It is not uncommon in Chapter 7 bankruptcy proceedings for the courts to permit the Trustee to sell the property of the bankruptcy estate. While it is within the courts’ authority to allow such sales to occur, they must ensure that any property is sold for its optimal value in consideration of the circumstances. Recently, a California court addressed the issue of how a property’s optimal value is determined in a matter in which a party with a lien against the debtor’s estate argued that an asset was sold for less than it was worth. If you have questions about how filing for bankruptcy may impact your property rights, it is wise to talk to a California bankruptcy lawyer promptly.
Facts of the Case
It is reported that the debtor and the claimant were business partners who engaged in a series of real estate investments in the late 1990s. Their relationship deteriorated over time, and the claimant divested himself of his interests in their joint assets. The debtor agreed to pay him for said interests but failed to do so, and the claimant ultimately obtained a $34 million judgment against him.
Allegedly, the debtor filed for Chapter 7 bankruptcy and an adversary proceeding seeking relief, including the mandatory subordination of the claimant’s judgment. The court granted the motion. At the same time, the Trustee filed a motion asking the court to authorize the sale of one of the debtor’s properties free and clear of liens for $18 million, even though the claimant assessed its value at $25 million. The property ultimately sold at auction for $20 million, and the claimant appealed the sale order.