Ninth Cir Decision In re Deuel
Posted: Tue Feb 02, 2010 5:25 pm
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This is the same problem we have discussed many times. The issue is that
there are two conflicting bankruptcy code sections which apply. Section
541(d) says that property of the estate includes only the interest in
property held by the debtor. If someone else is the equitable owner, then
the estate only gets bare legal title. Section 544, on the other hand, says
that the Trustee gets to be treated as a judgment lien creditor or BFP of
property. As we know from Property Law 101, a BFP defeats an unrecorded
interest every time (basic Poker Rule?).
Judges are complete inconsistent when deciding where each individual case
comes down. This case happened to come down on the side of the Trustee
(Section 544). There is a risk of this in EVERY case where the debtor holds
title to someone else's property or vehicle (or in the case of
uncertificated personal property, where the Debtor has possession of someone
else's property).
In short, there is no definitive answer.
David A. Tilem
Certified Bankruptcy Specialist*
Law Offices of David A. Tilem (a debt relief agency)
206 N. Jackson Street, #201, Glendale, CA 91206
Tel: 818-507-6000 Fax: 818-507-6800
* Bankruptcy specialist cert. by State Bar of CA Bd of Legal
Specialization.
Dennis McGoldrick
Sent: Monday, February 01, 2010 7:33 PM
To: cdcbaa@yahoogroups.com
Subject: Re: [cdcbaa] Re: Ninth Cir Decision In re Deuel
Members:
This is a BFP issue. Eariler this year I suggested we make sure the lien,
and/or property interest is listed on the skeds or the statements. This is
now very bad advice.
What the BAP and now the 9th Cir are saying is nothing you do can work. The
trustee is a BFP, no matter how you list things. So, the only way to beat
that is to file something at the County Recorders office before the case is
filed. And guess what, if you do file somthing at the county recorders
office before the case is filed, you may set your client up for a 727
complaint.
My new suggestion is to have the real owner/lienholder file a suit, and a
lis pendes before the bk is filed.
So, the trustee is the bfp, we just have to get used to it. Watch out for
more trustee's taking property from anyone who files bk when holding
property for another. Advise your client's appropriately. Our old standard
of convincing the trustee that the person paid nothing, is not necessarily
going to work.
My new suggestion is to have the real owner/lienholder file a suit, and a
lis pendes before the bk is filed.
dennis
The post was migrated from Yahoo.