John F. Flynn filed Chapter 7 bankruptcy. Among his assets, Flynn owned 50 percent of a property with his mother, Elsie C. Stine. At the time Flynn filed bankruptcy, the property was subject to a state court partition lawsuit to force its sale and divide the sales proceeds between Flynn and Stine.

The co-owners eventually agreed to sell the property. The sale produced $120,000 net sales proceeds after paying the realty agent’s sales commission and the mortgage liens.

Purchase Bob Bruss reports online.

From these sales proceeds, the bankruptcy trustee argued that co-owner Stine should pay half the legal costs of clearing title for the property sale, litigating the partition lawsuit, and other sales expenses.

Stine argued she should not have to pay half of her son’s bankruptcy costs involving this property.

If you were the judge, would you rule that co-owner Stine should have to pay half the sales costs of the property?

The judge said no!

The bankruptcy trustee, the judge began, has no jurisdiction over the co-owner’s sales proceeds from this property. He must immediately disburse half of the sales proceeds to co-owner Elise C. Stine, the judge ordered.

Although Stine might have benefited from the costs of clearing title to the property, and other sales expenses, she should not have to pay 50 percent of those costs without having any voice in the handling of the litigation, the judge ruled.

Based on the 2005 U.S. Court of Appeals decision in In re Flynn, 418 Fed.3d 1005.

(For more information on Bob Bruss publications, visit his
Real Estate Center
).

***

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