Generally, in a bankruptcy case when a Trustee attempts to sell property free and clear of any interest in that property they must fall under one of the five subsections outlined in Bankruptcy Code Section 363(f). Specifically, Section 363(f)(4) allows the Trustee to sell the property free and clear if such interest in that property is in bona fide dispute. To protect your interest in your collateral you must know what a bona fide dispute is. Luckily, an experienced bankruptcy attorney can help!
Bona Fide Dispute with a Bankruptcy Attorney
While bona fide dispute is not defined in the Bankruptcy Code, several Courts have fashioned a generally similar definition. Courts have held that a bona fide dispute exists when “there is an objective basis for either a factual or legal dispute as to the validity of the debt.” In re MMH Automotive Group, LLC, 385 B.R. 347, 370 (Bankr. S.D. Fla. 2008) (citing In re Gulf States Steel, Inc. of Alabama, 285 B.R. 497, 507 (Bankr. N.D. Ala. 2002).
Bankruptcy Attorney Evidence for Bona Fide Disputes
When the Trustee moves to sell property free and clear under the bona fide dispute theory, it is the Trustee’s burden to show that a dispute exists. While Courts require evidence that shows that there is an “objective basis” for the dispute, the court is not required to make any findings as to the outcome of the dispute but rather only determine that a dispute does exist.