In bankruptcy actions, debtors are typically protected from claims from creditors. The bankruptcy code only protects debtors from personal liability, however, not claims to property interests in a partnership, as demonstrated in a recent California ruling issued in a bankruptcy case. If you need assistance managing your debts, it is in your best interest to talk to a California bankruptcy lawyer to determine what relief may be available.
Factual and Procedural History of the Case
It is reported that the subject claim arises out of a dispute regarding ownership rights to a commercial property in Oceanside, California. The owners did not have a written partnership agreement. The debtor asserts an 85% interest in the property, based on the recorded title in 1996. The claimant asserted that there was an oral agreement in 1995 to reduce Keenan’s partnership interest to 55%.
Allegedly, the debtor filed for Chapter 11 bankruptcy. During his bankruptcy proceedings, he consistently treated his interest as 55%. After his Chapter 11 plan was confirmed, however, he filed an amended property schedule asserting the larger interest. The bankruptcy court rejected the debtor’s post-confirmation assertions. Subsequently, the claimant filed a state court action seeking to amend the recorded deed to reflect the adjusted interest. The state court ruled in favor of the claimant in 2017, and the debtor’s appeal was dismissed.
Reportedly, the debtor then returned to the bankruptcy court to challenge the state court judgment, arguing that it was inconsistent with the discharge provision of the Chapter 11 plan. The bankruptcy court denied the debtor’s motion, stating that the discharge provision only applied to the debtor’s personal liability, not the claimant’s equitable rights to the partnership. The court also noted that the debtor’s breach of the partnership agreement occurred after the discharge became effective and that he was precluded from challenging the partnership.
Claims Involving Partnership Interests in the Context of Bankruptcy Actions
On appeal, the Bankruptcy Appellate Panel (BAP) affirmed the bankruptcy court’s decision, stating that the state court litigation concerned a property interest rather than a dischargeable claim. The BAP also emphasized that the confirmed plan did not discharge the claimant’s equitable claim, as only the 55% interest claimed by the debtor in his bankruptcy schedules became part of the estate.
Additionally, the BAP clarified that the provision in the plan regarding partnership adversary proceedings did not address the claimant’s equitable claim, as it pertained to disputes between the trustee and the partners, not between the partners themselves. Finally, the debtor’s argument that claimant’s claim should have been resolved through an adversary proceeding in the bankruptcy court was dismissed due to the lack of subject matter jurisdiction, as the action did not concern property of the estate.
Consult a Skilled California Bankruptcy Attorney
It is crucial to have a clear understanding of the rules surrounding bankruptcy before filing, as debtors are not protected from all claims. If you are facing substantial debts that you find difficult to repay, it is advisable to consult with an attorney to explore the available options for debt relief. Matthew D. Roy is a skilled bankruptcy lawyer in California with extensive experience in assisting individuals in gaining financial stability through bankruptcy, and if you hire him, he will work diligently to achieve the most favorable outcome based on the specific circumstances of your case. You can contact Mr. Roy through the form online or by calling (916) 361-6028 to set up a conference.