Federal Court in Oregon Rules that Debtor Cannot Compel Lender to Take Title to Bankruptcy Estate Property

Stoel Rives was recently involved in a successful appeal of a Chapter 13 bankruptcy confirmation order that purported to transfer title in property of the estate to the borrower’s lender. The District Court vacated the confirmation order and remanded for further proceedings.

In her decision, Judge Ann Aiken quoted with approval a prior bankruptcy court decision, In re Rose, 512 B.R. 790 (Bankr.W.D.N.C. 2014):

"[f]orcing a lender to take title to property would open a Pandora's Box of unintended, injurious consequences First, and obviously, [it] causes [the lender] to assume burdens of ownership for which it did not contract ... The potential for personal liability also exists if the collateral property is dilapidated, damaged," or "subject to multiple encumbrances, [including] accrued HOA obligations".