Local Rule 6004-1: SALE OF ESTATE PROPERTY

RULE 6004-1. SALE OF ESTATE PROPERTY.

(a) Sales Free and Clear of Liens. A party seeking to sell property free and clear of liens under § 363(f) must file a motion and obtain a Court order approving the sale.

(1) Contents of Motion. The motion must include:

(A) a detailed description of all property to be sold;

(B) a list of the holders and amounts of all secured claims against each property to be sold;

(C) the proposed bidding, auction and sale terms and procedures, including any governing (i) qualification of bidders, (ii) good faith deposits, (iii) bid deadlines, (iv) forms of bid, (v) bid protections proposed to be offered to an initial or "stalking horse" bidder, (vi) back up bids, (vii) modifications of any bid or auction dates, deadlines, or procedures and how such modifications will be communicated to parties in interest, and (viii) whether and how the bidding at the auction will be recorded, transcribed, and/or reported.

(D) the date, time, and location of (i) any hearing to approve bidding and sale procedures, (ii) any auction, and (iii) the hearing to approve the sale;

(E) a list of all methods used or proposed to advertise the sale to potential bidders; and

(F) a description of the due diligence undertaken to identify and provide notice to (i) all parties with an interest in the property being sold, and (ii) all potential bidders.

(2) Notice. The notice of sale must set forth the information outlined in subparagraph (1) above and may do so in summary form. The notice of sale must also make clear the sale is subject to Court approval. The notice of sale and notice of motion must be served on all secured creditors, the United States Trustee, all parties who have (or are identified on public record as claiming to have) an interest in the property being sold, all other parties listed on the master mailing list, and all parties that the movant, through due diligence, determines to be potential bidders.

(3) Hearing to Approve Proposed Sale Procedure. If a movant seeks Court approval of a proposed sale procedure (e.g., proposed bidding procedure for an auction to be conducted at a subsequent hearing), a hearing to approve the proposed sale procedure must be set at least seven days before the proposed sale, unless the Court approves a shorter time. The movant must set a hearing to approve the sale within seven days of completion of the sale, unless the Court approves a longer time.

(b) Other Sales Outside the Ordinary Course of Business. The debtor-in-possession or case trustee may seek approval of a sale outside the ordinary course of business through a notice of intent to sell, if the movant is not seeking to sell property free and clear of liens, and the aggregate value of the estate's property being sold is less than $2,500. A notice of intent to sell or a motion to sell for estate property valued more than $2,500, outside the ordinary course of business must include:

(1) the type of sale and a list of all known prospective purchasers;

(2) the terms of sale, including but not limited to (A) the location and condition of the items to be sold, (B) bidding procedures, (C) the minimum bid, if any, and whether the sale is subject to higher and better offers, (D) the funds required to be paid at the time the sale is approved, (E) the form of funds required at the time of approval and time of closing of the sale, and (F) a proposed date for both the approval and closing of the sale;

(3) identification of the property (e.g., the VIN, make, model, and serial number of a vehicle; volume/page number and town where ownership of real property is recorded; street address of real property), as applicable;

(4) the names and purported interests of all parties known, or discoverable after reasonable investigation, to claim an interest in the property;

(5) the fair market value of the property, the basis for that valuation, and the amount and holder of any outstanding indebtedness secured by the property;

(6) a copy of the contract; and

(7) any other information that provides due process to all parties in interest and is likely to maximize the sale price.

(c) Form of Orders Approving Sales. All proposed orders approving sales must state the name and address of the buyer, identify the property sold, specify the amount paid, and disclose the net proceeds to the estate. If the terms of sale do not match exactly the terms set forth on the notice of sale, the proposed order must identify and explain the differences.

(d) Orders Based on Notice of Intent to Sell. The Court will enter an order approving the case trustee's sale of estate property when the trustee files a proposed order in conjunction with a notice of intent to sell, as referenced in paragraph (b) above, only if the proposed order:

(1) contains all the information set forth in the notice;

(2) indicates no objections were filed within the time required under the applicable Bankruptcy Rules; and

(3) contains sufficient specificity to enable the Court to determine whether all statutory requirements of § 363(b)(1) have been met.

(e) Sale or Refinance of Property in Chapter 12 and 13 Cases.

(1) Approval Procedures. No sale or refinance of the debtor's principal residence or other real property may take place while a chapter 12 or 13 case is pending unless:

(A) the Court approves the sale or refinance after notice to all parties in interest, see Bankruptcy Rule 2002(a)(2); or

(B) the debtor obtains the chapter 12 or 13 trustee's approval using the procedure described in subparagraph (2) below.

(2) Chapter 12 or 13 Trustee's Approval.

