Question Not Sure If I'm Allowed to Cash Check from House Sale

[BKnCOFFEE]

I filed Chapter 13 bankruptcy to stop a property tax foreclosure (tax sale) on a house that I wanted to keep. Before filing BK, I also owned another house and put it up for sale, hoping that the closing would go thru before the need file bankruptcy, so I could pay-off the back taxes on the house I wanted to keep, and stop the foreclosure. My realtor found a qualified buyer, and a timely closing was to occur, but unfortunately the closing got delayed, so I had to file BK to save my other house. 30 days after I filed BK, the house closing occurred. Now my real estate attorney (not my BK attorney) is holding a large check for me. My BK case was later confirmed, and the BK Judge ordered that I send SOME of the house sale proceeds to the Trustee, and also ordered that the remaining house sale funds can be distributed to me. The BK Judge did not specify any particular date by when funds must be sent to the Trustee. Would it be ok for me to cash the house sale check, and then send a money order to the trustee? Also, I ask whether I would have been permissible for me to cash the check before the BK Judge agreed that I could receive some of the funds?

[justbroke]

This is an answer that should be answered by your Chapter 13 Bankruptcy attorney. You need to find out how the Trustee wants to receive the funds (e.g. cashier's check, ACH (billpay), or wire). It reads to me as though you did a Motion to Sell and the judge authorized the sale under conditions. You are then to work with the Trustee to determine how and when the funds should be provided to that Trustee. I would suspect that the funds are to be paid to the Trustee immediately. Most Chapter 13 Trustees don't want 3rd party checks, or even checks that are paid to the order of the debtor (and subsequently endorsed).

I think of this as no different than a tax refund. All Chapter 13 Trustees that I know want the debtor to get the refund check, deposit it into their own account, and then get "certified" funds to send to the Chapter 13 Trustee.

The key here is 1.) working with your attorney, and 2.) finding out the exact type of "certified" funds acceptable by the Chapter 13 Trustee. Since Trustees are so different, I can't answer for your Trustee.

[BKnCOFFEE]

Hello "just broke." Thank you for your reply and advice.

You are correct that because the house sale closing took place shortly after my filing of BK, before approval was requested, my BK attorney had to file a "nunc pro tunc" (now for then) motion for a retroactive approval of the house sale, which the BK Judge did approve, but there were no special conditions other than a portion of the sales proceeds (about 30%) would need to be sent to the BK Trustee.

Can I just call the BK Trustee's office directly, and ask how the funds should be delivered?

[justbroke]

You can call the Chapter 13 Trustee's office directly. However, please be aware that many of those offices won't speak to a debtor that is represented by an attorney. I would still call them first just to see if they'll give you the exact way they want to receive the funds, and where you need to send those funds.

[Carmella]

Why not just call your attorney? They should be able to tell you the best way to pay and confirm you are paying the correct amount to the trustee. In Ohio we can make extra payments online, maybe that would be an option, so you don't have to get a money order.

[BKnCOFFEE]

Well I found out a few things. According to my BK attorney, I cannot cash the check and deposit it into my personal bank account because, based on court order, a portion of the funds must be sent to my BK Trustee. My attorney said that if I took custody of all the funds, even momentarily, I would be violating BK rules/procedure. I'm not a BK expert, so I can't say for sure whether my attorney is correct.

I must sign the check, and then my attorney will deposit it into his trust account. After it clears, he will write me a check, and then send the remaining portion to the NJ Trustee, via certified check. However, because we plan to object to some of the Proof of Claims, my attorney will hold-off on sending funds to the Trustee until after the Proof of Claims issues are resolved.

I'm sorry to say that I may have hired the wrong BK attorney, as I'm the one who brought up what appears to be significant problems with some of the Proof of Claim's, and my attorney is now investigating. My attorney seemed to accept each POC as legitimate, and if no one objects, my understanding is that the Trustee will pay them. I will elaborate further after my attorney looks into the concerns I have with some of the POC's.

I may have some more BK questions, and thank "justbroke" and "Carmella" for your advice. Thank you!

[justbroke]

I wouldn't say that the BK attorney is bad. To tell you the truth, hardly anyone "polices" the Proof of Claims (POCs) like the debtor does. In fact, I don't know of any BK attorney that will go through your POCs and look to see if there are issues. It is usually the debtor that finds something that is questionable (such as an invalid debt).

In some Chapter 7 cases, the Chapter 7 Trustee may look at the claims but not with the same critical eye that a debtor has.

I think that your POC issues worked exactly how they should. You believe that one or more creditor claims are not accurate, you informed your attorney, your attorney will review, and if your issues with the claims appear to have significance, your attorney will file an Objection to Claim.

[flashoflight]

My attorney would ignore inaccurate POCs if it makes no difference in the case. I had one account among several from a single collection agency that didn't belong to me, but it's so small that we ignored it. Honestly I never bothered to double check the POCs except for the real big ones and I would have done nothing unless the error was well into the four digits due to my 1% payback plan.

[flashoflight]

One other thing. If the mortgage or HOA POC is inaccurate, you might incur post-petition legal fees that the lender or HOA had to incur to investigate your disputed POC. I wanted to dispute my mortgage POC, but it would have been a losing battle with even more junk fees added.

[justbroke]

One other thing. If the mortgage or HOA POC is inaccurate, you might incur post-petition legal fees that the lender or HOA had to incur to investigate your disputed POC. I wanted to dispute my mortgage POC, but it would have been a losing battle with even more junk fees added.

And that's the kicker. Be wary of fighting with an HOA because should you lose, those fees will make you cry. I fought with mine to the tune of them adding over $20K to my bill. Well, at first it was only about $5K, but I fought the $5K and it became $20K!