Published on:

Bankruptcy Court Rules Chapter 7 Trustee Cannot Avoid Mortgage with Misspelled Name

By Profoss (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia CommonsA bankruptcy court denied a Chapter 7 trustee’s motion for summary judgment in an adversary proceeding, which sought to avoid a mortgage that misspelled the debtor’s name. In re Thibault, No. 13-31204, Adv. Proc. No. 14-3001, mem. dec. (Bankr. D. Mass., Sep. 29, 2014). The trustee argued that the Bankruptcy Code gives him the authority to avoid debts that “do[] not correctly identify the Debtor.” Id. at 5. The court held that Massachusetts law allows an individual to use more than one spelling of his or her name, or even more than one name, for non-fraudulent purposes. California law has similar provisions regarding an individual’s right to choose his or her own name, often known as a common-law name change.

The debtor and her husband, who is now deceased, purchased real property for use as their primary residence in Springfield, Massachusetts in 1964. The deed conveying the property to them identified their last name as “Thibeault,” with an “e.” The couple granted a new mortgage on the property in 1990, and the mortgage documents also used the name “Thibeault.” The debtor refinanced the home several more times between 1992 and 2004. Most of the documents used the “Thibeault” spelling, but documents filed in 1992, 1993, and 1995 used the spelling “Thibault.” Id. at 4.

In her Chapter 7 petition filed in October 2013, the debtor identified herself with the name “Thibault” but included “Thibeault” in the section asking debtors to list other names used in the previous eight years. The trustee filed an adversary proceeding to avoid the debtor’s mortgage based on his “strong-arm” powers, 11 U.S.C. § 544(a), which allow a trustee to avoid certain debts. He argued that the mortgage failed to identify the debtor accurately, that “his only duty was to search the Registry under the Debtor’s ‘true’ surname,” Thibault at 5, and that this would not have led to the discovery of the mortgage.

The court found that state law governed the issue, and that a person may legally use any name he or she chooses in Massachusetts, provided that the choice is not made for “fraudulent or nefarious reasons.” Id. at 8, citing Comm. v. Clark, 846 N.E.2d 765, 771 (Mass. 2006). Massachusetts law, the court found, generally gives legal effect to instruments that use a name by which a person is commonly known, and the fact that “the person is known [by that name] constitutes constructive knowledge of the instrument.” Thibault at 10.

Most states, including California, provide procedures for official name changes, which typically require a petition and court order. See Cal. Civ. Pro. Code § 1275 et seq. Common law name changes are also valid in California, however, according to an opinion issued by the state attorney general in 2000. California bankruptcy and other courts would probably reach a similar conclusion as the Thibault court. One state court, for example, declined to stop a foreclosure because of a debtor’s misspelled name in the notice of default, finding that “[n]o reasonable person would be confused by such a minor error.” Gillies v. California Reconveyance Co., No. B224995, decision at 7 (Cal. App., 2nd Dist., Apr. 11, 2011).

Bankruptcy attorney Devin Sawdayi has guided individuals and families in the Los Angeles area through the Chapter 7 and Chapter 13 bankruptcy process for more than 18 years. Contact us today online or at (310) 475-9399 to schedule a free and confidential consultation with a knowledgeable, skilled, and compassionate advocate.

More Blog Posts:

Transfer of Real Estate by Debtor More than One Year Before Filing Chapter 7 Bankruptcy Petition Does Not Bar Discharge of Debt, According to California Appellate Court, Los Angeles Bankruptcy Lawyer Blawg, January 9, 2015

Debtors Allowed to Sue Loan Servicer for Charging Unapproved Fees During Chapter 13 Bankruptcy, Los Angeles Bankruptcy Lawyer Blawg, December 23, 2014

Embezzlement Judgment Does Not Prevent Debtor From Exempting Proceeds of Civil Lawsuit Against Creditor, Los Angeles Bankruptcy Lawyer Blawg, November 14, 2014

Photo credit: By Profoss (Own work) [CC BY-SA 3.0], via Wikimedia Commons.