Reinbold v. Thorpe (In re Thorpe)

February 15, 2018

Case Type:

Case Status:

Citation:

17-1766 (7th Circuit, Jan 31,2018) Published

Ruling:

Under the Illinois law, each spouse is vested with independent contingent interests in marital property when the divorce petition is filed. When one spouse files bankruptcy, a trustee succeeds only to the title and rights in property that debtor had on the petition date and when the divorce court award the marital property to the non-debtor spouse, the debtor’s contingent interest vanishes. A debtor’s rights against third parties is limited to what existed on the petition date and the estate’s property does not include things to which it lays claim until the matter is adjudicated or resolved.

Procedural context:

The chapter 7 trustee brought an adversary proceeding seeking a ruling that debtor’s half interest in the marital home was transferred to the estate free and clear of the wife’s contingent interest. The bankruptcy court found in favor of the non-debtor spouse and the district court affirmed. The 7th Circuit affirmed reviewing the lower court’s interpretation of Illinois law de novo.

Facts:

The debtor and his wife were married and bought a house as joint tenants. The wife filed for divorce and approximately 8 months later, the debtor filed for chapter 7 bankruptcy protection. After the automatic stay was lifted, the divorce court awarded the marital home to the wife and the Trustee brought the adversary proceeding seeking to sell the debtor's half interest in the marital home. The Trustee contended that both the bankruptcy and district courts incorrectly interpreted Illinois law regarding marital property arguing, instead, that the debtor’s half interest in the house was free of the wife’s contingent interest. The 7th Circuit disagreed finding that when the wife filed for divorce, she and the debtor were each vested with contingent interests in the entire marital home and the debtor owned a half-interest subject to the wife’s contingent interest. This qualified half-interest is what the estate acquired when the debtor filed for bankruptcy less than a year later. Finally, once the divorce court awarded the wife the entire marital home, the estate’s contingent interest in the house disappeared leaving the estate without a claim.

Judge(s):

Bauer, Flaum, Sykes (Sykes)

Tag(s):

Pittner v. Castle Peak 2011-1 Loan Trust

Secured creditor was not in contempt of confirmation order and confirmed chapter 11 plan where the plan and...

BAPCPA Limits Remedies Against Debtors Who Don’t Reaffirm or Surrender

‘Stay and pay’ may not be permissible, but the remedies can be toothless.

Return to Home

Insolvency news at your fingertips.

Reinbold v. Thorpe (In re Thorpe)

Previous Article

Next Article

Reinbold v. Thorpe (In re Thorpe)

Previous Article

Next Article

Other content in this Stream

Washington, D.C. ~ ~ ~ April 11 - 14 . . . . . . . . . . . . Bob Woodward just announced as keynote speaker.

Has the stigma surrounding personal bankruptcy increased, not decreased?

Once a landlord files for bankruptcy protection, what options will the trustee have in dealing with their remaining tenants?

David R. Kuney of Whiteford Taylor Preston talks about the rapidly shifting landscape of the retail world and issues for practitioners to be aware of in handling landlord or tenant rights.

"If the trustee rejects an unexpired lease, then the lessee may retain its appurtenant possessory rights in the property for the balance of the lease term."

"The bankruptcy court in Felgner identified 10 factors from Murphy that are relevant in determining domicile: [...]"

All foreclosure sales in Georgia are held on the first Tuesday of each month. As foreclosure sales are final in Georgia, debtors are incentivized to file a chapter 13 to stop a foreclosure sale.

With the rise of retail bankruptcies, loss of rental income and anticipated increase in the national interest rate, the need for bankruptcy in the commercial real estate sector might increase.

The meaning of a debtor's election to "surrender" his or her residence in a chapter 7 case.

ABI Deputy Executive Director Amy Quackenboss talks with David Cox of Cox Law Group and Elizabeth Gunn of the Office of the Virginia Attorney General about their new consumer book.

Secured creditor was not in contempt of confirmation order and confirmed chapter 11 plan where the plan and order imposed no duty or requirement that the secured creditor could have violated.

‘Stay and pay’ may not be permissible, but the remedies can be toothless.

Bifurcation in a Chapter 13 plan after In re Coyle.

District judge refuses to give automatic stay protection to a tax evader.

ABI's Bill Rochelle talks with John Rao of the National Consumer Law Center about his role as a member of ABI's recently formed Commission on Consumer Bankruptcy.

Real estate debtor principals who guaranty a debtor’s debts often face uphill battles to obtain stays pursuant to § 105 of the Bankruptcy Court of guaranty actions against them by secured creditors.

A recorded session from an ABI consumer conference that covers a variety of escrow and mortgage-related issues.

State foreclosure processes are notoriously messy. They can drag on for a years and debtors don’t always recoup their loan balance or legal fees.