When a deed from a trustee in bankruptcy or debtor in possession is recorded together with a §363(f) Order to Sell Free and Clear, a title examiner may presume that the conveyance was properly authorized if the deed is consistent with the terms and conditions of the Order.
Comment 1. The recorded Order acts as a release of the liens and other interests included in the bankruptcy proceedings. If the Order does not specify the liens released, a title examiner should review the bankruptcy court file to determine which creditors were parties in the bankruptcy proceedings.
Comment 2. An Order to Sell Free and Clear may include the lien of municipal real estate taxes in the list of liens and interests to be removed from the property or it may require that they be paid from the proceeds along with the closing costs. Many taxing authorities refuse to recognize the right of the bankruptcy court to remove the tax lien from the property. It is important that the municipal taxes be paid in full and any liens associated therewith be released to avoid additional problems, expense, and potential litigation.
Comment 3. PACER, an on-line data base maintained by the Federal Courts (http://pacer.psc.uscourts.gov/), provides for a search tool to determine if there has been a Bankruptcy filing in any of the Federal Bankruptcy Courts.
September 20, 2012:
- This Standard was added.