The Friendly Lien.

On 23 October 2026 the Bankruptcy Appellate Panel of the Tenth Circuit decided exactly that case. Coney v. Sender (In re Gibson) is an unpublished opinion. It is persuasive authority only, not binding precedent (Coney v. Sender (In re Gibson), BAP No. CO-25-023 (B.A.P. 10th Cir. Oct. 23, 2026) (unpublished) (Somers, J., joined by Parker and Herren, JJ.), at 1 n.1 (citing 10th Cir. BAP L.R. 8026-6), available at bap10.uscourts.gov; appeal from Bankr. D. Colo., Bankr. No. 22-14730, Adv. No. 24-01018). It is still a compact and unusually clear lesson in why the “friendly lien” fails. It also shows why a structure built after a claim arises tends to supply the evidence that undoes it.

The debtor, Michael Gibson, had lost a lawsuit in Arapahoe County, Colorado, and was ordered to pay his opponent’s attorney’s fees. A first award of $5,116.50 was entered in March 2018. After an unsuccessful appeal, a second award of $17,224.87 followed on 4 January 2022 (Id. at 2).

Mr. Gibson’s mother, Ella Coney, had loaned or given him money over time, mostly by cashier’s check or cash. On 27 January 2022, about three weeks after the second award, he signed a $45,000 promissory note in her favor at 5% interest. The note was secured by a deed of trust on his Colorado home, which was recorded the same day. The court called this the “Home Loan Transaction” (Id. at 2–3). Asked later why she wanted security, Ms. Coney testified that her son owed her “a lot of money” and that she needed “security for this” (Id. at 3 & n.6 (quoting deposition testimony)).

In November 2022 Mr. Gibson gave his mother $5,000 in cash. He filed a Chapter 7 petition on 2 December 2022 and scheduled the home at $615,000. On 7 December 2022, less than a week after filing, he gave her another $5,000 (Id. at 3). The Chapter 7 trustee, Harvey Sender, sued to unwind all three transfers.

After a two-day trial, the U.S. Bankruptcy Court for the District of Colorado ruled for the trustee on every count. It held that:

• the note and deed of trust were actually and constructively fraudulent under 11 U.S.C. § 548(a)(1) and Colorado law, and were also a preference under § 547(b);
• the November cash was actually and constructively fraudulent; and
• the December payment was an unauthorized post-petition transfer under § 549(a).

The court also disallowed Ms. Coney’s claims against the estate under § 502(d) (Id. at 3–5 (summarizing the bankruptcy court’s Memorandum Opinion After Trial and Judgment of Aug. 25, 2025)). She appealed.

The BAP affirmed every evidentiary ruling and every finding of fact. Three parts of the opinion matter for anyone thinking about intra-family security.

The paper trail could not prove the debt. Ms. Coney tried to prove the $45,000 with copies of signed receipts. The trustee objected, and the originals were never produced. The bankruptcy court excluded the copies under Federal Rules of Evidence 1002 and 1003, and the BAP found no abuse of discretion (Id. at 8–10 (citing Fed. R. Evid. 901(a), 1002, 1003; United States v. Chavez, 976 F.3d 1178, 1194 (10th Cir. 2020))). What remained was $28,896 in documented 2021 cashier’s checks and a $10,000 check handed over on the day of the note. The debtor also testified that he had already repaid about $25,000 before the note was signed and had signed it to “make it official.” The court found him not credible (Id. at 10–13). On any reading of the record, the value given was less than $45,000. A note for more than the documented debt is not “reasonably equivalent value” (Id. at 22–23 & n.77 (citing Zubrod v. Kelsey (In re Kelsey), 270 B.R. 776, 781–82 (B.A.P. 10th Cir. 2001); BFP v. Resolution Trust Corp., 511 U.S. 531, 538 n.4, 548 (1994))).

Six badges of fraud were found. Under the Tenth Circuit’s standard, “[w]hen one or more of these badges [of fraud] are present fraudulent intent can be inferred” (Id. at 20 (quoting In re Taylor, 133 F.3d 1336, 1339 (10th Cir. 1998))). The bankruptcy court found six, and the BAP upheld each (Id. at 17–23):

1. A transfer to an insider. A parent is a “relative,” and therefore an insider, under both 11 U.S.C. § 101(31)(A)(i) and Colo. Rev. Stat. § 38-8-102(8)(a)(I) (Id. at 21).
2. Timing. The transfer was made within two years before bankruptcy.
3. Concealment and dishonest disclosure. The debtor scheduled the $45,000 debt as owed to “Coney Management” rather than to his mother. He omitted payments to her from his Statement of Financial Affairs and left the November cash out of his schedules altogether (Id. at 21–22).
4. Pending litigation, and proximity to a substantial debt. The note came three weeks after the second award.
5. Inadequate consideration.
6. Insolvency. The debtor’s schedules showed about $504,000 in liabilities against about $270,000 in assets (Id. at 23).

As to the November cash, the bankruptcy court added a finding that should concern anyone who “parks” money with a relative. The debtor gave his mother the cash “with the intention and expectation that she would hold it for him to use at a later time, after the bankruptcy, so he effectively maintained control.” It also found that his use of an all-cash budgeting system was a way “to evade record keeping” (Id. at 19 (quoting the bankruptcy court’s findings)). Retained control and concealment are classic badges, and here they were found as facts.

