In re: Kvn Corporation, Inc.

Opinion

FILED JUL 29 2014

1 SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT 2 5 In re: ) BAP No. NC-13-1318-JuKuD ) 6 KVN CORPORATION, INC., ) Bk. No. 13-10477 ) 7 Debtor. ) ______________________________) 8 ) O P I N I O N LINDA S. GREEN, Chapter 7 ) 9 Trustee, ) ) 10 Appellant. ) ______________________________) 11 12 Submitted Without Oral Argument on July 11, 2014* 13 Filed - July 29, 2014 14 Appeal from the United States Bankruptcy Court for the Northern District of California 15 Honorable Alan Jaroslovsky, Bankruptcy Judge, Presiding 16 _________________________ 17 Appearances: Jean Barnier, Esq., on brief for appellant Linda S. Green. 18 ________________________ 19 Before: JURY, KURTZ, and DUNN, Bankruptcy Judges. 20 21 22 23 24 25 26 * 27 On June 18, 2014, this Panel entered an order determining that this appeal was suitable for submission without oral 28 argument. 1 JURY, Bankruptcy Judge: 2 3 Linda S. Green, chapter 71 trustee (Trustee) in the 4 bankruptcy estate of KVN Corporation, Inc. (KVN or debtor), 5 filed a motion seeking approval of a stipulation between Trustee 6 and Wilshire State Bank (Bank) which contemplated a sale of the 7 Bank’s fully encumbered property in exchange for a carve out 8 from the lien proceeds paid to the bankruptcy estate. The 9 bankruptcy court denied the motion and Trustee’s later filed 10 motion for reconsideration. This appeal followed. For the 11 reasons discussed below, we VACATE and REMAND this matter to the 12 bankruptcy court for proceedings consistent with this decision. 14 The essential facts are few and undisputed. KVN owned a 15 sporting goods store. KVN was indebted to the Bank under the 16 terms of a note in the original principal sum of $915,000. The 17 note was secured by KVN’s real property and by substantially all 18 of its business assets. 19 On March 8, 2013, KVN filed its chapter 7 petition and 20 Green was appointed chapter 7 trustee. In Schedule A, debtor 21 listed inventory including “liquor, gun, ammunition, cleaning 22 kits, and fishing reels” with a value of $28,950. Debtor failed 23 to reflect the Bank’s security interest in the inventory, but 24 listed the Bank as a secured creditor against its real property 25 in Schedule D. At the time of the filing, debtor owed the Bank 26 27 1 Unless otherwise indicated, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and 28 “Rule” references are to the Federal Rules of Bankruptcy Procedure.

-2- 1 approximately $309,569. In Schedule F, debtor listed unsecured 2 claims in the amount of $107,565. After the filing, Trustee 3 removed rifles and guns from debtor’s store and placed them in a 4 gun storage locker at the cost of $25 per day. Trustee employed 5 an auctioneer to conduct a public sale of these assets, which 6 would likely bring $10,000. After reviewing public records, 7 Trustee learned that the Bank held a perfected UCC-1 on all of 8 debtor’s inventory, including the firearms. Trustee contacted 9 the Bank and informed it that the firearms had been removed for 10 safekeeping and that the Bank could retrieve them. 11 In late April 2013, the Bank contacted Trustee and 12 requested her assistance in selling the firearms through the 13 auctioneer she had employed. The Bank agreed that it would pay 14 for the storage costs and split the net proceeds with the 15 bankruptcy estate. Trustee agreed based on her belief that the 16 transaction would net between $4,200 to $4,400 for the benefit 17 of unsecured creditors. Trustee and the Bank entered into a 18 stipulation setting forth these terms. 19 Trustee subsequently filed a motion seeking approval of the 20 stipulation from the bankruptcy court. At the May 10, 2013 21 hearing, the bankruptcy court denied Trustee’s motion. 22 Initially, the court made reference to Charles Duck, a former 23 trustee in the Northern District of California, who “had a habit 24 of making deals with secured creditors even though there was no 25 equity he would sell the — he would liquidate the asset and have 26 various types of arrangements for sharing the proceeds. And I 27 28 -3- 1 put a stop to that many years ago.”2 The court further opined: 2 [T]he role of a chapter 7 trustee is to closely examine the secured creditor’s security interest and 3 defeat it, if the trustee can. And, if not, turn the asset over to the secured creditor. It is a slippery 4 slope, to my mind, when the debtor and the secured creditor start making deals. I do not believe it’s 5 the appropriate role of a chapter 7 trustee to liquidate fully-encumbered assets. 6 7 Counsel for Trustee and the Bank both emphasized that there 8 was full disclosure, everything was above board, and there would 9 be a return to the unsecured creditors. The Bank’s counsel 10 further explained that the auctioneer hired by Trustee had the 11 expertise to sell the firearms in a lawful manner which caused 12 it to agree to release its lien on fifty percent of the 13 proceeds. The bankruptcy court responded: “I have no problem if 14 your client wants to waive its security, and the trustee can 15 liquidate it in the ordinary course. I just have a problem with 16 the sharing arrangement.” The court opined that “arrangements 17 like this are dangerous because they can lead to improper 18 activity.” The court concluded: “So in this particular case I 19 do not believe that the benefits to the estate outweigh my 20 concerns for the proper role of the trustee and the bankruptcy 21 system.” On May 15, 2013, the bankruptcy court entered the 22 order denying approval of the stipulation. 23 Trustee moved for reconsideration. Trustee argued that 24 2 25 Charles Duck is a former bankruptcy trustee who was convicted for embezzling more than $1.9 million from various 26 bankruptcy estates in late 1989. See Dickinson v. Duck (In re Duck), 122 B.R. 403, 404 (Bankr. N.D. Cal. 1990). The bankruptcy 27 court made clear that it was not equating Ms. Green with Mr. 28 Duck.

