In re: Hadley, No. 16-8010 (6th Cir. 2016)Annotate this Case
Debtor was unable to pay $70,000 attorney fees accrued over several years. The attorney continued to provide legal services. In May 2008, Debtor gave the attorney possession of the titles to a 1954 MG and a 1977 Ferrari as security. There was no written security agreement. When a bank began putting pressure on Debtor, she turned over possession of the vehicles in 2012. Debtor did not sign over the titles or complete assignment of ownership forms until six days before Debtor’s Chapter 7 bankruptcy filing. The vehicles were not in working order. The attorney had some repairs done and sold the vehicles to a third party for $40,000 in November 2013. Eight months later, the Chapter 7 trustee filed an adversary complaint, 11 U.S.C. 547(b). The bankruptcy court concluded that the attorney did not have a valid or perfected attorney lien under Ohio law and that the transfer occurred within the look-back period for avoidance. The bankruptcy court granted the trustee judgment for $32,000, plus prejudgment interest. The Sixth Circuit Bankruptcy Appellate Panel affirmed, upholding the determination of value. The transfer was preferential; the bankruptcy court found unsecured creditors would receive no distribution, so the attorney received more than he would have in the Chapter 7.