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In re Mullen (Case No. 05-70763) 07/15/2005

The Trustee objected to confirmation of the Debtor's Chapter 13 plan on the ground that it does not meet the requirement of 11 U.S.C. § 1325(a)(4) (the "liquidation test").  The Debtor co-owns her personal residence with her sister.  The issue before the Court is whether the Debtor would have to absorb the full cost of the sale of her residence, rather than prorating the costs of sale among the co-owners, thereby reducing the Debtor's equity, if any, in the property.  For purposes of the liquidation test, 11 U.S.C. § 363(j) is clear that if the case were liquidated under Chapter 7, the trustee would distribute any proceeds according to the interests of any co-owners after deducting costs and expenses.  There is no dispute in the courts in the interpretation of this provision and the costs of sale are to be pro-rated rather than charged first against any individual co-owner's interest.

Friday, July 15, 2005
Confirmation of Plan
Liquidation Test