Question about buy back of non-exempt property

[kw1025]

i have been discharged but i own a few rental properties that i am going to "buy back" (the equity) from the trustee. Does anyone have any undertsanding of this? The process, the negotiation. My attorney said he can handle it for me. Is there a length of time you can make payments, etc? Let me know -thanks

[AngelinaCat]

I don't understand how you are discharged, and yet are going to buy back your assets now. You need to talk very seriously to your attorney.

We had non-exempt assets that we had to buy back from the BK estate, but we had to make payments of $450.00 per month for a year. This deal started in May 2008--we filed 12/28/2007. We were discharged on Aug. 13, 2008, and finished our obligation on April 1, 2009.

But our deal was struck well before we were discharged.

Please explain further.

[kw1025]

I was discharged Dec 16, and i my filing it specifically said that i was going to re-affirm 3 properties, my house (exempt) and 2 rental properties. I recieved no re-aff agreements for anything from bank of America, they said since i am current, there is no need to re-affirm, and they dont do that anyway.

The trustee is aware i intend to keep my rentals. Right now we are waiting for any tax return and we need to discuss the buy back of the equity. Does this not seem normal? What in your opinion could happen? I think becuase my case was so apparent, that the trustee knew there was no abuse, discharged my liabilities, and we just have to resolve those issues. My attorney is really good, and he said there is no reason to be concerned, but now i am thinking that i should be. What is the worse that will happen?

[justbroke]

I agree with Mrs. Cat. You need to sit down with your attorney because we don't know what's going on. From what you wrote, it is unknown whether those properties are still part of the Estate or not. Did the Trustee filed a motion to abandon or otherwise was seeking to recover the equity from the properties?

The key here, really is... are the properties exempt? If not, how much non-exempt equity was there? Are you an asset case? What was on your preliminary asset report? Has your attorney already talked to the Trustee about buying the equity back?

[ChaseDidThis]

This happened to a few at my 341, the trustee told them he would review their tax returns, then make a determination on their non-exempt assets, none of them had property, it was jewelry and such. When it was my turn, he told me to make an offer within a short period of time, so we settled our buyback with him about 30 days before discharge. We still have to give him our refunds also. I don't know why he handled the cases differently, but glad that ours is still not up in the air.

[kw1025]

yes, i am an asset case from the onset. Have about $50,000 in equity according to market value from taxes. When my trustee gets to it, he 'll ask if i want to buy back, and then i will make offer. It is kinda strange thoough, after the discharge

[justbroke]

yes, i am an asset case from the onset. Have about $50,000 in equity according to market value from taxes.

If you are using the Market Value from a tax assessment... that is just wrong. Those are never accurate. You, or the Trustee, would order an appraisal to see what the real value is. The Trustee, being cheap and not wanting to lose money, will probably do a CMA first, and then, perhaps a full appraisal to find the true value.

I think there is something wrong here, generally speaking. A diligent attorney would have at least had the debtor get a comparative market analysis (CMA) to see what the value is likely to be. Never rely on tax assessments, Zillow, Domania or any of those... "guesses". After the attorney had the right value (or close to it), then that's what value the debtor would use on Schedule A.

I would absolutely NOT let the Trustee base his/her assessment of value on a mere tax assessment / tax record. You want to know that you're not paying for $50,000 in value that isn't even there. If there's really that much money in the property, it is worth it for you to get a full appraisal done and submit that with any "offer".

Please review with your attorney.

[HHM]

More fundamental question, where are you going to get the money to pay the non-exempt equity?

[kw1025]

Good fundemental question. I am going to get the money from 401k or a payment plan, or some other tactics. My attorney assured me that the trustee will likely take considerably less than 55k.He also said "Buy back of equity is seperate and distinct from discharge and negotiations can take place either before, after, or both". He also told me to RELAX and told me i should not lose one ounce of sleep over this.. thats what i pay him for! I will tell you this, that hiring the right attorney is ESSENTIAL. I am glad he is there for me!

[AngelinaCat]

I am glad that the right attorney is there for you, but I also hope he has told you of ALL the tax and penalty consequences for messing with your 401k. If he hasn't, he isn't doing his job.

I really and truly C*R*I*N*G*E when I see someone mention a 401k in a post. We took a 10K loan from 'Hub's trying to get solvent, then ended up cashing it out altogether.

The income tax consequences besides the penalties involved were/are horrendous. We owe about 20K in income taxes, part of which is the 401k consequence. We are paying back $400.00 a month from 'Hub's SS income to IRS every month, and will probably be doing so until the day he dies. He will be 66 in March.

Think LONG and HARD about it.

[kw1025]

Very valid points Cat. He did inform me of the consequences, but i have over $225,000 in there and i am just 40 years old. He said IF i wanted to keep non-exempt properties, that this may be the way to do it, along with other alternatives like a payment plan with the truste, or just simply borrow it from a friend. He really cited the 401k as a last option, but one that is needed if i want to keep my 2 rental properties. He said the "he" will negotiate the best deal for me with the trustee. As far as income tax, i would have that taken out right away from my distribution, and the penalties are just the penalties, nothing you can do about that. I WAS stupid enough to take $20,000 ealier this year to do a pay secured creditors for a few Florida properties i ended up surrendering. That was dumb, but at the time, i did not know i would be filing.

[HHM]

Bad idea all around...what exactly are you trying to buy back. Whatever it is, I am willing to bet you can get a better one in 2 years and spend less (all things considered, taxes, penalties etc).

[kw1025]

I own the rental properties side by side to each other, and they provide income for the carrying costs. They are great rentals, plus members of my family live there. Right now, i have about $55,000 in equity between the two, so that is what i am buying back. The 401k option is the last option i will use, there are many others. The payment plan is what i am looking for. If the trustee can do a 12 month payment plan, i would be fine with that. I make a good living, and if required, i will just step up my efforts even more and make an even better living.

[AngelinaCat]

For our buy back, our trustee did give us 12 months, but we were only paying $450.00 a month. We were buying back family heirlooms and some other things not related to real property. But that is our district. I hope you can work something out with your trustee.

We were and are on a semi-fixed income in that I lost my FT job two years ago and have not been able to secure another, though I have been looking. I do have a good PT job, but my hours have been cut. 'Hub is semi-retired and partially disabled due to health, so he really is not able to actively go back to work. Also, we are 57 and 65, so prospective employers tend to overlook us.

So please keep a realistic view of your employment and potential employment. I did NOT expect to become 'down-sized' two years ago.

My best~~