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avoidance of personal property transfer

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  • avoidance of personal property transfer

    Greetings, have read hundreds of posts here and could not fine one exactly like this.

    I now find myself practicing BK law, very new to this.

    Here is situation:
    16 months prior to filing chapter 7 the debitor transferred a vechicle to his father-in-law for an antecedent debt. vehicle worth 8K. This vehicle in California is not required to have a certificate of title issued with it because it is one of those PTI registered vehicles, (an enclosed car toy hauler) and dmv does not issue titles unless specifically asked for. it does however have to be registered in Calif prior to being usde upon public roads.

    the debitor gave the registration card, and the father-in-law took possession in month 16 prior to filing. the debitor notified his insurance company in month 15 to delete it from insurance, the receiver added it to his insurance in month 14 prior to filing. the debitor filed a release of liability with dmv also in month 16 prior to filing. the receiver did not use the vehicle on public lands and therefore did not register it with dmv.

    I as the trustee now want to avoid this transfer of personal property because it was not perfected with dmv. I have absolutely no evidence of fraud, they provided cancelled checks to show where the father-in-law paid medical bills on the debitors behalf several years prior to this transfer.

    Can I successfully argue to the courts that since this was not recorded I can stand in the shoes of a BFP to add this property to the estate since it was not perfected with dmv.

    Around the office we are having differences of opinion.

  • #2
    I see at least two reasons that this is a preferential payment.

    1. No present consideration.
    2. No perfection of the transaction.

    I agree that it is not fraud, however it is preferential, and therefore would be voided by the trustee.
    All information contained in this post is for informational and amusement purposes only.
    Bankruptcy is a process, not an event.......

    Comment


    • #3
      My question would be not "can you?" but should you?

      I have to tell you, this is the first time I've seen a trustee in here asking questions.
      Filed Chapter 13 02/2006 - Confirmed 05/2006 - Discharged 09/2011
      I'm not an attorney. My replies are merely suggestions or observations, not legal advice. As always, consult with an attorney before making any decisions.

      Comment


      • #4
        Originally posted by newbie2 View Post
        My question would be not "can you?" but should you?

        I have to tell you, this is the first time I've seen a trustee in here asking questions.
        I have to agree with Newbie2. Just because you can does not mean you should. There are plenty of people that you should go after, but with what you said regarding this debtor, this is not one of those IMHO.
        8-07-09-filed Chapter 7
        11-18-09-DISCHARGED!!

        Life is not what challenges you face, but how you face those challenges.

        Comment


        • #5
          thanks for responses;

          on perfection: I am trying to put myself in the shoes of the receiver now;

          I would attempt to argue that perfection was accomplished when I took possession, that I held equitable title, and the debitor is going to show release of equitable or legal title when he gave up possession, and further shows release of interest upon removing from his insurance.

          there are several ucc codes and california codes that would possibly support his argument of Perfection upon possession.

          Unlike real property that is generally perfected upon recording for filing. or unlike secured financial interests that must be recorded on titles, or as lein holders with DMV.

          Back as the trustee now: I seem to be missing something in this situation,
          Perhaps it will occur to someone on this board or I will find it as I research case law on this. So far I have not been able to find case law that is exactly on point here.

          On the present conconsideration concept, nothing in bk code would require that, it was a transfer based upon the antecedent debit.
          Ray
          Last edited by HRay; 03-03-2010, 12:51 PM.

          Comment


          • #6
            Originally posted by HRay View Post

            On the present conconsideration concept, nothing in bk code would require that, it was a transfer based upon the antecedent debit.
            Ray
            Therefore a preferential payment.
            All information contained in this post is for informational and amusement purposes only.
            Bankruptcy is a process, not an event.......

            Comment


            • #7
              The problem with perfection being recorded, is not a real issue. The problem that not recording something does, is that is removes the owner's rights in a court of law or equity against creditors. That's why recordation is usually what determines line priority. The old, first to file... wins.

              In the end you have an unrecorded, yet perfected transfer of title and the property. The question is whether it needs to be recorded in that particular State. I think that it would only be required to record it, if you were a lienholder in order to "protect" your rights under some underlying agreement. Otherwise, if just sold or transferred to another party, as is this case, the person named on the certificate of title, is the new owner and that the title is perfected upon signature of the prior owner.
              Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
              Status: (Auto) Discharged and Closed! 5/10
              Visit My BKForum Blog: justbroke's Blog


              I am not an attorney. Any advice provided is not legal advice.

              Comment


              • #8
                frogger; you are correct, it could be a prefrential transfer to an insider, however the legal question is, When did this occur? if upon the date the debitor gave up paperwork, and gave up possession, and removed insurance from it does that establish the date of transfer, of so then it is outside the 12 month reach back timeframe.

                justbroke; I think you are correct, since this was not a lein or secured interest but a total transfer of legal title then no reqirement to record the lein with dmv in order to be first in line, he who files first has the first rights.
                so the transferee will most likely attempt to use this argument.

                the transfer was eventually recorded so the father in law could use it legally by being listed as the registered owner on the registration forms. This took place within the 1 year reach back timeframe.

