To continue with the Blog of Nov. 19, 2013 on Trustee Whitmore’s selling autos in the bankruptcy case for the benefit of creditors. Judge Houle continued in his opinion….
The trustee must articulate some “business justification” for selling estate property out of the “ordinary course of business” before the court may approve the transaction. In re Lionel Corp., 722 F.2d 1063, 1071 (2d Cir. 1983); In re Ernst Home Ctr., Inc., 209 B.R. 974, 979 (Bankr. W.D. Wash. 1997). Objections to sale that are based on inadequacy of price are often resolved the court ordering an auction, which may occur in open court. Simantrob v. Claims Prosecutor, LLC (In re Lahijani), 325 B.R. 282, 287 (9th Cir. BAP 2005) citing Fed. R. Bankr. P. 6004(f).1
Here, the value of the Vehicle is between $16,675 and $17,750. The Debtor properly exempted $2,725 and has offered to pay $9,000 in order to retain the Vehicle. Though this amount does not represent the full value of the Vehicle’s remaining equity, the Trustee asserts that it is in the best interests of the estate to accept the $9,000 offer from the Debtor in order to avoid undertaking the expensive process of taking possession of the Vehicle as well as the costs and risks associated with an auction. For these reasons, the Trustee has demonstrated a sufficient business justification for selling of the Vehicle as requested.
Sale Free and Clear of non-Debtor Interests
A trustee may sell estate property “free and clear” of third party interests in the property, such as co-ownership interest, liens, claims and encumbrances. See 11 U.S.C. § 363(f). A sale free and clear of third party interests pursuant to section 363 is authorized only if one of the following conditions is met: (1) sale authorized by applicable nonbankruptcy law; (2) third party whose interest will be affected consents; (3) the affected interest is a lien and the sale price is greater than total value of all liens on the property; (4) the affected interest is a bona fide dispute; or (5) the third party whose interest will be affected could be compelled to accept a money satisfaction of the interest. 11 U.S.C. § 363(f)(1)-(5).
The Trustee must demonstrate the above in order to have permission to sell an auto or personal property.