-4- 1 there was nothing in the bankruptcy code which prevented her 2 from entering into agreements with secured creditors or that 3 stated a chapter 7 trustee’s proper role was to liquidate only 4 unsecured assets. Trustee further asserted that there was 5 nothing in the agreement between her and the Bank which 6 suggested the parties were acting in an improper manner. 7 Trustee noted that § 506(c) provided authority that 8 administrative expenses could be paid from the sale of secured 9 assets even if there was no benefit to unsecured creditors and 10 when the secured creditor caused or consented to the expense. 11 See Compton Impressions, Ltd. v. Queen City Bank, N.A. (In re 12 Compton Impressions, Ltd.), 217 F.3d 1256 (9th Cir. 2000). 13 On June 14, 2013, the bankruptcy court heard the matter and 14 took it under advisement. Two days later, the bankruptcy court 15 issued its Memorandum of Decision and denied Trustee’s motion 16 for reconsideration. The bankruptcy court opined that 17 arrangements between trustees and secured creditors raised a 18 presumption of impropriety and found that Trustee had not 19 rebutted that presumption. On June 17, 2013, the court entered 20 the order denying Trustee’s motion for reconsideration. 21 Trustee timely appealed. 23 The bankruptcy court had jurisdiction pursuant to 28 U.S.C. 24 §§ 1334 and 157(b)(2)(A), (N) and (O). We have jurisdiction 25 under 28 U.S.C. § 158. 27 Whether the bankruptcy court abused its discretion by 28 denying approval of the stipulation between Trustee and the Bank

-5- 1 which contemplated a sale of the Bank’s fully encumbered 2 property in exchange for a carve out from the lien proceeds to 3 the bankruptcy estate. 5 The bankruptcy court’s decision denying approval of the 6 stipulation between Trustee and the Bank is reviewed for abuse 7 of discretion. A & A Sign Co. v. Maughan, 419 F.2d 1152, 1155 8 (9th Cir. 1969). A bankruptcy court abuses its discretion when 9 it applies the incorrect legal rule or its application of the 10 correct legal rule is “(1) illogical, (2) implausible, or 11 (3) without support in inferences that may be drawn from the 12 facts in the record.” United States v. Loew, 593 F.3d 1136, 13 1139 (9th Cir. 2010). 15 A. The General Rule Is That The Sale Of Fully Encumbered Property Is Prohibited. 16 17 We begin with an overview of the chapter 7 trustee’s duties 18 under § 704 and his or her power to sell under § 363. Under 19 § 704(a)(1), a chapter 7 trustee has the duty to “collect and 20 reduce to money the property of the estate for which such 21 trustee serves . . . .” To fulfill this duty, the trustee’s 22 “primary job is to marshal and sell the assets, so that those 23 assets can be distributed to the estate’s creditors.” U.S. Tr. 24 v. Joseph (In re Joseph), 208 B.R. 55, 60 (9th Cir. BAP 1997). 25 Indeed, a core power of a bankruptcy trustee under § 363(b) is 26 the right to sell “property of the estate” for the benefit of a 27 debtor’s creditors. See § 363(b)(1) (“The trustee, after notice 28 and a hearing, may use, sell, or lease, other than in the

