Summary of a Recent
Judicial
Development in
Bankruptcy
Relief from Automatic Stay Granted; Real Property
in Debtor's
Possession Was Not Part of Estate
Walt McCarterNational AgLaw Center Research Associate
Summary of Decision
In In re Schiemer, No. 09-00315-TLM, 2009 WL 741887 (Bankr. D. Idaho Mar. 19, 2009), the United States Bankruptcy Court for the District of Idaho held that real estate in possession of a Chapter 12 debtor was not part of his bankruptcy estate because he had conveyed title to his creditor in lieu of foreclosure and had failed to exercise his repurchase right prior to filing for bankruptcy.
Background
Farm Credit, a creditor in a Chapter 12 bankruptcy proceeding, sought relief from the automatic stay pursuant to § 362(d) and (e) of the Bankruptcy Code. Id. at *1. The debtor had conveyed his real property to his parents in 2005, who assumed the mortgage on the property via assumption agreement. Id. at *2. He thereafter continued to farm the properties, and although he did not make any "lease" payments to his parents, he claimed he continued paying the Farm Credit debt assumed by his parents. Id. at *3. A subsequent liquidation agreement between Farm Credit and the debtor provided that his parents would execute and deliver a deed in lieu of foreclosure on the real property, and surrender possession at a later date unless they exercised their right to repurchase. Id. at *7-8. The debtor and his parents did not exercise the right to repurchase, and a few months after the right had lapsed, the debtor filed for bankruptcy. Id. at *8-9.
Analysis and Holdings
The court concluded that the automatic stay did not apply to Farm Credit because the real property at issue was not property of the debtor's estate; the debtor's repurchase right had lapsed prior to filing his Chapter 12 petition. Id. at *12. Furthermore, the court held that even if the stay applied, Farm Credit was entitled to relief under § 362(g)(1) because it had successfully proven the debtor's lack of equity in the property. Id. The court therefore granted Farm Credit's motion for relief from stay as to the debtor's real property. Id. at *14.
The case was decided on March 19, 2009.