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PaperclipPerfector  25d ago (text post)   2693 thread views

Friday Fun Thread for March 7, 2025

Be advised: this thread is not for serious in-depth discussion of weighty topics (we have a link for that), this thread is not for anything Culture War related. This thread is for Fun. You got jokes? Share 'em. You got silly questions? Ask 'em.

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Based on the facts, I think it is safe to assume that the borrower didn’t knowingly mislead the creditor here. The plaintiff is the trustee for the bankrupt borrower, meaning the debtor is not directing the action. The trustee’s job is to find every avenue of relief permissible under the law. Given that the borrower is a truck driver in rural Kentucky, living in a trailer home, I’m going to go out on a limb and say that he is probably not a sophisticated borrower who knew the nuances of title registration law when negotiating with the bank.

This is likely an instance of the trustee’s attorney finding a technical argument on behalf of the bankrupt estate with no bad faith involved in the creation of the loan.

Notably, the creditor here does not lose the debt claim, they just move from secured to unsecured creditor status and can recover from the general assets of the bankrupt party along with other unsecured creditors. The borrower doesn’t get a free truck here, and the bank is only left out in the lurch to the extent that the other unsecured creditors share in the assets.

The plaintiff is the trustee for the bankrupt borrower, meaning the debtor is not directing the action. The trustee’s job is to find every avenue of relief permissible under the law.

Gotcha, I didn't catch that detail. I thought that this was a case where the borrower himself was claiming his residence was different once he was in bankruptcy court.

I would also clarify that the upshot here isn't that the debtor gets to keep the truck. For the sake of argument, let's assume that sale of the truck will recover $50,000 after fees, which amount is exactly the same as the lien Creditor A claims against it. This is the only property of the estate available for distribution. Let's also assume that the debtor has $100,000 in total debt, and that the other $50,000 is from an unsecured loan from Creditor B. This is a straight Chapter 7 liquidation. If Creditor A's lien is valid, then Creditor a gets the full $50,000 proceeds and Creditor B gets nothing. Since the court ruled the lien was invalid, there's now $50,000 to be split between two unsecured creditors, and each would get $25,000.

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