A debtor filed a Chapter 13 bankruptcy proceeding. His sister filed a claim asserting that she had a $42,433 lien under Montana law against the debtor’s brand and branded livestock. The claim arose from a state district court order against the debtor for breaching a settlement agreement after he allegedly misappropriated cattle sale proceeds from the siblings’ ranching operating. The bankruptcy court, finding that the sister had a general unsecured lien, affirmed the debtor’s Chapter 13 plan which omitted the sister as a secured creditor. The sister appealed claiming the bankruptcy court erred in finding she lacked a secured lien.
A bankruptcy court will determine whether a creditor has a secured claim based on applicable state law. Bankruptcy laws will then determine the treatment of secured claims. See 11 U.S.C. § 506(a). Under Montana law, a judgment lien is not created in personal property until the debtor either seizes the property or leaves notice of attachment with the debtor. The sister did neither of these. She did, however, obtain a writ of execution from the state district court which directed the Montana Department of Livestock to satisfy the judgment using brands owned or maintained by the debtor. However, there is no Montana law that creates a lien on a brand or on livestock by doing so. Because the sister lacked a secured claim, the court affirmed the debtor’s Chapter 13 plan.