Trustee threatens adversary proceedings against Debtor.

[bkonfusion]

Debtor received letter from BK Trustee assigned to his case stating that Debtor is indebted to the BK estate. Trustee is filing an adversary proceeding to collect this debt. The BK estate can make no disbursements until these funds are received. Litigation will likely take more than one year. Debtor must forward funds immediately to Trustee or contact Trustee to make payment arrangements.

Questions:
1. Should Trustee not go through or at least CC. Debtor’s Attorney when contacting Debtor?
2. What means does a trustee have to collect funds from a debtor whose income is less than poverty level and has no assets of value?

Thank you for sharing your knowledge.

[despritfreya]

Instead of asking the above questions, why don't you get the matter resolved? Did you fail to turnover a tax refund, have too much money in the bank on the filing date. . . What asset is the Trustee looking for?

Failure to resolve the matter can (and most likely will) result in either the denial of your discharge or, if you have your discharge, its revocation. This is in addition to a judgment for the dollar amount not turned over (plus legal fees).

Now, as to your questions. . . 1) In all likelihood a copy of the letter was emailed to your attny. 2) A money judgment obtained by the Trustee can be collected just like any other judgment in your State. You would have to look at State law.

Bottom line - the Trustee does no want to sue you. He/she simply wants the matter resolved.

Des.

[bkonfusion]

Thank you very much Des for helping me with my questions.
As for your questions;

why don't you get the matter resolved? Did you fail to turnover a tax refund, have too much money in the bank on the filing date. . . What asset is the Trustee looking for?

I have been working to resolve this matter since it became one. The asset that I believe the Trustee is looking for is the money that the Trustee believes I can borrow from relatives. The dollar figure derives from an inflated monthly rental amount retroactively charged to me for remaining in my homestead after I filed for BK until it was sold at auction. I can supply more background if you think it may be helpful.

[despritfreya]

It appears your issues are more complex than just turning over an asset such as a tax refund.

I am guessing that during the course of the case you did not service the mortgage and, as a result, the payoff was a bit higher than it would have been had you paid the monthly payment???? I am also guessing that the failure to service the mortgage resulted in an argument by the Trustee that you should be paying rent to the bk estate????

Sounds like this has already been litigated and a dollar amount has been imposed upon you for the "rental value" of the property. Since this cannot be re litigated you now need to work out a payment plan. I believe that the Trustee, by stating litigation could take up to a year, has opened a window for you to work with him/her to get the amount owed paid over the next 12 months. However, my guess is that with the state of worldly affairs right now, you could get that time period extended ever further. Please discuss with your attny tomorrow.

Des.

[bkonfusion]

I am guessing that during the course of the case you did not service the mortgage and, as a result, the payoff was a bit higher than it would have been had you paid the monthly payment???? I am also guessing that the failure to service the mortgage resulted in an argument by the Trustee that you should be paying rent to the bk estate????

No mortgage. Paid cash for it and never borrowed against it.

Sounds like this has already been litigated and a dollar amount has been imposed upon you for the "rental value" of the property.

No litigation yet. All assets fully administered. Trustee was hoping to get more money out of assets and apparently still is.

I believe that the Trustee, by stating litigation could take up to a year, has opened a window for you to work with him/her to get the amount owed paid over the next 12 months.

The amount that Trustee has decided upon is 4~5 years of my total income minus EBT benefits.

[justbroke]

The amount that Trustee has decided upon is 4~5 years of my total income minus EBT benefits.

I'm speechless.

[bcohen]

Is there any legal precedent for a panel trustee expecting a debtor to pay "rent" for the "privilege" of continuing to live in his house until it is sold? I have never heard of such a thing, and am really struggling to see the legality of this. For one thing, this type of argument, if true, would appear to deny a debtor the fresh start which bankruptcy is supposed to provide. Also, it is unlikely that the trustee could have sold the property sooner, or rented it out to someone else, had the debtor agreed to leave immediately. So it could be argued that the "value" which the trustee is seeking does not exist, and never did exist.

[justbroke]

Is there any legal precedent for a panel trustee expecting a debtor to pay "rent" for the "privilege" of continuing to live in his house until it is sold?

They have tried.

bkonfusion did you ever see this case... In Re Nestor Payne, 512 B.R. 421 (2014) . It was also a homestead sale case where the Trustee wanted to sell the property but wanted the debtors to move out or pay rent. It speaks to the issues of a "fresh start" and balances the Trustee's desire to sell a homestead property. (I distinctly remember this case because I thought I would have to battle my Chapter 7 Panel Trustee on this issue, but it never arose.)

[t]his bankruptcy appeal raises a surprisingly fundamental, and difficult, question ... on which we are unable to find any authority. The question is whether if a debtor continues to occupy his home after declaring bankruptcy, the trustee can charge rent to him, notwithstanding the homestead exemption.

In re Szekely, 936 F.2d 897 (1991) (emphasis added is mine)

The answer in Szekely, an 7th circuit appellate case, attempted to answer the question whether the Trustee could charge the debtor rent. The Nestor court, just like in Szekely, found that the Trustee and debtors are co-tennants with neither allowed to charge the other rent.

I have never heard of such a thing, and am really struggling to see the legality of this.

Me too, but we don't know under what theory, or actual law, the Trustee is pursuing this collection of rent.

[shipo]

The Nestor court, just like in Szekely, found that the Trustee and debtors are co-tennants with neither allowed to charge the other rent.

Good stuff; I never considered the debtor trying to charge the Trustee rent; interesting gambit. I'm thinking if a Trustee wants to get aggressive and charge the debtor rent, said debtor could try and flip it back onto the Trustee and possibly cause a stalemate.

[justbroke]

I'm thinking if a Trustee wants to get aggressive and charge the debtor rent, said debtor could try and flip it back onto the Trustee and possibly cause a stalemate.

And hence the reason why the ruling in Nestor Payne, and the referenced cases, is the correct reason; both are not happy! When both parties reach a settlement and neither is particularly happy, it's probably the right settlement.

[bcohen]

The Nestor court, just like in Szekely, found that the Trustee and debtors are co-tennants with neither allowed to charge the other rent.

This is the only interpretation which makes sense. Legally, the house remains the property of the debtor for tax and liability purposes until the moment a sale takes place, and the deed is transferred to the buyer. In this context, the idea of the debtor paying "rent" to the trustee simply does not make sense.

Also, it can be reasonably argued that to the extent which a debtor occupies his house until it is sold, both the debtor and the trustee receive something of value. The debtor, of course, is saving the money which he would have had to pay in rent to live somewhere else. However, the trustee is receiving the benefit of having the house occupied, and thus protected from damage, theft, and vandalism which often occur when a property is allowed to sit vacant. This is a service which the trustee would otherwise have to hire a foreclosure management company to perform, and pay out-of-pocket for as long as the house remains on the market.