BERNARDO ALVAREZ RIOS and GISELA GOMEZ LUGO

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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF PUERTO RICO
IN RE:
BERNARDO ALVAREZ RIOS and
GISELA GOMEZ LUGO
Debtor
CASE NO. 21-02376 (ESL)
CHAPTER 12
FILED AND ENTERED 9/30/2026
OPINION AND ORDER
This case is before the court1 upon Debtors’ Motion for Authority to Sell Real Property
Free and Clear of Liens Pursuant to 11 U.S.C. § 363 (the “Sale Motion”, dkt. #148), the
opposition filed by PR Recovery and Development REO, LLC (“PR Recovery”)2 (dkt. #155),
the Debtors’ reply (dkt. #162), and PR Recovery’s sur-reply (dkt. #169).
For the reasons stated herein, the opposition (dkt. #155) is hereby GRANTED.
Consequently, the Sale Motion (dkt. #148) is DENIED.
Factual and Procedural Background
1. 	This is the Debtors’ third bankruptcy case; the two prior cases were dismissed. See
Bankr. Case No. 14-01691, dkt. #1; Bankr. Case No. 17-05523, dkt. #1 (thereafter consolidated
with Case No. 14-01690); Bankr. Case No. 21-02376, dkt. #1. See also Bankr. Case No. 14-
01690, dkt. #44; Bankr. Case No. 17-05523, dkt. #208.
2. 	On December 7, 2021, the Debtors filed an Amended Chapter 12 Plan – Dated
December 7, 2021 	(the “Plan”, dkt. #65), which provides the following treatment for PR
Recovery:
CLASS 3 PR RECOVERY REO LLC CLAIM #1
PR Recovery REO is a secured debt. The property with served as collateral have
several mortgage promissory note encumbering, the following: Lot of land
comprised of 3.00 cdas with a value of $130,000.00; Lot of land comprised of 3.0
cdas with a value of $21,000.00. The total amount of PR Recovery collaterals value
is $57,000.00. In this case this creditor filed claim #1 for the sum of $566,317.94,
but the collateral worth $57,000.00. The proof of claim will be objected to reduce
1 The instant case was reassigned to this judge on August 28, 2025, after the Chapter 12 plan was confirmed.
2 PR Recovery is the successor in interest of PR Recovery and Development JV, LLC, and Banco de Desarrollo
Económico para Puerto Rico (“BDE”).
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the secured portion to the value of the collateral and the secured portion that
guaranties the same. As to this debt, Debtors’ first property, which is the residence,
guarantee the amount of $36,000; as for the second property, which is the lot of
land, it is guaranteed for the amount of $ 533,000 but this property has a secured
value of $ 21,000 according to appraisal. The same serve collateral of the loan,
meaning that the secured portion below has $36,000 of the house and $21,000 for
the second loan, for a total amount of $57,000.00., meaning that the reaming
balance of the claim #1 $109,317.94 to be considered unsecured.
Debt Balance Restructuring Upon Confirmation: As such, since a claim has
been filed this class will be paid in the amount of $57,000.00 owed to creditor as a
secured debt as follows:
The monthly payments to be received by PR Recovery will be in the amount of
$600.00 monthly for the five (5) years of the plan with a Lump Sum payment in
month sixty-one (61) of $29,916.81. This monthly payment will be applied to the
principal and interest for a period of sixty (60) month. The same will be at an
interest rate of 4.00% and amortized over a period of five (5) years. This payment
will be made through the Chapter 12 Plan and by the Chapter 12 Trustee. Payment
number 61 will be made directly by debtor to creditor to pay off the remaining
balance
At the end of the first 60-month period of the plan, debtors will made one additional
payment for $29,916.81 to pay the remaining balance … This payment will be made
by refinance of Debtors’ residence through the private banks or by the government
assistance.
…
If at any moment, Debtors decide to sell or refinance there will be no penalties as
to the unpaid balance. Regarding the security agreements over personal property,
this creditor will retain unaltered the legal and contractual rights over the property
serving as collateral until full payment of the secured amount as detailed in the
plan. With the confirmation of the chapter 12 plan the third mortgage for the sum
of $336,000.00 will be cancel and creditor will retain the first mortgage for the sum
of $70,000.00 and the second mortgage for the sum of $90,000.00 as collateral of
the properties, See Exhibit Title Search[.]
