Hope v. Acorn Financial, Inc.

Summarized by Paul Avron , Berger Singerman LLP
12 years 5 months ago

Citation:

Case No. 12-10709 (11th Cir. Sept. 26, 2012)

Tag(s):

Ruling:

A chapter 13 trustee who, depsite having actual knowledge that a secured creditor's lien was unperfected as of the date the debtor filed the bankruptcy case, and who affirmatively recommended confirmation of the debtor's chapter 13 plan which treated the creditor as secured, is bound by the order confirming the plan and cannot thereafter bring suit against the creditor to avoid its lien.

Procedural context:

The chapter 13 trustee appealed the District Court's affirmance of the Bankruptcy Court's grant of summary judgment to the creditor, Acorn Financial, Inc., on its motion for summary judgment seeking dismissal of the trustee's action to avoid the creditor's lien as a preferential transfer in violation of section 547(b) of the Bankruptcy Code.

Facts:

Debtor purchased a car and financed it through Acorn Financial, Inc. which obtained a security interest in the vehicle. Acorn did not perfect its lien until six days after Debtor filed his chapter 13 case. Acorn filed a claim in Debtor's bankruptcy case. The Trustee's office was advised that Acorn's lien had not been perfected as of the date of the bankruptcy filing. Nevertheless, the Trustee recommended that the Bankruptcy Court confirm Debtor's chapter 13 plan which treated Acorn's claim as a secured creditor. After confirmation the Trustee filed an adversary proceeding to avoid Acorn's lien as a preferential transfer in violation of section 547(b) of the Bankruptcy Code. Acorn moved for summary judgment based on the confirmed plan which it argued bound the Trustee under section 1327(a) of the Bankruptcy Code. The Bankruptcy Court granted the motion and the District Court affirmed. On further appeal the Eleventh Circuit also affirmed finding, among other things, that Code section 1327(a) did not specifically identify a trustee as one of the persons bound by a confirmation order the Trustee was, in fact, bound, relying on its prior case law, and the fact that the Trustee was a "party in interest" who was bound by a chapter 13 confirmation order.

Judge(s):

Circuit Judges Adalberto Jordan and Rosemary Barkett, and District Judge Harvery Schlesinger, Middle District of Florida, sitting by designation

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