                I have found this delima to be very troublesome as to how to determine the date of transfer under BK law. Under section 547 personal property does not have to be recorded like real property in order for avoidance to take place.
                Originally posted by justbroke View Post
                The problem with perfection being recorded, is not a real issue. The problem that not recording something does, is that is removes the owner's rights in a court of law or equity against creditors. That's why recordation is usually what determines line priority. The old, first to file... wins.

                In the end you have an unrecorded, yet perfected transfer of title and the property. The question is whether it needs to be recorded in that particular State. I think that it would only be required to record it, if you were a lienholder in order to "protect" your rights under some underlying agreement. Otherwise, if just sold or transferred to another party, as is this case, the person named on the certificate of title, is the new owner and that the title is perfected upon signature of the prior owner.

                Comment


                • #9
                  Originally posted by HRay View Post

                  the transfer was eventually recorded
                  If I were in a trustee position, this is the date that I would consider for it to have been transferred.
                  All information contained in this post is for informational and amusement purposes only.
                  Bankruptcy is a process, not an event.......

                  Comment


                  • #10
                    This is a preferential transfer that is dated back from the date the transfer was recorded. Since that date falls within the one or two year window (depending on district) for transferring property to family members, the trustee can have the transfer voided and claim the car for the estate in my opinion.
                    You can't take a picture of this. It's already gone. ~~Nate, Six Feet Under

                    Comment


                    • #11
                      What trustee misspells 'debtor' "debitor"

                      This is a state law question. I am not sure you have any standing here to avoid this transfer.
                      It doesn't appear to be a section 547 preference, the timeline is to old and you still need to prove the debtor was insolvent at the time. Preferences only have a 90 day shelf life if made to 3rd parties and a 12 month shelf life if made to insiders. Based on what you described above, this transaction took place beyond the 12 months. And this is true in ALL districts. (sorry backtoschool, but preference is no more than one year. The 2 year look back is for Fraudulent Transfer).

                      If CA does not require a title, any perfection argument you have is dead in the water. For personal property unless specifically required to by law, is perfected upon transfer of possession. The old adage that possession is 9/10's the law, is actually true. Registration would probably be held in this case as merely administrative to allow legal use, but is not a requirement of ownership. If a person does not renew vehicle registration (and just lets the car sit in the drive way) no one considers that surrendered ownership.

                      This leaves 548 Fraudulent Transfer, so far there appears to be no badges of fraud, the facts to support this claim have little to do with perfection of title.

                      So, just tuck your tails between your legs and stop wasting your time
                      Last edited by HHM; 03-06-2010, 11:15 AM.

                      Comment


                      • #12
                        Originally posted by HHM View Post
                        What trustee misspells 'debtor' "debitor"

                        This is a state law question. I am not sure you have any standing here to avoid this transfer.
                        It doesn't appear to be a section 547 preference, the timeline is to old and you still need to prove the debtor was insolvent at the time. Preferences only have a 90 day shelf life if made to 3rd parties and a 12 month shelf life if made to insiders. Based on what you described above, this transaction took place beyond the 12 months. And this is true in ALL districts. (sorry backtoschool, but preference is no more than one year. The 2 year look back is for Fraudulent Transfer).

                        If CA does not require a title, any perfection argument you have is dead in the water. For personal property unless specifically required to by law, is perfected upon transfer of possession. The old adage that possession is 9/10's the law, is actually true. Registration would probably be held in this case as merely administrative to allow legal use, but is not a requirement of ownership. If a person does not renew vehicle registration (and just lets the car sit in the drive way) no one considers that surrendered ownership.

                        This leaves 548 Fraudulent Transfer, so far there appears to be no badges of fraud, the facts to support this claim have little to do with perfection of title.

                        So, just tuck your tails between your legs and stop wasting your time
                        Ahh....I thought the two year look back included preferences as well, my bad. This is clearly not a fraudulent transfer in my opinion.
                        You can't take a picture of this. It's already gone. ~~Nate, Six Feet Under

                        Comment


                        • #13
                          I think that this is a battle that the Trustee would lose, easily.

                          The mere fact that it is NOT a requirement to transfer a title in order to transfer ownership, unless you want to tag the vehicle, is extremely relevant. The fact that insurance was placed by the father and dropped by the son in the 14-15-16 month time frame would indicate a TRANSFER to me. This seems like an elementary argument that is cut and dried. As stated, outside the 12 month period, is a non-issue.

                          Also the type of property here may not even be classed as a vehcile unless it is tagged, which would make it essentially like son gave dad his super-nice sofa 16 months ago. And where is the problem.......?

                          Comment


                          • #14
                            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.

                            Comment


                            • #15
                              Originally posted by HRay View Post
                              Hey, give a guy some slack for typos.
                              and why would a trustee go after this, just because he can.
                              Isn't there a joke that has the same punch line... why does a dog lick his ............... ?

                              Comment

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