…
Debtor will object proof of claim #1 of PR Recovery to pay just the value of
the collateral as secured …
dkt. #65, pp. 4-6 (boldface original; italics added). See also Exhibit A to Plan dkt. #65, pp. 10-11
(Payment Proposal).
3. 	After various procedural events, (i) Proof of Claim No. 1 filed by PR Recovery
(the “Claim”) was “allowed in the amount of $57,000.00 as secured and $509,317.94 as
unsecured” (dkt. #115, p. 1), and (ii) the Plan was confirmed at the confirmation hearing held on
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April 7, 2022 (id.), and via entry of an Order Confirming Chapter 12 Plan on April 11, 2022 (dkt.
#116).
4. 	On April 10, 2026, the Debtors filed a Sale Motion (dkt. #148) requesting to sell a
property located in Utuado, Puerto Rico (the “Property”), and encumbered by mortgage liens
held by PR Recovery, to Isaac Ernesto Serrano Feliciano (the “Buyer”) for $26,000.00, free and
clear of all liens under 11 U.S.C. § 363(f). Attached to the Sale Motion are a property appraisal
dated September 2021 valuing the property at $21,000 (dkt. #148-1, p. 3), a title study dated
January 7, 2026 (dkt. #148-2), a statement of account from the Municipal Revenue Collection
Center (“CRIM”, by its Spanish acronym) (dkt. #148-3), and the option agreement (dkt. #148-
4), among others.
5. 	The Property is described in the Spanish language as follows:
RUSTIC: Parcel 12 located in the Angeles Ward of the Municipality of Utuado. It
has an AREA of 3 cuerdas equivalent to 1 hectare, 17 areas, 92 centiareas, and 1868
thousandths of another. Boundaries: North: PARCEL 13 and MARIA AQUILINA
TORRES; South: PARCEL 11; East, PARCEL 5; West: MARIA AQUILINA
TORRES, TODAY ELADIA H. FRÍAS
Property Number 9579 registered at page 10 of volume 212 of Utuado Registry of
the Property of Utuado
Cadastral number 187-000-001-26-001
dkt. #148, pp. 1-2, § III (Description of Property)
6. 	On May 1, 2026, PR Recovery filed an Opposition to Debtors’ Motion for
Authority to Sell Real Property Free and Clear of Liens Pursuant to 11 U.S.C. § 363 (the
“Opposition”, dkt. #155) arguing that the confirmed “Plan does not propose to sell any property
for the repayment of PR Recovery’s Claim, and provides instead that PR Recovery will retain
unaltered the legal and contractual rights over the property serving as collateral until full payment
of the secured amount as required in 11 U.S.C. § 1225(a)(5)(B)(i)” (dkt. #155, citing Plan, dkt.
#65, p. 4), and stating that it does not consent to the sale of the Property. PR Recovery argues that
the court lacks authority to grant the Sale Motion because Section 363 of the Bankruptcy Code is
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no longer applicable after the confirmation, citing In re Tacoronte Ortiz, 2022 Bankr. LEXIS
3312, 2022 WL 17184654 (Bankr. D.P.R. Nov. 23, 2022). PR Recovery argues that although
Tacoronte Ortiz was analyzed under the purview of 11 U.S.C. § 1141(b), 11 U.S.C. § 1227(b)
(applicable to Chapter 12 cases) reads verbatim as 11 U.S.C. § 1141(b). PR Recovery argues also
argues that even if Section 363 is somehow applicable, the Debtors have not alleged nor met their
burden of compliance under Section 363(f).
7. 	The court ordered the Debtors to state his position to PR Recovery’s opposition.
See Order, dkt. #156.
