13.3.5 Marshalling of Assets
13.3.5 Marshalling of Assets
Marshalling of assets is an equitable doctrine by which a senior creditor, who has more than one fund or item of collateral available to satisfy a debt, may be ordered to proceed in a way that preserves the rights of junior creditors. For example, a court may require a senior creditor to proceed against an asset that it alone can reach, rather than against an asset that is a junior creditor’s sole security. Marshalling cannot, however, be used to deprive a debtor of a state exemption, such as a homestead exemption.97 For example, a junior creditor cannot force a senior creditor to proceed against a homestead that the junior creditor could not reach.98
Footnotes
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97 Meyer v. United States, 375 U.S. 233, 84 S. Ct. 318, 11 L. Ed. 2d 293 (1963) (stating this principle as a general rule and interpreting New York law, applicable here to enforce a federal tax lien, as adopting it).
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98 In re Schantz, 2017 WL 3972451 (Bankr. N.D. Iowa Aug. 7, 2017) (marshalling denied where it would force senior creditor to satisfy more of its debt from debtors’ homestead); In re Ferrari, 2006 WL 3247120 (Bankr. D. Alaska Oct. 25, 2006) (refusing to apply marshalling of assets to homestead; IRS, which could recover against exempt or non-exempt property, takes non-exempt property, leaving debtor with homestead and non-governmental creditor with nothing); Gaumer v. Hartford-Carlisle Sav. Bank, 451 N.W.2d 497, 501 (Iowa 1990). But see In re Szywd, 444 B.R. 10 (Bankr. D. Mass. 2011) (IRS, which can reach homestead that is exempt as to other creditors, will be required to take homestead so that other creditors can collect from non-homestead property; here, homestead had to be sold in any event because non-homestead assets were insufficient to satisfy IRS’s claim). See generally § 15.2.7, infra (creditor that has claim against both homestead and non-homestead property may be required to proceed first against non-homestead property).