A Party Does Not Have Standing to Appeal Bankruptcy Court Order simply because it has been Allowed to Appear in Bankruptcy Proceedings

A Party Does Not Have Standing to Appeal Bankruptcy Court Order simply because it has been Allowed to Appear in Bankruptcy Proceedings

Under Florida law, when property is held as a tenancy by the entireties, only a creditor of both spouses (jointly) can reach such property. See In re Kossow, 325 B.R. 478, 483 (Bankr. S.D. Fla. 2005). Therefore, with limited exceptions, entireties property does not become property of the bankruptcy estate when only one spouse has filed a bankruptcy petition.  William, who filed a Chapter 7 bankruptcy petition on July 27, 2015, contends that certain of his assets (henceforth, the “Entireties Assets”) are owned as tenants by the entireties with his wife, Terre, and are therefore exempt from his bankruptcy estate. However, the Chapter 7 Trustee contends that the married couple owes a joint debt to the Creditors; if so, the Entireties Assets would be subject to administration by the Chapter 7 Trustee up to the amount of the joint debt.

The (alleged) debt at issue arises from certain loans from SunTrust Bank that were guaranteed by the Creditors and the couple, among others. After the loans went into default, the Creditors made payments to SunTrust on the guarantees and then turned to their co-guarantors, seeking equitable contribution. The Creditors filed suit against the couple in state court in 2014, but the equitable contribution claim has not yet been resolved.

The Chapter 7 Trustee now seeks to have the Bankruptcy Court determine whether Terre  owes a debt to the Creditors and, if so, whether that debt is owed jointly with her husband. The Creditors argue that it would be improper (or, at least, inefficient) for the Bankruptcy Court to adjudicate a dispute between two non-debtors that is already pending in state court. The Creditors filed a motion to have the Bankruptcy Court abstain from resolving the joint debt issue, but on December 18, 2017, the Bankruptcy Court denied the motion. The Creditors now seek leave to appeal the denial of the motion for abstention.

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