Suffering an Unfair Job Loss is Tough, our california employment attorneys can help.

Sixth Circuit BAP Allows Debtor to Avoid Unperfected Mortgage on Manufactured Home - In re Barbee

January 17, 2012

Vincent Howard and our team of Riverside County foreclosure defense lawyers were interested to see another ruling allowing a bankruptcy debtor to successfully avoid a lien on a manufactured home. In In re Barbee, the Bankruptcy Appellate Panel for the Sixth U.S. Circuit Court of Appeals found that Gary D. Barbee of Kentucky may avoid a lien on his manufactured home because the lender, U.S. Bank, never perfected its lien on the home. Barbee mortgaged the land and all improvements, including a double-wide trailer built onto the land. When he later filed for bankruptcy, he argued that the bank never perfected its lien because it never acquired title to the manufactured home. The bankruptcy court agreed, and after review, the Sixth Circuit BAP allowed that ruling to stand.

Barbee and Rebecca Gaunce borrowed about $75,500 from Countrywide to buy the land in 1999, encumbering "all improvements and fixtures" on it. They never acquired title to the home, but the record shows it was gutted and rebuilt as a non-mobile home in 1997. In 2009, Barbee filed for Chapter 13 bankruptcy; Gaunce filed a separate case in which there was no controversy with the lender. Six months later, the bankruptcy court allowed Barbee to pursue an adversary complaint alleging that the bank's interest is avoidable because it was not perfected by acquiring title. Both sides filed for summary judgment, with the bank arguing that Barbee lacked standing to bring the adversary proceeding in the first place because he also has no title and no interest in the home other than as an improvement or fixture on real estate. The bankruptcy court disagreed, ruling the lien avoidable because ownership was never noted on the title and the home had not been converted to real property.

In a ruling that relied heavily on the Sixth Circuit's 2011 manufactured home case, Countrywide Home Loans v. Dickson, the Sixth Circuit BAP upheld the bankruptcy court. The BAP in Dickson ruled that the debtor did have standing to avoid a lien even though she was not the trustee, and while the Sixth Circuit itself never reached the issue, the BAP adhered to that precedent. The BAP also ruled that the home is a part of Barbee's bankruptcy estate, because he has an equitable interest regardless of whether he has the title. However, under Kentucky law, a manufactured home is personal property, which means perfecting a lien requires noting it on the title or converting it n court. Bankruptcy law says a property interest must be created by state law or federal interest, the court said, rending the bank's mortgage argument incorrect. Other bank arguments were waived because they were used for the first time on appeal. Thus, the BAP agreed that the lien is avoidable.

Our San Juan Capistrano foreclosure defense attorneys are pleased to see another opinion requiring lenders to answer for the consequences of their inaction when it comes to legal technicalities. Very often, borrowers are the ones who suffer when lenders aren't prompt or make mistakes with paperwork, and it takes an experienced attorney like Vincent Howard to keep these mistakes from doing lasting harm. This case and Dickson rely to some extent on the fact that a manufactured home is treated as a different kind of property in Kentucky -- more akin to a car than a home. It's unclear whether this is true everywhere, but because Dickson reportedly created a split in the circuits, the issue is likely to be revisited. At Howard Law, P.C., our Oceanside foreclosure defense lawyers help clients find quirks like these that can help them fight a rushed or unfair foreclosure.

Vincent Howard and our team of experienced attorneys represent Californians who have run out of options or patience with their lenders and are ready to fight back. To learn more or tell us your story, send us an email or call toll-free at 1-800-872-5925.

Similar articles:

Chapter 13 Debtor May Avoid Lien Created by State Court Judgment on Manufactured Home - Dickson v. Countrywide Home Loans

Eighth Circuit Rejects Chapter 13 Bankruptcy Plan That Avoids Junior Home Liens - Fisette v. Keller

Bankruptcy Trustee May Pursue Judgment Even When Debtor May Not, Fifth Circuit Rules - Reed v. City of Arlington