avoidance of personal property transfer

[justbroke]

and why would a trustee go after this, just because he can.

From my experience, case review, and from looking at actual Trustee policies, they are a shoot first ask questions later type organization. When it comes to avoidable transfers... they will sue everyone and then worry about it if someone opposes the Trustee's actions.

Yes, because he can.

[HHM]

Hey, give a guy some slack for typos.

I think the section is 547, for preference to an insider, with one year reach back. Some of you are getting real close if not dead on (in my opinion anyway) as to the problem. for the transfer of personal property there is no requirement for recording as there is in real property.

the definition of perfected transfer in 547 of personal property is that the perfection is considered done when the transfer is protected from a judicial lein creditor that would not allow the lein creditor to take a position that is superior to that of the person getting the transfer. For example a unrecorded lein on personal property would take second place to that of a recorded one. But most likely the trustee would not be able to show a position that would be over that of the owner.

So in order unravel this one, it would seem state and federal law would be the standard to see if the transaction was perfected. I do think that california and UCC codes would accept this transfer as being perfected and the father in law does have equitable title to the vehicle. If the father in law does have equitable title, then most likely that would supersede the position of a judicial lein creditor.

Does this sound appropriate.

and why would a trustee go after this, just because he can.

That sounds about right. I don't even think equitable or legal title are even an issue, this is personal property, the father in law has both. If I sell my DVD player to someone, he gives money and I give him the player, the buyer has both legal and equitable title. I see no difference in the transaction at issue.

In any event, if I were on the other side of this and the trustee came after this asset, I would seek FRCP Rule 11 sanctions for brining a frivolous action and go after the trustees bond.

[Mensa1]

In any event, if I were on the other side of this and the trustee came after this assets, I would seek FRCP Rule 11 sanctions for brining a frivolous action and go after the trustees bond.

Sounds good to me, but what are the chances of prevailing with that argument (in this hypothetical situation).?

What are the practicalities of such an argument; costs, etc.? Aren't you entitled only to recover your costs to defend this frivilous claim? If so, it seems like almost a flip of the coin wager since the upside is slight.

Interesting point, as I have looked at seeking Title 11 sanctions in another court proceeding, (non-Bk), and the move seemed quite impractical; but I am all ears.

[justbroke]

Interesting point, as I have looked at seeking Title 11 sanctions in another court proceeding, (non-Bk), and the move seemed quite impractical; but I am all ears.

Read Federal Rules of Bankruptcy Procedure Rule 9011, which incorporated Fed. R. Civ. P. Rule 11. This is the part of the Bankruptcy rules under which Sanctions are granted. You can't file frivolous proceedings... or even be careless about things when you put your signature on papers submitted to the Court.

[HHM]

Impractical, maybe; but strategically sometime necessary. It is true that courts are not prone to giving rule 11 sanctions, but if you have a rogue trustee and the U.S. Trustee is not willing to address the issue, then Rule 11 is how you can start fighting back.

It is how you make the trustee think twice before doing the shoot first, ask questions later approach.

[HRay]

Hey Fellow Forum commenters: these are excellent discussions, some of which I will now have to research.

For those of you inclined here is an excellent article I discovered, some of the case law is very interesting, assuming a person likes to read case law.

Thought not exactly on point in this discussion a few of the cases presented in this document could be used to support one side or the other.

http://www-rcf.usc.edu/~usclrev/pdf/072405.pdf

[HHM]

I honestly can't believe you are wasting so much time over this. Let's assume for a moment that the transfer was made within 12 months, do you even have evidence to support the other elements that are REQUIRED for you to prevail

547 preference: the transfer was made...
1. to or for the benefit of a creditor
2. for an antecedent debt
3. made while the debtor was insolvent (my guess is, you will have a tough time on this element).
4. Enables the creditor to receive more than it would have in chap 7, if transfers had not been made, etc.

Realize, you have to PROVE all those elements.

As for 727(a)(2): there is NO WAY (unless there are serious other issues and badges of fraud) you will get a denial of discharge on this issue.

The problem, however, is that there is no recording requirement for this transfer, so the transfer is effective when it is effective between the parties. My sense is, there maybe some confusion or overlap with the requirements to perfect a "security interest" and the requirements for a sale or transfer. The rules of one do not necessarily apply to the other.

[HRay]

HHM: You have hit the nail exactly on the head.

So the trustee only needs to get a judge that will also have a twisted vision and mix up a BFP perfected transfer, and ignore the lein creditor argument.

A judge might say, "Mr Father-in-law I agree you were the BFP, but since you failed to register this transfer the son-in-law could have come and borrowed the trailer, took it to dmv, had them bring up the registeration on the computer and then he could have sold the trailer then on the spot and a new person would be the BFP, so you had no protection".

if he said that a person might think the judge is ignoring the senior position of the owner as being superior to the judicial lein creditor and then be forced to file with the BAP.

