- 14 -
dealings between the parties; and lack of assets. Am. Offshore,
Inc. v. Commissioner, supra at 594-595. No single factor is
conclusive. Id. at 595.
Respondent argues that petitioners did not show that the
notes evidencing the debt owed them became worthless. Respondent
further argues that petitioners’ respective security interests in
the 3513 property and the 3532 property survived the bankruptcy
and that petitioners failed to institute foreclosure proceedings.
A debtor’s petition in bankruptcy is not conclusive of a
debt’s total worthlessness. Estate of Mann v. United States, 731
F.2d 267, 276 (5th Cir. 1984); Dallmeyer v. Commissioner, 14 T.C.
1282, 1292-1293 (1950). Ordinarily, liens and other secured
interests survive bankruptcy. Farrey v. Sanderfoot, 500 U.S.
291, 297 (1991). A lien on real property passes through
bankruptcy unaffected. Dewsnup v. Timm, 502 U.S. 410, 418
(1992). A bankruptcy discharge extinguishes only one mode of
enforcing a claim--namely, an action against the debtor in
personam--while leaving intact another--namely, an action against
the debtor in rem. Johnson v. Home State Bank, 501 U.S. 78, 84
(1991).
Petitioners established that a debtor-creditor relationship
existed, as evidenced, in part, by two settlement statements
dated July 7, 1983, which detailed the sale of the 3513 property
and the 3532 property to the debtors. The record establishes
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011