Objection to Property Sale Bankruptcy
Once a bankruptcy petition is filed, the property of the estate becomes "subject to the control and administration of the trustee." Id. 1087.
When administering the estate, "one of the principal duties of a Chapter 7 trustee is to collect the property of the estate and reduce it to money, and to close the estate as expeditiously as is compatible with the best interests of the parties in interest." 9 Am. Jur. 2d Bankruptcy 317 (1999).
One method to accomplish this duty is to sell the property in the estate. See 9B Am. Jur. 2d Bankruptcy 1518 (1999). "The trustee . . . is granted broad powers . . . with respect to the . . . sale . . . of property of the estate . . . . Generally, transactions outside the ordinary course of business require notice and an opportunity for a hearing if there are any objections." Id.
see also Fed. R. Bankr. P. 6004(a), (e). Objections to a proposed sale "shall be filed and served not less than five days before the date set for the proposed action or within the time fixed by the court." Id. 6004(b). "Failure to timely file an objection . . . can result in a waiver of the objection." 9B Am. Jur. 2d Bankruptcy 1534.
Upon completion of the sale, the regular practice of bankruptcy courts is to issue an order confirming the sale. See id. 1554. Such orders constitute final orders. See 9E Am. Jur. 2d Bankruptcy 3495 (2000).
Thus, the appropriate method to challenge such a sale is by appeal, not collateral attack.
The principles that underlie bankruptcy law are relevant to its application.
In particular, "a principal function of bankruptcy law is to determine and implement in a single collective proceeding the entitlements of all concerned." 9 Am. Jur. 2d Bankruptcy 2.
Bankruptcy law thus "contemplates participation in a bankruptcy proceeding by any party having an interest in any issue relating to the debtor." Id.
1. Stated differently, "a bankruptcy case operates as a collective execution on behalf of creditors on all the assets of the debtor . . . that replaces individual collection remedies." Id.
2. This collective execution increases "the aggregate pool of assets available to satisfy the creditor's claims by prohibiting a disadvantageous, piecemeal liquidation of the debtor's assets," id. and "prevents the inequity of one creditor recovering more on its debt than the remaining similarly situated creditors can recover on theirs," Delgado Oil Co. v. Torres, 785 F.2d 857, 861 (10th Cir. 1986).
In sum, bankruptcy law seeks to accomplish three goals:
(1) "equitable distribution of the debtor's assets among his or her creditors";
(2) "relieving the honest debtor from the weight of oppressive indebtedness to permit the debtor to start afresh";
(3) "expeditious and economic administration of cases under the Bankruptcy Code." 9 Am. Jur. 2d Bankruptcy 5.