-6- 1 ordinary course of business, property of the estate. . . .”). 2 Under § 363(f)(2), a bankruptcy trustee may sell property of the 3 estate free and clear of a lien or other interest where the 4 holder of the lien or interest consents. 5 It is universally recognized, however, that the sale of a 6 fully encumbered asset is generally prohibited. Carey v. 7 Pauline (In re Pauline), 119 B.R. 727, 728 (9th Cir. BAP 1990); 8 In re Scimeca Found., Inc., 497 B.R. 753, 781 (Bankr. E.D. Pa. 9 2013) (“It is generally recognized that a chapter 7 trustee 10 should not liquidate fully encumbered assets, for such action 11 yields no benefit to unsecured creditors.”) (citing Morgan v. 12 K.C. Mach. & Tool Co. (In re K.C. Mach. & Tool Co.), 816 F.2d 13 238, 245–46 (6th Cir.1987)); In re Covington, 368 B.R. 38, 41 14 (Bankr. E.D. Cal. 2006) (“[W]hen an asset is fully encumbered by 15 a lien, it is considered improper for a chapter 7 trustee to 16 liquidate the asset.”); In re Feinstein Family P’ship, 247 B.R. 17 502, 507 (Bankr. M.D. Fla. 2000) (“Clearly, the Code never 18 contemplated that a Chapter 7 trustee should act as a 19 liquidating agent for secured creditors who should liquidate 20 their own collateral.”); In re Preston Lumber Corp., 199 B.R. 21 415, 416 (Bankr. N.D. Cal. 1996) (actual conflict of interest 22 arises when the trustee sees he can make more money for himself 23 by liquidating collateral for a secured creditor than he can by 24 asserting a claim against the secured creditor on behalf of the 25 estate); In re Tobin, 202 B.R. 339, 340 (Bankr. D.R.I. 1996) 26 (“The mission of the Chapter 7 trustee is also to enhance the 27 debtor’s estate for the benefit of unsecured creditors.”). 28 The prohibition against the sale of fully encumbered

-7- 1 property is also embedded in the official Handbook for Chapter 7 2 Trustees in several places: 3 Generally, a trustee should not sell property subject to a security interest unless the sale generates funds 4 for the benefit of unsecured creditors. A secured creditor can protect its own interests in the 5 collateral subject to the security interest. 6 U.S. DOJ Exec. Office for U.S. Trs., Handbook for Chapter 7 7 Trustees at 4–16 (2012) (hereinafter, Handbook). The Handbook 8 also provides: 9 A chapter 7 case must be administered to maximize and expedite dividends to creditors. A trustee shall not 10 administer an estate or an asset in an estate where the proceeds of liquidation will primarily benefit the 11 trustee or the professionals, or unduly delay the resolution of the case. The trustee must be guided by 12 this fundamental principle when acting as trustee. Accordingly, the trustee must consider whether 13 sufficient funds will be generated to make a meaningful distribution to unsecured creditors, 14 including unsecured priority creditors, before administering a case as an asset case. 28 U.S.C. 15 § 586. 16 Id. at 4-1. Finally, 17 [i]n asset cases, when the property is fully encumbered and of nominal value to the estate, the 18 trustee must immediately abandon the asset and contact the secured creditor immediately so that the secured 19 creditor can obtain insurance or otherwise protect its own interest in the property. [§§] 554, 704. 20 21 Id. at 4-7. Taken together, the above-referenced authorities 22 stand for the proposition that sales of fully encumbered assets 23 are generally improper. In that instance, the trustee’s proper 24 function is to abandon the property, not administer it, because 25 the sale would yield no benefit to unsecured creditors. 26 In fact, “‘the principle of abandonment was developed . . . 27 to protect the bankruptcy estate from the various costs and 28 burdens of having to administer property which could not