However, the father-in-law might just agree to pay some money instead of going thru the AP process not knowing the law to this extent. Hence a situation which some might equal to legal extortion.

[HRay]

Sorry HHM missed the first part of your question.

Specifically on proving the antecedent debt.

Here is a question for us to ponder.

son-in-law quits job to go to Calif Corrections Academy to be a corrections officer. Take a big cut in pay, The house hold the kids, take a big hit in income. The daughter says, dad can we borrow money, (it just would not be right for her to say dad give us some money). Dad says you do not have to borrow, we will help you out and do not worry about repayment. Dad give money several times throughout a 2 year timeframe. Dad considers it a gift, kids consider it a loan. nothing is written down to document the money, a few checks were written for doctor bills on behalf of kids. Later kids are doing well financially, the new cadet is hired in the prison system and they decide to repay dad. Dad needs a trailer, kids tell dad they will either sell trailer and give him money, or he can have trailer.

So legally is dad a creditor, or not, if not, then the trailer was a gift for not apparent value. If gift then reach back still could apply. If loan then avoidance to an insider is warranted.

The reason kids filed is they both worked for the State, both got 15 percent pay cuts, and the daughter was cut to half time. So therefore they could not make payments on mortgage and the consumer debit they ran up to get thru school for the new job. But since the housing market crashed in California the 200K lost equity put them insolvent even at the 16 month prior to filing.

[Mensa1]

HHM:
However, the father-in-law might just agree to pay some money instead of going thru the AP process not knowing the law to this extent. Hence a situation which some might equal to legal extortion.

Pretty much what it comes down to isn't it?

Can I get him to buy me off, and hope no one cries foul. Afterall, he doesn't know the law to that extent and you will prolly get away with it. Case closed, decision made, extort away.

[newbie2]

However, the father-in-law might just agree to pay some money instead of going thru the AP process not knowing the law to this extent. Hence a situation which some might equal to legal extortion.

If it walks like a duck and talks like a duck...legal extortion? In my eyes, yes. Except nothing about extortion should ever be sugar coated.

Frankly, it makes me sick that this is even being considered.

Mr. Trustee, drop it already.

[HHM]

HHM: You have hit the nail exactly on the head.

So the trustee only needs to get a judge that will also have a twisted vision and mix up a BFP perfected transfer, and ignore the lein creditor argument.

A judge might say, "Mr Father-in-law I agree you were the BFP, but since you failed to register this transfer the son-in-law could have come and borrowed the trailer, took it to dmv, had them bring up the registeration on the computer and then he could have sold the trailer then on the spot and a new person would be the BFP, so you had no protection".

if he said that a person might think the judge is ignoring the senior position of the owner as being superior to the judicial lein creditor and then be forced to file with the BAP.

However, the father-in-law might just agree to pay some money instead of going thru the AP process not knowing the law to this extent. Hence a situation which some might equal to legal extortion.

The problem is, registration (at least in this scenario) has nothing to do with ownership. Registration is about use, not ownership. I highly doubt you will get that far.

The only way you win this is if they have a coward attorney or give in to pressure. If it's a gift, you will have a HARDER time avoiding the transfer. Now you are talking about section 548 fraudulent transfer. If the debtor or debtors were both working at the time, and current on their debts, you lose this issue on them not being insolvent. If I were on the other side, I would certainly make you go to the effort to file the action, and I would take you to a hearing and file a complaint for rule 11 sanctions (no joke), based on the facts that you presented so far, I don't see that you even have a good faith argument to proceed.

[moonflower]

Yes, the law is the law, but "can" is not the same as "must". Does the morally "right thing" ever come into play?

[tigergem]

Yes, the law is the law, but "can" is not the same as "must". Does the morally "right thing" ever come into play?

From what I have been reading... umm... yeah... case law... "sometimes". But it's a crap shoot. "Sometimes" the judge will even acknowledge the "morally correct thing" or the "common sense thing" in issuing his/her decision, and still make his/her ruling "even though...however..." as a result of some procedural error... or precedent...or interpretation of the law. I have learned that in my district the "Unwritten Local Rules of Common Sense" prevail. That's my judge. I love him.

[HRay]

The trial was held, trustee won at trial, now before the bap 9th circuit, first two briefs have been filed, more will come as we get ruling from 9th bap.

short version seems to indicate the trustee should have lost and the judge made a mistake in his ruling. case law in California seems to indicate failure to perfect with dmv does not affect who the owner really is.

seems like the trustee shoots first as was mentioned above and might say sorry later.

if you are really interested find gates vs levers case law and In re roosevelt 9th circuit decision.

maybe a few more months we will get ruling and a case law ruling on this from the 9th circuit.