(A) If the debtor wishes to use the proceeds of a sale or refinance of real or personal property to fund a chapter 12 or 13 plan, the debtor may request a "Certificate of Approval" from the chapter 12 or 13 trustee on seven days' notice to all parties in interest only if at least one of the following conditions is met:

(i) to the extent there are net proceeds, all net proceeds will be dedicated to fund the chapter 12 or 13 plan;

(ii) the confirmed chapter 12 or 13 plan provides a dividend of no less than 15% to all unsecured creditors holding allowed claims; or

(iii) to the extent the confirmed chapter 12 or 13 plan does not provide at least a 15% dividend to all unsecured creditors holding allowed claims, the net proceeds of the sale or refinance are used to create such a dividend, and any net proceeds the debtor seeks to retain may be claimed exempt under applicable law.

(B) The debtor's request for a Certificate of Approval must (i) indicate which of the three conditions will be met if the sale or refinance is approved, (ii) list all debts secured by the property to be sold, and (iii) itemize how the debtor proposes to distribute the proceeds. If no objection is timely filed, then after the expiration of the notice period, the chapter 12 or 13 trustee may issue a Certificate of Approval authorizing the debtor to use the net proceeds of the sale or refinance of the property to fund the chapter 12 or 13 plan in accordance with the debtor's request. If a timely objection is filed, the Clerk's Office will set a hearing on the debtor's request.

(3) Sale Plans. Even if the chapter 12 or 13 plan sets forth the contents of the sale motion (as required by paragraph (a) or (b) above), the chapter 12 or 13 plan is confirmed, and the confirmation order includes reference to the sale, the debtor must still file a separate motion to approve the sale, and obtain an order granting that motion, prior to consummating the sale.

(4) Broker's Commissions; Closing Costs. When a chapter 12 or 13 plan calls for the sale of real or personal property and a broker's commission is payable as part of the sale, the broker may collect a commission of up to 6% (or up to 10% for vacant land or commercial property) of the sale price without a Court order, absent unusual circumstances. If there are unusual circumstances, the debtor must disclose them to the Court and the trustee prior to the sale, if known, and in any event prior to disbursement of the commission. Customary closing costs do not need prior Court approval for disbursement, provided they have been disclosed in the plan or proposed order authorizing the sale.

(5) Payment of Secured Claims. If there is a mortgage or other claim secured by the property being sold, and the order approving sale directs the debtor to pay that secured claim from the sale proceeds, then the chapter 12 or 13 trustee shall pay any pre-petition arrearage owed to that secured creditor, and the debtor shall pay the balance due that secured creditor directly, unless the Court authorizes a different treatment of the secured claim.

(f) Mortgage Modification.

(1) Approval Procedures. No mortgage, whether secured by the debtor's principal residence or other real property, may be modified by agreement of the parties while a bankruptcy case is pending unless:

(A) the parties to the mortgage file a modification agreement, signed by both the debtor(s) and the lender; and

(B) either:

(i) the Court grants a motion approving the mortgage modification agreement, after notice to the debtor(s), lender, and the case trustee,

(ii) the Court approves a stipulation modifying the mortgage, which has a copy of the fully executed mortgage modification agreement attached, or

(iii) the Court approves the mortgage modification agreement as part of the plan confirmation process.

(2) Debtor's Retention of Funds Available as a Result of the Modification. If a debtor files a motion to approve a mortgage modification and seeks to retain the difference between the prior monthly payment and the current, lower monthly payment due on the mortgage, rather than apply the difference to fund a higher dividend to unsecured creditors, the debtor must set forth in the motion facts to support the request, and must file with the motion an amended Schedule J showing the new payment and current monthly expenses. See Official Form B6J.

(g) Additional Requirements in Chapter 11 Cases. If a chapter 11 debtor-in-possession or trustee seeks authority to sell all or substantially all of the assets of the estate under § 363(b), prior to the entry of a confirmation order, the motion to sell must contain the following:

(1) a clear and conspicuous statement to that effect;

(2) the terms of sale, including but not limited to: the location and condition of the items to be sold, the bidding procedures and minimum requirements for bidding, whether the sale is subject to higher and better offers, the funds required to be paid at the time the sale is approved, the form of funds required at the approval and closing of the sale, and a proposed date for both the approval and closing of the sale;

(3) the information required under Bankruptcy Rule 2002(c);

(4) the extent to which the proceeds of sale will be used to benefit each class of creditors,

(5) the extent of the debtor's liabilities;

(6) the net value of the debtor's remaining assets, if any, not subject to the proposed sale; and

(7) the business justification for disposing of estate assets before a disclosure statement has been approved or a plan confirmed.