Ch. 13 Debtor Can’t Force Sale of Co-Owned Property

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By Diane Davis

A Chapter 13 debtor can’t force family members who aren’t in bankruptcy to sell property they all own together, the U.S. Bankruptcy Court for the District of Massachusetts held ( Andrade v. Essenfeld (In re Andrade) , 2017 BL 240769, Bankr. D. Mass., Chapter 13 Case No. 16-31020-EDK Adversary Proceeding No. 17-3009, 7/12/17 ).

Chapter 13 debtors have limited authority under Bankruptcy Code Section 1303 to exercise the powers of a trustee and sell property that is co-owned, Judge Elizabeth D. Katz wrote July 12.

Most courts agree that the plain language of Bankruptcy Code Section 363(h) leads to the “obvious conclusion” that a Chapter 13 debtor can’t force the sale of co-owned property, the court said.

Karen Andrade filed for Chapter 13 protection in which she could retain her property, but must propose a plan that uses future income to repay all or a portion of her debts over a three- to five- year period.

After the death of her father, Andrade inherited property in New York along with her brother and sister. She then asked the court for authority to sell both her interest and her siblings’ interests under Bankruptcy Code Section 363(h).

Section 363(h) allows a trustee to sell both the estate’s interest and the interest of any co-owner in property under certain limited circumstances. Section 1303 limits the power of a trustee, however to those rights under Sections 363(b), 363(d), 363(e), 363(f), and 363(l). Section 363(h) is not listed.

The court noted that it could only find five published cases allowing a Chapter 13 debtor to proceed with a sale under Section 363(h). The courts that allow it use the concept of “incorporation” to conclude that Section 363(h) incorporates subsection (b) by reference so the debtor can proceed.

The incorporation reasoning isn’t persuasive, and a majority of recent cases have rejected it, the court said. The plain language of the statute leads to a conclusion that Chapter 13 debtors can’t bring Section 363(h) actions, the court said.

Mark A. Papirio, Springfield, Mass., represented Andrade; Daniel Parente, Callaghan Parente LLP, Westbury, N.Y., represented Cindy C. Essenfeld; Mark Andrade, Richmond Hill, N.Y., represented himself.

To contact the reporter on this story: Diane Davis in Washington at DDavis@bna.com

To contact the editor responsible for this story: Jay Horowitz at JHorowitz@bna.com

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