The property of the bankruptcy estate cannot be removed from the bankruptcy court’s exclusive jurisdiction except by proceedings in the bankruptcy court. The bankruptcy case filing vests exclusive jurisdiction over the debtor’s property in the bankruptcy court so that it may control the administration of the case.
Section 363 and § 554 provides for the voluntary disposition of assets during administration of the case if authorized. Section 549(a) provides a remedy for the avoidance of voluntary transfers that are unauthorized.
Under § 549(a), "[a] transfer, including a lien, may be avoided . . . if: (1) the subject property was property of the bankruptcy estate; (2) the property was transferred; (3) the transfer was made post-petition; and (4) the transfer was not authorized by the bankruptcy code or the bankruptcy court." Section 549(a) permits the avoidance of liens and any other mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an interest in property that occurs post-petition.
Under § 547, "The Bankruptcy Code allows the trustee to avoid (set aside) pre-bankruptcy transfers of the debtor's property that would result in preferential treatment of favored creditors." Generally, "an avoidable preference is a transfer of the debtor's property, to or for the benefit of a creditor, on account of the debtor's antecedent debt, made less than ninety days before bankruptcy while the debtor is insolvent, that enables the creditor to receive more than it would in a Chapter 7 liquidation."
When a preferential or post-petition transfer is avoided, the trustee recovers the value of the property transferred. This allows the trustee to restore the bankruptcy estate to the position it would have been in had the transfer or preference not occurred. 11 U.S.C. § 550(a). Many times in a chapter 7 bankruptcy the debtor is not concerned with the recovery of the preference payment made to creditors in the ninety days preceding the bankruptcy filing. Commonly, this is because the debtor will be discharged the debt owed to the creditor. Preference payments can however become problematic when there is a co-debtor associated with the preference payment. Debtors should understand that if the preference payment to the creditor is avoided, the co-debtor will not only owe the previous remaining balance, but also for any avoided amount.
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The bankruptcy case filing vests exclusive jurisdiction over the debtor’s property in the bankruptcy court so that it may control the administration of the case. Preference payments and post-petition transfers are avoidable by the case trustee. Contact the attorneys at LifeBackLaw and see us at www.LifeBackLaw.com and let us help you get your life back.
