Legal Question in Bankruptcy in California

I have filed for chapter 7 bankruptcy more than a year ago in California. I have a 33% share in a hair salon. The trustee in my case wants to sell my 1/3rd share. Nobody but my partner�s uncle came forward to buy it, of course for her but under disguise. If I'm not mistaken, based on insider law below my partner�s uncle cannot buy it. Below is my research:

[Section 101(31) of the Code, defines four entities as

"insiders" when the debtor is an individual:

"Insider" includes -

if the debtor is an individual - (i) relative of the debtor or of a general partner of the debtor; (ii) partnership in which the debtor is a general partner; (iii) general partner of the debtor; or (iv) corporation of which the debtor is a director, officer, or person in control;

The word "includes" as used in the definition is meant to be

expansive.4 "Relative" is defined in section 101(45) as:

individual related by affinity or consanguinity within the third degree as determined by the common law, or individual in a step or adoptive relationship within such third degree.]

Now, my partner's uncle is trying to buy my share and in his declaration in the sales agreement with the trustee, he declares that he is not an insider, but he says that his sister has married to my partner's father. It means that my partner is her step daughter of his sister. He is pretending that my partner is his step family; however, I can prove that he is her blood uncle. As I researched and copy and paste the rule above, even a family in a step relationship is an insider, hence this sale cannot occur.

My question is that if this sale would be an arm-length transaction or it would not based on insider law and therefore prevents this sale agreement with the trustee from taking place. Thanks


Asked on 11/20/13, 12:33 pm

1 Answer from Attorneys
Charles Andersen Charles Andersen, Atty

Section 101 is defines the term insider and is generally used in exercise of the trustee's avoidance powers of transfer by the debtor to "insiders". The purpose of this section generally is to stop the debtor from giving away or transferring property for less than market value to friends or relatives in an effort to keep it out of the reach of creditors in a bankuptcy proceeding.

The trustee is not the debtor and can exercise his discretion in how to sell property of the estate. It doesn't appear to be material if the only person who wants to buy from the trustee is an insider of the debtor, since the transfer is not one by the debtor to any insider prior to the filing of the case, but rather a trustee's post filing sale of recovered assets.

If it is your wish to keep your interest in the property, the most viable alternative is to file chapter 13 before the trustees transfer of the property. You'll have the opportunity to oppose the sale by filing appropriate paperwrok, however once the judge approves the sale, it's to late to get it back by filing another case. http://www.superdebtbuster.com

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Answered on 11/20/13, 5:38 pm


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