Bankruptcy Proceedings

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7^TH Circuit Court of Appeals

Case Name: Keith Smith v. Sipi, LLC

Case No.: 15-1166

Officials: BAUER, WILLIAMS, and HAMILTON, Circuit Judges.

Practice Area: Bankruptcy Proceedings

Court addresses issue of whether debtor may set aside a sale and addresses compliance with Illinois tax sale procedures.

“We believe this argument misunderstands a key distinction between a debtor’s power acting in place of a trustee to avoid a transfer and the entitlement to and amount of a debtor’s recovery. It is true that the Smiths as debtors have the power to avoid the transfer just as their trustee would. See 11 U.S.C. § 522(h). As the bankruptcy court explained, where a transfer is avoidable under § 548 but the trustee does not attempt to avoid it (which the bankruptcy court found was the case here), the debtors themselves may avoid the transfer. But the power to avoid is only the power to unwind the transfer. No authority would allow the Smiths themselves to recover the full value of the property simply because they can avoid the tax sale. The homestead exemption provides a safe haven for some recovery for parties in the Smiths’ position. But any additional recovery would be for the benefit of the Smiths’ estate and therefore for their other creditors.”

Reversed in Part

Affirmed in Part

Full Text

Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.