8. 	On May 26, 2026, the Debtors filed a Motion in Compliance With Court Order
(the “Reply”, dkt. #162) averring that a lump sum payment at month 60 of the plan and the sale
of property are contemplated under the terms of the confirmed Plan, and that although the Sale
Motion was “styled … under 11 U.S.C. § 363(f), the proposed transaction was consistent with
and in furtherance of the confirmed plan and the treatment previously negotiated between the
parties” (id., ¶ 10), “[a]ccordingly, the requirements of § 363(f) are not controlling under the
circumstances of this case” (id., ¶ 19). That is, Debtors do not contest the inapplicability of Section
363(f). Debtors argue that the Mortgage Law of Puerto Rico allows for partial releases and
cancellations of mortgages affecting multiple properties under specific circumstances. According
to Debtors “[p]ursuant to Article 175 of the Mortgage Law of Puerto Rico, 30 L.P.R.A. § 2571,
when a mortgage is divided among several properties and a portion of the loan corresponding to
one of the encumbered properties is paid, the debtor may demand a partial cancellation of the
mortgage on that specific property. This provision allows the debtor to select which property is
to be released, provided that the payment made is not less than the amount of the special liability
assigned to that property. Even though the deeds of mortgage assign a mortgage liability in the
amount of $36,000.00 over the property to be sold, the confirmed Amended Chapter 12 Plan
expressly limited the treatment and assigned value of the property being sold to $21,000,
consistent with the property’s determined value. Accordingly, the amount expected to be realized
from the sale of said property was never contemplated to exceed $21,000 under the confirmed
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plan.” (id., ¶ 21) (boldface removed). Debtors argue that the doctrine of res judicata bars PR
Recovery from relitigating plan terms that became final and binding upon entry of the Order
Confirming Chapter 12 Plan, which “valued Property #9579 at $21,000”and “allocated only
$21,000 of PR Recovery’s $57,000 total secured claim to this property, with the remaining
$36,000 allocated to Debtors' residence” (id., ¶ 15). “The property being sold was separately
valued under the confirmed plan at $21,000, and the proposed sale price of $26,000 exceeds that
valuation” (id., ¶ 18). Debtors thus argue that the proposed sale benefit PR Recovery,
“representing a 23.8% premium” (id., ¶ 24) and a “accelerates payment to PR Recovery compared
to the plan's monthly payment schedule” (id., ¶ 26). Debtors further state that PR Recovery “will
remain in possession of mortgage notes with an aggregate principal amount of $496,000, secured
by valid and perfected liens against property 9497 in the amount of $460,000” (id., ¶ 32), and
“[a]fter receiving the $26,000 sale proceeds, PR Recovery will have received a total of $54,800
($28,800 in prior Plan payments plus $26,000 from the sale) toward its $57,000 allowed secured
claim, leaving an unpaid balance of $2,200” (id., ¶ 35). With respect to PR Recovery’s reliance
on Tacoronte Ortiz, Debtors argue that although the “Tacoronte court addressed whether Section
363 applied to a post-confirmation transfer, but it did not address whether a plan provision
explicitly authorizing sales provides independent authority for court approval of such sales (id., ¶
47).
9. 	On June 10, 2026, PR Recovery filed a Reply to Debtors’ “Motion in Compliance
With Court Order” (the “Sur-Reply”, dkt. #169) arguing that the Sale Motion relied exclusively
on Section 363(f). With respect to the Plan’s alleged sale provision, PR Recovery argues that
The single sentence on which the Debtors rely ('[i]f at any moment, Debtors decide
to sell or refinance there will be no penalties as to the unpaid balance” (Plan, ECF
No. 65, p. 5)) is a no-prepayment-penalty provision, not an authorization to strip
PR Recovery’s liens in exchange for a partial payment. By its own terms, the clause
presupposes payment of “the unpaid balance”. It says nothing about selling
collateral free and clear of liens, releasing mortgages, or capping PR Recovery’s
recovery at a “plan valuation”. Likewise, the Plan provides that the Month-61 lump
sum payment “will be made by refinance of Debtors’ residence through the private
banks or by the government assistance”, not through the sale of the property. Plan,
ECF No. 65, p. 5 (boldface added).
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The argument that the confirmed Plan is final and binding upon all parties does not
contradict PR Recovery’s position, and does not give Debtors’ carte blanche to
rewrite it. Under 11 U.S.C. § 1227(a), the provisions of a confirmed plan bind the
debtor and each creditor. The binding terms of this Plan are that PR Recovery
retains its mortgages until full payment of its Secured Claim. The res judicata
doctrine invoked by the Debtors (Motion in Compliance, ECF No. 162, pp. 3, 6, 9-
11, ¶¶ 14, 23, 38-44) cuts squarely against them. It is the Debtors (not PR Recovery)
who seek a remedy that the Plan simply does not provide. Enforcing a confirmed
plan as written is not a collateral attack on it; rewriting it through a responsive brief
is. That is precisely why they needed (and moved for) §363 relief, which, as
previously discussed, is no longer available as a matter of law
dkt. #169, #169, ¶ 15 (emphasis original). PR Recovery also argues against the Debtors’ request
for a “partial cancellation” of PR Recovery’s mortgages under Article 175 of the Mortgage Law
of Puerto Rico, 30 L.P.R.A. § 2571, asserting that the act invoked was repealed, among other
things.
