to be satisfied to claim the exemption: involuntary transfer and not concealed.On Saturday, July 5, 2014, Michael Avanesian michael@avanesianlaw.com [cdcbaa] <cdcbaa@yahoogroups.com> wrote:
Now that your client is going forward in a Chapter 13, the only place this matters is the best interest of creditors test/liquidation analysis, is that correct? If so, why don't you amend her exemptions and proceed as if she is entitled to the homestead (ahead of the estate) and address this issue only if it's brought up by the Chapter 13 Trustee?
With the facts as you have now presented, I doubt the Chapter 13 Trustee gives you much trouble over this issue.
The post was migrated from Yahoo.