By Beau Hays
Hays, Potter & Martin, LLP
Peachtree Corners, GA
Judge Margaret Murphy of the Bankruptcy
Court for the Northern District of Georgia recently handed down a victory for
Trustees (and creditors) in a case involving a carve-out negotiated with
secured lenders to allow for a short sale and create a fund for unsecured
creditors. In re Diener, No. 11-83085-MHM
(Bankr. N.D.Ga. 7/6/15; docket #88) The Opinion can be found here.
What Happened
Debtors filed
Chapter 7 case with three security deeds on their home, totaling about
$350,000.00. As everyone acknowledged
that the property was underwater, the Trustee sought to negotiate a carve-out
with Wells Fargo, holder of the second- and third-priority liens on the house,
offering to pay $9,000.00 in satisfaction of the second and third positions in exchange for
finding a buyer and keeping the property from being foreclosed by the first
mortgage holder. A buyer was eventually
found at market value; the first lien was paid off, Wells Fargo got its $9,000 and
the balance was paid to the Trustee – allowing the Trustee to pay
administrative expenses in the case and ultimately providing for about $6000 to
go to the unsecured creditor pool.