-8- 1 conceivably benefit unsecured creditors of the estate.’” In re 2 Pauline, 119 B.R. at 728; see also In re K.C. Mach. & Tool Co., 3 816 F.2d at 246 (“[I]n enacting § 554, Congress was aware of the 4 claim that formerly some trustees took burdensome or valueless 5 property into the estate and sold it in order to increase their 6 commissions.”). However, “[a]bandonment should not be ordered 7 where the benefit of administering the asset exceeds the cost of 8 doing so. . . . Absent an attempt by the trustee to churn 9 property worthless to the estate just to increase fees, 10 abandonment should very rarely be ordered.” In re K.C. Mach. & 11 Tool Co., 816 F.2d at 246; see also Vu v. Kendall (In re Vu), 12 245 B.R. 644, 647–48 (9th Cir. BAP 2000). 13 B. There Is No Per Se Rule That Bans Carve-Out Agreements. 14 Despite the general rule prohibiting the sale of fully 15 encumbered property, chapter 7 trustees may seek to justify the 16 sale through a negotiated carve-out agreement with the secured 17 creditor. A carve-out agreement is generally understood to be 18 “an agreement by a party secured by all or some of the assets of 19 the estate to allow some portion of its lien proceeds to be paid 20 to others, i.e., to carve out its lien position.” Costa v. 21 Robotic Vision Sys., Inc. (In re Robotic Vision Sys., Inc.), 22 367 B.R. 232, 237 n.23 (1st Cir. BAP 2007); see also In re 23 Besset, 2012 WL 6554706, at *5 n.5 (9th Cir. BAP 2012). There 24 is no per se rule that bans this type of contractual 25 arrangement: “[C]reditors are generally free to do whatever 26 they wish with the bankruptcy dividends they receive, including 27 to share them with other creditors.” Official Unsecured 28 Creditors Comm. v. Stern (In re SPM Mfg. Corp.), 984 F.2d 1305,

-9- 1 1313 (1st Cir. 1992).3 2 The Handbook also provides some guidance on carve-out 3 agreements in the context of a sale: 4 A trustee may sell assets only if the sale will result in a meaningful distribution to creditors. In 5 evaluating whether an asset has equity, the trustee must determine whether there are valid liens against 6 the asset and whether the value of the asset exceeds the liens. The trustee may seek a ‘carve-out’ from a 7 secured creditor and sell the property at issue if the ‘carve-out’ will result in a meaningful distribution 8 to creditors. . . . If the sale will not result in a meaningful distribution to creditors, the trustee must 9 abandon the asset. 10 Handbook at 4–14. 11 C. The Genesis Of The Bankruptcy Court’s “Presumption Of Impropriety” Is Based On Past Abuses Of Carve-Out 12 Agreements Such As This. 13 Although there is no per se ban on carve-out agreements, 14 agreements such as the one before us have been reviewed under a 15 standard of heightened scrutiny due to past abuses. One court 16 noted: 17 It is not rare that trustees of Chapter 7 estates are approached by secured creditors who seek the trustee’s 18 help to liquidate fully encumbered collateral. They realize that before the trustee is willing to go along 19 with the proposition the secured creditor must put a little sweetener in the deal by agreeing to pay 20 sufficient sums to compensate the trustee and to pay other costs of administration. The more sophisticated 21 trustee may demand that the secured creditor throw in a pittance to pay a meaningless dividend to unsecured 22 creditors, making the arrangement more palatable to the court. The proposition is very attractive from 23 the secured creditor’s point of view and economically sound because it may stave off a possible attempt by 24 the trustee to seek to surcharge the collateral and, 25 3 26 The SPM court also held that the bankruptcy court had no authority to control how the secured creditor disposed of the 27 proceeds once it received them. Id. at 1313. 28 -10- 1 most importantly, save the potentially expensive cost of a foreclosure suit. The offered deal is also 2 attractive to the trustee because it assures that he or she will earn a commission in an otherwise no asset 3 case and may seek a commission based on the gross sales price and not on the net distributed to parties 4 of interest. 5 In re Feinstein Family P’ship, 247 B.R. at 507; see also In re 6 Pauline, 119 B.R. at 728 (“Some of the early cases condemned 7 this particular practice [,] . . . and decried the practice of 8 selling burdensome or valueless property simply to obtain a fund 9 for their own administrative expenses.”) (citing Standard Brass 10 Corp. v. Farmers Nat’l Bank, 388 F.2d 86 (7th Cir. 1967); Miller 11 v. Klein (In re Miller), 95 F.2d 441 (7th Cir. 1938); and 12 Seaboard Nat’l Bank v. Rogers Milk Prods. Co., 21 F.2d 414 (2d 13 Cir. 1927)). Against this historical backdrop, coupled with the 14 bankruptcy court’s first-hand experience with Mr. Duck, there is 15 support for the bankruptcy court’s conclusion that a presumption 16 of impropriety arises under these circumstances. 17 We do not agree with Trustee’s argument that the literal 18 text of §§ 704(a)(1), 506(c), and 363(f)(2) “compels the 19 conclusion that the ‘presumption of impropriety’ suggested by 20 the bankruptcy court . . . was error.” The issue presented in 21 this appeal is not simply a matter of interpreting any of these 22 statutes where the “plain language” applies. If this were the 23 case, we could ignore the well-settled case law, including our 24 own, that espouses the proposition that a sale of fully 25 encumbered property is generally inappropriate because there is 26 no benefit to unsecured creditors. We would also undermine the 27 guidance provided to chapter 7 trustees in the Handbook, which 28 Trustee fails even to mention in this appeal.

