IN THE UNITED STATES BANKRUPTCY COURT

FOR THE EASTERN DISTRICT OF VIRGINIA

At Alexandria

In Re: :

X K SPORTS, LLC : Case No. 16-11220

Debtor : Chapter 11

X K SPORTS, LLC :

Debtor/Movant :

:

v. :

:

LUQUN LIU :

43096 Unison Knolls Cir. :

Ashburn, VA 20148 :

Respondent :

COMPLAINT TO SET ASIDE A DEED OF TRUST 

HELD BY CREDITOR LUQUN LIU

AS PREFERENTIAL

Comes now Debtor by undersigned legal counsel and moves this honorable Court to pass

an Order setting aside a deed of trust as a preferential transfer as follows:

1. Debtor commenced this case on April 5, 2016.

2. A proceeding to determine, avoid or recover preferential transfers is a core proceeding

and this adversary proceeding constitutes a core proceeding pursuant to 28 USC §§157(b)(2)(F)

and 1334.

3. By deed dated May 13, 2011, the Debtor acquired title to the premises commonly

known as 21586 Atlantic Blvd., Suite 130, Sterling Virginia. A copy of this deed is attached

hereto as Exhibit A.

4. This deed was recorded among the land records of Loudoun County, Virginia on June

1, 2011.

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5. By Deed of Trust dated August 27, 2013, the Debtor granted a security interest to

creditor Luqun Liu. A copy of this Deed of Trust is attached hereto as Exhibit B, and a copy of

the note secured by this Deed of Trust is included in this Exhibit.

6. Said Deed of Trust was recorded among the land records of Loudoun County, Virginia

on January 13, 2016.

7. Section 547(b) of the Bankruptcy Code provides that, with certain exceptions not

material, the trustee may avoid any transfer of any interest of the debtor in property:

(1) to or for the benefit of a creditor;

(2) for or account of an antecedent debt owed by the debtor before such transfer was

made; 

(3) made while the debtor was insolvent; 

(4) (A) made on or within 90 days before the date of the filing of the petition; 

(5) that enables such creditor to receive more than such creditor would receive if 

(A) the case were a case under Chapter 7 of this title; 

(B) the transfer had not been made; and 

(C) such creditor received payment of such debt to the extent provided by the

provisions of this title.

8. The Deed of Trust referenced herein constitutes a transfer of an interest in property

which benefits creditor Luqun Liu.

9. The Deed of Trust was made and delivered for or on account of a disputed antecedent

debt owed to said creditor before the Deed of Trust was delivered and recorded.

10. At the time the Deed of Trust was recorded, the Debtor was insolvent. Debtor is

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presumed to have been insolvent during the 90-day period which preceded the filing of this case. 

§547(f).

11. In addition, on the date that the Deed of Trust was delivered to the creditor, the

Debtor was insolvent. The Debtor at the time was renting out space to fitness educators. The

rent did not cover the payments on the Middleburg Bank mortgages, which were serviced by

Debtor out of other resources.

12. The Deed of Trust was recorded 83 days prior to the commencement of this case, and

so the transfer was made on or within 90 days before the filing date of the petition.

13. If the Deed of Trust is enforced, it would permit creditor Luqun Liu to receive more

than she would have received if the case were commenced under Chapter 7 of this title, if the

transfer had not been made, and, if the debt secured by the Deed of Trust is treated as a general

unsecured claim, this creditor will receive a payment on her debt to the extent provided under the

Bankruptcy Code. 

14. Debtor obtained an appraisal of the subject premises which is attached hereto as

Exhibit C. That appraisal shows a value of the subject premises between $1,309,000 and

$1,322,644. The subject premises burdened by a deed of trust recorded on or about August 3,

2005 as instrument no. 200508040086750 with the original balance due of $757,000 and by a

deed of trust recorded October 24, 2011 as instrument no. 201110250065297 in the original

balance due of $736,000 both in favor of Middleburg Bank. Both of these instruments were

recorded among the land records of Loudoun County, Virginia.

15. With respect to these deeds of trust, $554,821.59 is due with respect to the earlier

deed of trust (per proof of claim no. 2) and $571,7340.04 is due with respect to the later deed of

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trust (per proof of claim no. 3), for a total secured claim due to Middleburg Bank in the amount

of $1,126,555.63. 

16. In addition, there is due as a secured claim a debt to the County of Loudoun, Virginia

for property taxes on the subject premises in the amount of $34,292.13 (proof of claim no. 1).

17. Accordingly, the equity of the Debtor in the subject premises is computed as follows:

Property Value $1,309,000.00

Minus Middleburg Bank liens ( 1,126,555.63)

Minus Property Taxes ( 34,292.13)

Equity $ 148,152.24 (lower equity value)

Property Value $1,322,644.00

Minus Middleburg Bank liens ( 1,126,555.63)

Minus Property Taxes ( 34,292.13)

Equity $ 161,796.24 (higher equity value)

18. If creditor Luqun Liu is treated as a secured creditor under the preferential Deed of

Trust as alleged herein, she will receive between $148,152.24 and $161,796.24 as a secured

claimant in this case.

19. If this creditor's preferential deed of trust is avoided, she will share in a distribution

with the general unsecured creditors and receive less than she would have received if the

preferential transfer created by the Deed of Trust is not set aside. 

20. Eagle Bank has filed a proof of claim in the amount of $1,238,541.79 as a general

unsecured creditor based on a guarantee of a debt of another of Debtor’s companies, Loudoun

Gymnastics, Inc. This creditor and other administrative claims will be prejudiced by the

preferential treatment of the debt of creditor Luqun Liu.

WHEREFORE, Debtor requests this honorable Court to set aside the secured claim of

Luqun Liu based on the Deed of Trust which was recorded among the land records of Loudoun

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County, Virginia on January 13, 2016 as a preference, and to allow the claim of this creditor as a

general unsecured claim, subject to any dispute to this claim in which Debtor may prevail.

Respectfully submitted,

/s/ Thomas F. DeCaro, Jr. 

Thomas F. DeCaro, Jr. #34649

Attorney for Debtor

14406 Old Mill Rd. #201

Upper Marlboro, MD 20772

301-464-1400 phone

301-464-4776 fax

tfd@erols.com E-mail

CERTIFICATE OF SERVICE

I, Thomas F. DeCaro, Jr. do hereby certify that on October 3, 2016, I did mail, postage

prepaid, a copy of the aforegoing Adversary Proceeding to Set Aside Deed of Trust to:

John Conor

Suite 310

1033 North Fairfax St

Alexandria, VA 22314

via CM/ECF

Bradley D. Jones

Office of the US Trustee

Room 210

115 S. Union St.

Alexandria, VA 22314

via CM/ECF

Daily Law PC

10964 Inspiration Point Place

Manassas, VA 20112

County of Loudoun Virginia

attn: Belkys Escobar, Asst. Co. Atty.

1 Harrison St. SE

Leesburg, VA 20175

Eagle Bank

c/o Stephen A. Metz

Shulman, Rogers, Gandal, Pordy & Ecker PA

6

th Floor

12505 Park Potomac Ave.

Potomac, MD 20854

Luqun Liu

43096 Unison Knolls Cir.

Ashburn, VA 20148

Luquin Liu 

19112 Jingsh Road 

102 Building 9 106 Catoctin Circle

Jinan, China

/s/ Thomas F. DeCaro, Jr. 

Thomas F. DeCaro, Jr.

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