The mother’s good faith did not save her. Section 548(c) and Colo. Rev. Stat. § 38-8-109(1) protect a transferee who takes for value and in good faith. In the Tenth Circuit that test is objective. The questions are whether the circumstances would put a reasonable person on inquiry and whether a diligent inquiry would have revealed the fraudulent purpose (Id. at 14–15 (quoting Wagner v. Ultima Homes, Inc. (In re Vaughan Co., Realtors), 493 B.R. 597, 610 (Bankr. D.N.M. 2013), and In re M & L Bus. Mach. Co., 84 F.3d 1330, 1338–39 (10th Cir. 1996)); 11 U.S.C. § 548(c); Colo. Rev. Stat. § 38-8-109(1)). The court found that Ms. Coney was a well-educated realtor who knew her son was struggling financially. In years of lending she had never asked for security, and she demanded it only after the second judgment. As the bankruptcy court put it, “[t]he Court does not believe this is a mere coincidence” (In re Gibson, at 13–16 (quoting the bankruptcy court’s findings)). Her own sophistication counted against her.

The bankruptcy court had awarded the trustee both avoidance of the $45,000 lien and a $45,000 money judgment against Ms. Coney. The BAP reversed that part of the judgment.

Under 11 U.S.C. § 551, an avoided transfer “is preserved for the benefit of the estate.” Under § 550(a), the trustee may instead recover the property or its value. But § 550(d) states that the trustee “is entitled to only a single satisfaction” (11 U.S.C. §§ 550(a), 550(d), 551; In re Gibson, at 26–28). Following the Tenth Circuit’s decision in In re Trout, the BAP explained that for an avoided lien the default remedy is the return of the property itself. A money award is “a more unusual remedy to be used only in the court’s discretion,” and is appropriate where preservation alone would leave the estate short (In re Gibson, at 27–28 (quoting Rodriguez v. Drive Fin. Servs., L.P. (In re Trout), 609 F.3d 1106, 1111–13 (10th Cir. 2010), and citing In re Bremer, 408 B.R. 355, 359–60 (B.A.P. 10th Cir. 2009))). Here, avoiding and preserving the lien had already restored the estate. The panel remanded for a remedy consistent with Trout (Id. at 28–30).

The reversal is narrow, and its practical meaning is worth stating plainly. The BAP rejected the mother’s argument that the lien should be valued at only $13,896 and held that the transferred “property” was the full $45,000 lien (Id. at 29 & n.98). So the outcome is not that the family keeps the lien. The trustee steps into the mother’s position as a $45,000 secured creditor on the debtor’s home and holds that lien for all of his creditors. The device built to protect the family’s equity now secures the estate’s recovery.

The idea behind the friendly lien is that a related-party creditor with a recorded security interest will rank ahead of the outside creditor. Gibson shows the three ways that idea fails.

First, a lien is a transfer. The Bankruptcy Code defines “transfer” to include “the creation of a lien” (11 U.S.C. § 101(54)(A); In re Gibson, at 29 n.98). A deed of trust granted to a relative is examined under the same fraudulent-transfer rules as a deed of the house itself. Recording the security interest does not take it outside the statute. It creates a dated public record that the trustee will use.

Second, timing is evidence. The most damaging fact in Gibson was the calendar: the judgment on 4 January, the note on 27 January, and the bankruptcy within the year. A related-party loan secured years earlier, at arm’s length, with contemporaneous documents and regular payments, would have presented a very different record. The same loan secured three weeks after an adverse award looks like what the court found it to be.

Third, informality defeats the debt. Families rarely document their dealings, and that is natural. But when the relationship later has to be proved to a hostile trustee, the absence of originals, bank records, and dated receipts becomes decisive. Ms. Coney could not prove what she had lent, so she could not prove she had given value.

These are the same badges that appear in almost every failed improvised plan: an insider, bad timing, concealment, retained control, and inadequate value. They describe what a defensible plan avoids.

1. It is seasoned. It is put in place while there is no claim to hinder, delay, or defraud, which is the only time the law allows protective planning without suspicion.
2. It is irrevocable and discretionary. The person seeking protection does not keep a channel through which value can quietly flow back, such as a relative who holds the money “for later.”
3. It is independently administered. A trustee who is not a family member and not the debtor’s agent makes the decisions and keeps the records that prove the transaction was genuine.
4. It is fully disclosed. The Gibson schedules mislabeled the creditor and omitted the payments, and each omission became a separate badge of fraud. A legitimate plan has nothing to mislabel.

Gibson does not hold that a parent can never lend to a child, or that intra-family security is always voidable. A loan that is real, documented, and secured when it is made, for value actually given, can be defensible. The difficulty is that the families most tempted to formalize a loan are those who have just felt the pressure of a creditor, and that is when formalizing it is most dangerous. Whether a particular transaction holds depends on its facts, its timing, and the governing law. In bankruptcy, that law includes both the two-year reach-back of § 548 and any longer state-law period that a trustee can invoke through § 544(b).

The friendly lien appeals because it seems to cost nothing. No assets move and no one leaves the family, so on paper nothing has changed except that the outside creditor now ranks behind a relative. Gibson shows the cost. Signed in the shadow of a judgment, the note became evidence of intent, the deed of trust became the estate’s property, and the mother’s claims against her son’s estate were disallowed. Her greater sophistication made her less able to claim good faith.

Protection is not something a family arranges in the weeks after a judgment. It has to be built well before any claim, which is the only time the law allows it to be built cleanly.

This note is for general information and planning discussion and is not legal advice for any specific matter. The outcome of any transaction depends on its facts, its timing, and the governing law.