Debtor may not Block Trustee Settlement

The following is a summary of a Minnesota bankruptcy case or a case relevant to Minnesota bankruptcy law.

Minnesota Bankruptcy Case:

Stephens v. Hedback (In re Stephens), 425 B.R. 529 (B.A.P. 8th Cir. (Minn.) 3/12/10) (Federman, J.).

Case Summary:

Debtor may not Block Trustee Settlement when She has no Interest in Subject Property

The Eighth Circuit BAP considers the merits of a debtor’s appeal, even though she has been ordered to file no further pleadings regarding certain property, and affirms the order approving the trustee’s settlement with the trustee of another estate regarding that property. In the ongoing saga of Yvonne Stephens and Larry Alexander, two debtors who claim ownership and homestead interests in a parcel of property, their respective Chapter 7 trustees sought approval of a settlement involving the property. In past litigation, all of the federal courts including the Eighth Circuit have determined that neither debtor has any interest in the property. Nonetheless, Ms. Stephens filed amended schedules again asserting a homestead exemption, and argued that since that claim had not been adjudicated yet, the court could not approve the trustees’ settlement. But it did. On appeal, the BAP affirms, and actually takes eight pages to say that because the debtor has been determined to have no interest in the property, her amended schedules and her good or bad faith have no legal effect. They are a nullity and the settlement may proceed.

Credit: The preceding was a summary of a case relevant to Minnesota bankruptcy law. The case summary was prepared by the U.S. Bankruptcy Court through Judge Robert J. Kressel & attorney Faye Knowles.