Bankruptcy proceedings often involve not just questions of debt relief but also serious disputes over property rights, trust ownership, and trustee powers. When a debtor attempts to shield property by placing it in trust or disputes the trustee’s control over valuable real estate, the court must step in to determine what belongs to the estate and what does not. A recent California bankruptcy ruling illustrates how these conflicts are resolved in Chapter 11 and illustrates how the law of the case doctrine can prevent re-litigation of issues already decided. If you are considering bankruptcy or are already involved in proceedings where ownership of trust or jointly held property is contested, it is critical to speak with a California bankruptcy attorney as soon as possible.
Case Setting
It is reported that the debtor filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Central District of California and disclosed an interest in real property located on June Street in Beverly Hills, California. The debtor listed the property with an estimated value of $4.9 million and noted only a $15,000 tax lien as an encumbrance. The filing also disclosed roughly $32 million in liabilities.
It is alleged that although the debtor originally included the June Street property as part of his bankruptcy estate, he and other affiliated parties, including his wife and several family trusts—later claimed that the property was not his and was instead held by various trusts. In response, the Chapter 11 trustee filed a quiet title action seeking a declaration that the property belonged to the estate. Continue reading