-11- 1 Further, in our view, § 506(c) does not apply under these 2 circumstances. Substantively, the elements that Trustee must 3 prove for a § 506(c) claim are different from those needed to 4 justify a sale of fully encumbered property in connection with a 5 carve-out agreement. See Central Bank of Mont. v. Cascade 6 Hydraulics & Util. Serv., Inc. (In re Cascade Hydraulics & Util. 7 Serv., Inc.), 815 F.2d 546, 548 (9th Cir. 1987). (under § 506(c) 8 the trustee must show that the expenses incurred were 9 reasonable, necessary, and beneficial to the secured creditor 10 and to satisfy the benefit part of the test, the trustee must 11 “establish in quantifiable terms that [she] expended funds 12 directly to protect and preserve the collateral.”); compare In 13 re Bunn-Rodemann, 491 B.R. 132 (Bankr. E.D. Cal. 2013) (finding 14 “incentive payment” arrangement between secured creditor and 15 trustee for sale of fully encumbered real property “consistent” 16 with § 506(c)). 17 Of course, the presumption of impropriety is a rebuttable 18 one. To rebut the presumption, the case law directs the 19 following inquiry: Has the trustee fulfilled his or her basic 20 duties? Is there a benefit to the estate; i.e., prospects for a 21 meaningful distribution to unsecured creditors? Have the terms 22 of the carve-out agreement been fully disclosed to the 23 bankruptcy court? If the answer to these questions is in the 24 affirmative, then the presumption of impropriety can be 25 overcome. 26 The bankruptcy court made no findings with respect to these 27 questions. However, in answering the first and third questions 28 the basic and undisputed facts are not fairly susceptible of

-12- 1 diverse inferences. See Commercial Paper Holders v. Hine 2 (Matter of Beverly Hills Bancorp), 752 F.2d 1334, 1338 (9th Cir. 3 1984) (“Although remand generally is required for findings of 4 fact, remand is not necessary when the trial court fails to make 5 such findings and the facts in the record are undisputed.”). 6 The record shows that Trustee fulfilled her basic duties. She 7 examined the Bank’s asserted security interest against the 8 firearms and found its lien valid. See Handbook at 4-5. She 9 then informed the Bank where the firearms were so it could 10 retrieve its collateral. See Handbook at 4-7. In addition, 11 Trustee fully disclosed the terms of the carve-out agreement to 12 the bankruptcy court and the creditor body, which is contrary to 13 any inference of a secret side deal between Trustee and the 14 Bank. Therefore, it does not follow that Trustee was 15 administering the asset for primarily her own benefit. See 16 Handbook at 4-1. However, whether $5,000 from the lien proceeds 17 will result in a meaningful distribution to the unsecured 18 creditors is a question of fact that is, on this sparse record, 19 susceptible of diverse inferences resulting in different 20 conclusions. Because the bankruptcy court’s decision to approve 21 the stipulation is a matter committed to the court’s discretion, 22 we find it necessary to remand for factual findings on this 23 issue. 24 D. The Case Law Cited By The Bankruptcy Court In Support Of Its Decision Is Distinguishable. 25 26 The bankruptcy court cited In re Pauline, In re Preston 27 Lumber, and In re Covington in support of its decision denying 28 approval of the stipulation. Collectively, these cases stand

