In a recent case, In re Beck Mrs. Beck filed for bankruptcy protection but her husband did not. Together they owned a property which was valued at about $530,000.00. The property had actually been in Mr. Beck’s family since the 1930s. There was a mortgage on the property of about $150,000.00.
By the time of filing her bankruptcy petition, the balance on the mortgage was about $44,000.00. There was also a judgment lien in the approximate amount of $5,600.00 and there were outstanding real estate property taxes owed in the approximate amount of $114,000.00.
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In this case the chapter 7 Trustee filed a lawsuit in bankruptcy court requesting court permission to either partition or sell the property pursuant to 11 U.S.C. Section363(h). Mr. Beck filed a response to the lawsuit in which he claimed he would be irreparably harmed and that the sale would be detrimental to his children.
In determining whether the trustee could sell the bankruptcy estate’s interest and the interest of any co-owner in real property the court concluded that the property could only be sold if the Trustee could demonstrate the following:
- partition in kind of such property among the estate and such co-owners is impracticable;
- sale of the estate’s in divided interest in such property would realize significantly less for the estate than sale of such property free of the interest of such co-owners;
- the benefit to the state of a sale of such property free of the interests of co-owners outweighs the detriment, if any, to such co-owners; and
- such property is not used in the production, transmission, or distribution, for sale, of electric energy or of natural or synthetic gas for heat, light or power.
In this case there was no dispute as to three of the four factors. The issue which the court decided was whether the sale would outweigh any detriment to Mr. Beck. In deciding that the property could be sold, the court that Mr. Beck would receive $135,000.00 and that there would be enough money from the estate to pay all of Mrs.Beck’s creditors.
In sum, the court ruled that the benefit to the Debtor’s creditors from the sale oft he property free and clear of Mr. Beck’s interest pursuant to section 363(h) outweighs any detriment to Mr. Beck.
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