Applicable Law and Discussion
Section 363(f) of the Bankruptcy Code authorizes the trustee or debtor-in-possession to
sell “property under subsection (b) or (c) of this section free and clear of any interest in such
property of an entity other than the estate”. 11 U.S.C. § 363(f). See also 11 U.S.C. § 1203 (rights
and powers of debtor). The property identified for sale under subsection 363(b) and (c) is
“property of the estate”. See 11 U.S.C. § 363(b)(1), (c)(1). However, and in addition to the
limitation set forth in subsections 363(f)(1) through (f)(5)3 , the bankruptcy court “may not
authorize a sale free and clear of property that is not property of the estate.” 3 Alan N. Resnick &
Henry J. Sommer, Collier on Bankruptcy ¶ 363.06 (16th ed. 2026).
3 Section 363(f) provides that: “The trustee may sell property under subsection (b) or (c) of this section free and clear
of any interest in such property of an entity other than the estate, only if—
(1) applicable nonbankruptcy law permits sale of such property free and clear of such interest;
(2) such entity consents;
(3) such interest is a lien and the price at which such property is to be sold is greater than the
aggregate value of all liens on such property;
(4) such interest is in bona fide dispute; or
(5) such entity could be compelled, in a legal or equitable proceeding, to accept a money satisfaction
of such interest.”
11 U.S.C. § 363(f)(1)-(5).
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Generally, “[a] court may not authorize a sale free and clear after plan confirmation, as
the property revests upon confirmation in the reorganized debtor and is no longer property of the
estate, even though the plan provides for the court to retain jurisdiction to hear any applications
to sell the property dealt with by the plan free and clear of liens.” Id., at ¶ 363.06 (italics added)
See also 11 U.S.C. § 1227 (“Except as otherwise provided in the plan or the order confirming the
plan, the confirmation of a plan vests all of the property of the estate in the debtor”); In re Golf,
L.L.C., 322 B.R. 874 (Bankr. D.Neb. 2004) (noting that Section 363(f) is used during the
pendency of a bankruptcy case and before confirmation; post-confirmation sales of assets are
accomplished pursuant to the terms of a confirmed plan, or pursuant to non-bankruptcy law); In
re Tacoronte Ortiz, 2022 Bankr. LEXIS 3312, at *9, 2022 WL 17184654, at *3 (Bankr. D.P.R.
Nov. 23, 2022) (holding, in the analogous Chapter 11 context, that a post-confirmation sale
motion under § 363(f) was misplaced after property vested in the debtor).
In this case, the Debtors propose to invoke Section 363(f) post-confirmation. As noted, a
bankruptcy court may not authorize a post-confirmation sale free and clear under Section 363(f).
Here, neither the Plan nor the confirmation order provide that the Property would remain property
of the estate after confirmation. Accordingly, the Property revested in the Debtors upon
confirmation and is no longer estate property for purposes of Section 363(b), (c), or (f).
This conclusion does not mean that a Chapter 12 plan can never provide for a post-
confirmation sale. See, e.g., 11 U.S.C. §§ 363(l), 1222(b)(8), 1227. The operative question here,
however, is whether the confirmed Plan authorizes the sale proposed and the requested free-and-
clear relief. It does not. As pertinent here, the Plan expressly states that a lump-sum payment of
$29,916.81 “will be made by refinance of Debtors’ residence through the private banks or by the
government assistance” (dkt. #65, p. 4). The additional language that “[i]f at any moment, Debtors
decide to sell or refinance there will be no penalties as to the unpaid balance” (dkt. #65, p. 5) does
not alter that conclusion. The additional language addresses the absence of a penalty upon an
elective sale or refinancing; it does not expressly authorize a post-confirmation sale of the
Property, preserve the Property as estate property, authorize a sale free and clear of liens, or
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specify the disposition of sale proceeds. Such additional language therefore cannot supply the
authority sought in the Sale Motion.
Accordingly, the court concludes that Section 363(f) is inapplicable to the proposed post-
confirmation sale of property. The court further concludes that the terms of the confirmed Plan
and the confirmation order do not authorize the sale or the requested free and clear relief sought.
Conclusion
For the reasons stated herein, the Opposition (dkt. #155) is hereby GRANTED.
Consequently, the Sale Motion (dkt. #148) is DENIED.
IT IS SO ORDERED.
In San Juan, Puerto Rico, this 30 th day of September 2026.
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