On the somewhat unusual occasions when your judgment debtor has assets, the question turns to how do I maximize my judgment and collect every penny legitimately owed to my client?  Here are some thoughts:

The case of In re Dickson, 655 F.3d 585 (6th Cir. 2011) centered on the status of the debtor’s manufactured home under Kentucky law.  In Kentucky, a manufactured home is considered personal property.  As such, in order for a lien to be effective, it must be noted on the certificate of title.  A manufactured home may be converted to real property, however, if the owner files an affidavit that states it is permanently affixed to real estate and then surrenders title.

In a recent appeal to the Sixth Circuit Bankruptcy Appellate Panel, Inre Collins, 2011 WL 4445451 (6th Cir. BAP Aug. 12, 2011), the trustee sought a declaratory judgment to determine the validity, extent, and priority of liens on the debtor’s real property held by four defendants.  The trustee appealed the district court’s dismissal of his complaint as to purported holders of the debtor’s first and second mortgages on the debtor’s property.

FILING CHAPTER 13

The U.S. Court of Appeals for the Seventh Circuit recently affirmed a bankruptcy court’s decision refusing to confirm debtors’ reorganization plan that included auction procedures that forbade secured creditors from “credit bidding” for the assets. Inre River Road Hotel Partners, LLC, No. 10-3597, 2011 WL 2547615 (7th Cir. June 28, 2011). In that case, the debtors (owners of various hotel properties) proposed a plan of reorganization that included auctioning certain properties encumbered by security interests.

Debtors filed a voluntary petition for relief under Chapter 7.  The Debtors own and have title to real property ("Property").  Prior to the Petition Date, the husband borrowed $85,000 from Lender. This loan was reflected by a promissory note signed only by the husband, as "Borrower."  The term "Note" is defined in the Mortgage as the promissory note signed by Borrower.  On the same date, a mortgage granting Lender a mortgage on the Property was executed.

The Seventh Circuit recently decided that a mortgage that assigns future rental income to the mortgagee creates a security interest that takes priority over a federal tax lien.  Bloomfield State Bank v. United States, No.

A Cuyahoga County, Ohio trial court did not abuse its discretion when it appointed a receiver for a “defunct” foreign corporation that the trial court found “persists for the purpose of winding up its affairs in Ohio.”In re: All Cases against Sager Corporation (2010), 188 Ohio App 3d 796, appeal accepted for review (2011), 127 Ohio St. 3d 1503. The Court of Appeals found it undisputed that corporate assets existed after the foreign corporation had been dissolved, “and that these assets may afford insurance coverage to Ohioans injured by exposure to Sager’s products”.

Late this summer, the United States District Court for the Northern District of Illinois, Eastern Division, took on an issue of first impression – whether the fraud of one partner can be imputed to an “innocent” partner in order to render a judgment non-dischargeable.

What should be the remedy when a bankruptcy court holds that a security interest is avoidable as a preferential transfer, but the value of the security interest is not readily ascertainable? The Ninth Circuit recently addressed this issue in USAA Federal Savings Bank v. Thacker (In re: Taylors), 2010 U.S. App. LEXIS 5793 (9th Cir. 2010). The Court held that, since the value of the security interest was not readily ascertainable, the only available remedy is for the bankruptcy court to return the security interest itself, not its value, to the bankruptcy estate.