IN RE: BLASINGAME

Summarized by Bradley Pearce , Pearce Law PLLC
7 years 10 months ago

A trust designed to defeat the claims of creditors can sometimes hold up in bankruptcy.

- Rochelle Quick Take

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Case Type:

Consumer

Case Status:

Affirmed

Citation:

17-8009/8011 (6th Circuit, May 03,2018) Not Published

Tag(s):

Ruling:

Residential real property that has been owned by a properly formed trust for nearly 15 years before the commencement of the debtors' Chapter 7 bankruptcy case is not property of the bankruptcy estate. The debtors have only an equitable life estate interest in the residence, as established by the terms of the trust instrument.

Procedural context:

The bankruptcy court, upon cross motions for summary judgment, denied a creditor's motion for summary judgment on its request that the bankruptcy court declare that the residence, used by the debtors for more than 15 years, was property of the debtors' bankruptcy estate.

Facts:

In 1993, debtor Earl Blasingame's mother (Mom) established The Blasingame Family Residence Generation Skipping Trust (the BRT). An asset of the BRT was a residence in which the the debtors resided in 1993. In 1993, the debtors were indebted to a creditor for more than $4MM. The creditor agreed to settle, and release its lien on the residence, for $490,000. Mom wired the money to the creditor and formed the BRT, and the debtors signed the trust instrument as co-trustees. The BRT's beneficiaries included the debtors and their children. The debtors transferred title to the residence to the BRT. The debtors continued to live in the residence. In 2008, the debtors filed a Chapter 7 petition. In 2014, a creditor, acting derivatively on behalf of the Chapter 7 trustee, commenced an adversary proceeding against the debtors and the BRT, seeking a declaration that the residence was property of the debtors' bankruptcy estate. The bankruptcy estate granted the debtors summary judgment, holding that the debtors held only an equitable interest in the residence and that the residence was not property of the bankruptcy estate.

Judge(s):

HUMPHREY, OPPERMAN, and WISE, Bankruptcy Appellate Panel Judges

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