Case: John O. Desmond, Chapter 7 Trustee v. Marsha S. Green (In re Warren I. Green), no. 13-10204-MSH (Bankr. D. Mass.).
Chief Judge Melvin S. Hoffman
October 11, 2018
The Chapter 7 Trustee filed an action pursuant to 11 U.S.C. § 363(h) for authority to sell a condominium held by the debtor and his non-debtor spouse as tenants by the entirety. The defendant non-debtor spouse, Ms. Green, moved for summary judgment objecting to the sale on the ground that the Trustee could not meet the balancing test of § 363(h)(3). That section requires the court to determine if the proposed sale will confer upon the estate a benefit that outweighs any detriment to the non-debtor. Relying on Butner v. United States, 440 U.S. 48 (1979), Ms. Green argued that such a determination could not be made because: (i) under Massachusetts tenancy by the entirety law, each owner enjoys equal rights to the entire ownership and proceeds and, as a result any distribution to the estate would result in Ms. Green not receiving her full interest as required by § 363(j); and (ii) Massachusetts law precluded the Trustee from distributing any funds until termination of the tenancy, meaning that neither she nor the bankruptcy estate would receive a benefit from the sale so long as the tenancy remained intact.
The Bankruptcy Court held that strict compliance with Massachusetts tenancy by the entirety law would run counter to the policies of the Bankruptcy Code and was therefore preempted to the extent it was inconsistent with Bankruptcy Code § 363(h) and (j). The Court noted that although the Butner decision holds that, “property interests are created and defined by state law,” Ms. Green – like many other litigants – had glossed over the qualifier in the next sentence of that decision, which is that courts must also look to whether “some federal interest requires a different result.”
In Green, the Bankruptcy Court determined that federal bankruptcy law did indeed require a different result, a conclusion reinforced by the Bankruptcy Code’s legislative history, which explicitly states that a trustee should be permitted to sell entireties property. Further, the Court observed that requiring a trustee to hoard the proceeds of such a sale would be incompatible with the dictates of § 704, which requires the trustee to administer the bankruptcy case expeditiously and consistent with the best interest of the parties. Finally, the Court rejected the notion that § 363(j) should be incorporated into the balancing test of § 363(h). Rather, § 363(j) simply governs what happens after a sale vis-à-vis the non-debtor spouse and does not create a condition precedent to a sale by the Trustee under § 363(h). Interestingly, one question the Court did not decide was the appropriate formula for dividing the sale proceeds, in light of Massachusetts law entitling each party to ownership rights in the entirety of those proceeds. The Court did note, however, that a 50-50 distribution would appear to be a reasonable approach.
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New Lawyers Section Liaison to Bankruptcy Law Section
MCLE Bankruptcy Law Program: Chapter 7 and 13 debtor and creditor essentials from intake to closing.
Date/ Time: October 10 & 11, 2018 at 9:30 am – 4:30 pm
Location: MCLE Conference Center, 10 Winter Place, Boston
See link for Agenda and to REGISTER https://www.mcle.org/product/catalog/code/2190001P01
Please join us on Wednesday October 3, 2018, 1:00 p.m. to 4:00 p.m., at the Boston Bar Association for a comprehensive program on the history of student aid in higher education, with a focus on the dischargeablity of student loans in bankruptcy and current tax policy affecting loan repayment. Part I of this 3 hour CLE, takes a look at the past, present, and future of student loans in America. How did we go from the G.I. Bill and other grant-based initiates to the loan-dominant model that we have today? What changes, if any, can we reasonably expect to occur in the next 5, 10, or 15 years of student loan policy? Part II of the program will focus on the history of the student loan discharge in bankruptcy and features a case study of a recent dischargeability trial in Massachusetts bankruptcy court. Part III of the program discusses how loan interest payments and debt forgiveness are currently treated under the Internal Revenue Code and some interesting efforts by employers to tie a 401(k) company match to an employee’s loan payments.
The program features the following PANELISTS:
- Dr. Laura Perna, James S. Riepe Professor and Executive Director of the Alliance for Higher Education and Democracy at the University of Pennsylvania.
- David A. Mawhinney, K&L Gates LLP
- Kerime S. Akoglu, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
- Sara B. Clevering, Ropes & Gray LLP
- Rachel F. Smith, Goodwin Proctor LLP
Link to register: https://www.bostonbar.org/membership/events/event-details?ID=28864
CLE credit is available.
Chapter 11 Brown Bag on June 12, 2018
Chapter 11 Plans: What’s New?
Please join us on Tuesday, June 12 at 12:00 p.m. for a Chapter 11 Brown Bag featuring new developments in Chapter 11 plan and confirmation issues. Janet E. Bostwick will provide an update on recent cases and lead the discussion. This program is an annual favorite that you won’t want to miss! You can register for the program by using the link below:
An Introduction to Blockchain and Cryptocurrency:
Please join us on Tuesday, May 8 at 12:00 p.m. for a brown bag lunch demystifying blockchain and cryptocurrency. This one hour program will provide an overview of digital currencies, how transactions are verified on a distributed ledger, and how these currencies are mined and traded. The panel will touch on the legal questions concerning lending, trading, and investing that remain unanswered as this burgeoning technology continues to develop.
- Jeremy J Cusimano
- David E. Fialkow
- Yash Vazirani
TO REGISTER: https://www.bostonbar.org/membership/events/event-details?ID=24506
The March 28 Chapter 11 Brown Bag (Chapter 11 Plans: What’s New?) has been postponed. The new date for the program is Tuesday, May 8 at 12:00 p.m.
Due to the impending snow storm, we have rescheduled the 3/13/18 Chapter 11 Brown Bag. The new date for the program is Wednesday, March 28 at 12:00 p.m.
Chapter 11 Brown Bag on March 13, 2018
Chapter 11 Plans: What’s New?
Please join us on Tuesday, March 13 at 12:00 p.m. for a Chapter 11 Brown Bag featuring new developments in Chapter 11 plan and confirmation issues. Janet E. Bostwick will provide an update on recent cases and lead the discussion. This program is an annual favorite that you won’t want to miss! You can register for the program by using the link below:
American College of Bankruptcy/ Boston College Law School Bankruptcy Symposium
The Supreme Court and Bankruptcy: An Exploration of Practice and Recurring Issues Before the Court
Time: 1:00 PM to 4:00 PM
Boston College, Newton Campus
885 Centre Street
Please register in advance at