(Bankr. E.D. Ky. Mar. 6, 2015)
The bankruptcy court holds that the debtor’s right of redemption, following a postpetition foreclosure sale, is property of the estate. The debtor filed bankruptcy prior to the foreclosure sale of her real property. The court then granted stay relief (but not abandonment) to allow the foreclosure sale to proceed. No lienholders bid at the sale, and the property sold for $5,000, which was far less than the appraised value. The debtor than transferred the right of redemption to an entity she controlled. The trustee filed an adversary proceeding seeking a judgment declaring the right of redemption property of the estate. The court first determined under Kentucky law that the right of redemption did not arise prepetition but instead arose at the time of the foreclosure sale. Thus, it was not property of the estate at the time the petition was filed. The court then concluded that the right of redemption constituted proceeds of property of the estate (the real property) and thus under § 541(a)(6) it was now property of the estate. Opinion below.
Author: Matt Lindblom