-13- 1 for the proposition that overencumbered property generally 2 should be abandoned, not administered, because there is no 3 benefit to unsecured creditors. As noted above, most courts 4 recognize this general rule. Furthermore, in each case, the 5 court found the trustee’s actions inappropriate under the 6 circumstances of the case. However, none of these cases support 7 the bankruptcy court’s decision in this case. 8 In Pauline, the chapter 7 trustee decided to abandon the 9 debtor’s home and then reversed his decision, stating his 10 intention to sell it. The debtor moved to compel the trustee to 11 abandon the property. After considering the motion, the 12 bankruptcy court required the trustee to find a buyer for the 13 debtor’s home within 60 days at a price sufficient to satisfy 14 all liens on the home plus the allowed amount of the debtor’s 15 homestead exemption, in the absence of which the debtor’s home 16 would be deemed abandoned. In re Pauline, 119 B.R. at 728. On 17 appeal, the Panel affirmed the bankruptcy court’s decision in 18 part, because (1) the IRS did not ask the trustee to sell the 19 property for the IRS’ benefit, and (2) the trustee apparently 20 had “engaged in . . . conduct designed to enhance the size of 21 his bank account rather than the size of the funds available for 22 the debtor’s unsecured creditors . . . .” Id. at 728. Unlike 23 in Pauline, the Bank here supports Trustee’s sale due to the 24 auctioneer’s expertise in selling the firearms in a lawful 25 manner and, as discussed above, a sale will benefit unsecured 26 creditors, not just increase the fees paid to Trustee.4 27 4 28 Whether or not Trustee will be awarded fees from the (continued...)

-14- 1 The holding in In re Preston Lumber Corp. also does not 2 drive the outcome in this case. There, the secured creditor, 3 Sumitomo Bank and the debtor’s industrial lessor had a dispute 4 as to the priority of their lien rights in fully encumbered 5 sawmill equipment and rolling stock. Sumitomo convinced the 6 chapter 7 trustee to sell the assets free and clear of liens, in 7 exchange for a pre-fixed commission for the trustee and $35,000 8 fee for the trustee’s attorney. The bankruptcy court found the 9 arrangement “highly improper” on the grounds that (1) there was 10 no resulting benefit to the estate and (2) the trustee and his 11 counsel were motivated by personal gain. In re Preston Lumber 12 Group, 199 B.R. at 416-17. The case is distinguishable on its 13 face because, as discussed above, there is no evidence here that 14 Trustee was motivated by personal gain and there likely is a 15 resulting benefit to unsecured creditors arising out of the 16 sale. 17 Lastly, In re Covington, 368 B.R. 38, is inapposite. 18 Because the debtor in Covington owed a domestic support 19 obligation, the trustee argued that § 522(c)(1) required the 20 disallowance of the debtor’s exemption in a bank deposit and an 21 automobile to permit those assets to be liquidated and the 22 proceeds paid to the holder of the domestic support obligation 23 claim. The bankruptcy court rejected this argument, noting that 24 “§ 522(c)(1) does not provide for the disallowance of an 25 26 4 (...continued) eventual sale of the firearms was not at issue before the 27 bankruptcy court nor is it relevant to our analysis in this 28 appeal. The bankruptcy court may consider the appropriate fee at a hearing on compensation.

-15- 1 exemption. Rather, it provides that property exempted by the 2 debtor is nonetheless liable for a domestic support obligation. 3 Disallowance of the exemption is not a predicate to the 4 enforcement of a domestic support obligation.” Id. at 40–41. 5 The court also denied the trustee’s request to sell the assets 6 because (1) the property was removed from the bankruptcy estate 7 since it was exempt and thus there was no property of the estate 8 to administer and (2) although the assets were not fully 9 encumbered, the trustee sought to sell the assets for the 10 benefit of one creditor rather than for unsecured creditors 11 generally. Id. at 41. “Given that the Madera County Child 12 Support Department is collecting the claim for the benefit of 13 the claim holder, it is clear that the assistance of the 14 trustee, which would come at a price, is unnecessary. By 15 enforcing the domestic support obligation in state court, the 16 trustee's administrative expenses will be avoided.” Id. Unlike 17 Covington, the asset here is not exempt and Trustee is 18 liquidating the asset for the general unsecured creditor body. 20 For the reasons stated, we VACATE and REMAND this matter to 21 the bankruptcy court for proceedings consistent with this 22 decision. 23 24 25 26 27 28

-16-