POST-PETITION TRANSFEREE
circumstances,
an
attorney
representing a transferee should
first ask: was the transferred
property identifiable as real property
under state law interpretation?
If the transferred asset is real
property, the Bankruptcy Code
strengthens a bona fide good faith
purchaser defense because the
Code reads, “The trustee may not
avoid under subsection (a) of this
section a transfer of an interest
in real property to a good faith
purchaser 8 without knowledge of
the commencement of the case
and for present fair equivalent
value 9 unless a copy or notice of the
petition was filed, where a transfer
of an interest in such real property
may be recorded to perfect such
transfer, before such transfer is so
perfected that a bona fide purchaser
of such real property, against
whom applicable law permits such
transfer to be perfected, could not
acquire an interest that is superior
to such interest of such good faith
purchaser.” 10 (emphasis added) knowledge” and “good faith” for the
purchaser to receive a lien.
If the property is real property, but
less than the fair equivalent value
was paid by a good faith purchaser 11 ,
defenses may still arise. “A good
faith purchaser without knowledge
of the commencement of the case
and for less than present fair
equivalent value has a lien on the
property 12 transferred to the extent
of any present value given, unless
a copy or notice of the petition was
so filed before such transfer was so
perfected.” 13 (emphasis added) In
effect, the transferee is reimbursed
for the payment.
But, if the
purchaser “had knowledge” of the
bankruptcy – the problem recited
above with the Notice Document
being filed prior to the post-petition
transfer – such lien may not be
granted as the statute requires the
conjunctive elements of “without 4. Was Notice Document Recorded
item prior in time to Receipt by
Transferee?
□Yes – LIABLE b/c “odd matter”
□No – Go to 5
Checklist for Practitioners
Practitioners may want a shorthand
list for this matter. Below, devoid of
exceptions which may break these
not steadfast rules, is an outline
which addresses the majority of
positions which occur for post-
petition transfers – especially
foreclosure sales which arise after
the bankruptcy filing.
1. Transfer Post-petition?
□Yes – Go to 2
□No – GO TO END
2. Knowledge of Petition?
□Yes —
LIABLE
had knowledge
□No – Go to 3
b/c
3. Was Petition (e.g. Suggestion
of Bankruptcy) filed in County
Records?
□Yes – Go to 4
□No – Go to 5
5. Paid Fair Market Value – present
fair equivalent value?
□Yes – GO TO END
□No – May have lien, Seek
reimbursement
END: Not liable for Post-petition
Transfer if you made it to this level
Conclusion
has neither actual nor constructive
knowledge of the bankruptcy, the
transfer may still be avoidable if
the payment for the real property
was not for present fair equivalent
value – a unique term, which is not
identical, but ma inly analogous to,
the Uniform Commercial Code term
of “reasonably equivalent value.”
Further, even if the transferee has
neither actual nor constructive
knowledge of the bankruptcy, the
transfer may still be avoidable if the
transfer occurred after a paper was
recorded in the county which gave
imputed or constructive knowledge
of the bankruptcy. The greatest
and certainly solid defense arises
for the following transferee:
A.
A transferee who purchases
the real property after the filing;
B.
A transferee devoid of
constructive or other knowledge;
C.
A transferee who receives
title before any recording is made
in the county which identifies the
bankruptcy; and
D.
A transferee which paid
present fair equivalent value for the
property.
Any party, who obtains the debtor’s
property without all of these
qualifications, should review the
checklist recited above and make
a business decision of whether to
continue holding the asset even
though the unambiguous language
of the Bankruptcy Code could
persuade the court to require the
transferee to release the same.
Knowledge of the Bankruptcy,
actual
or
constructive,
will
annul the defense provided to a
purchaser who receives a post-
petition transfer of real property
from the estate. If the transferee
National Association of Consumer Bankruptcy Attorneys
Spring 2018
CONSUMER BANKRUPTCY JOURNAL
41