Chpt 7 + foreclosure, wanting trustee to take house with equity - experiences??

[KevFinnerty]

I'm looking for any comments from people who are in, or have been in, a situation similar to myself and want to tell about what happened to them.

I am confused and not sure my atty will act in my best interests. So I want to try to be as educated as possible to make sure things don't get mishandled in my Chpt 7 bk. As I already asked about in another thread, my atty/his secretary did not even fill out the forms correctly for my situation.

Basically, my situation:

- foreclosure proceedings started about a month ago; i don't know how much time it will be until the next steps happen (judgement/sheriff's sale)

- i owe 75k on my mortgage

- house has equity in it, as is could sell perhaps for 160k (according to realtor), if spruced up could sell for 180k-200k or more (but houses in this pricerange here are not selling at all)

- i have additional unsecured debts over like 120k, most delinquent for months that i cannot pay, lawsuits soon to come or other collection actions

- i am unemployed (and have given up on trying to get a job - at least until after i am out of here and move in with a relative in another state)

- have no assets (other than the equity in my house) that would be considered nonexempt

I want to give up my house in Chpt 7 for a trustee to take and sell. Have that sale payoff the mortgage rather than have it seized and sold at a sheriff sale or whatever. Use the federal homestead exemption of 20k applied to whatever funds are leftover from the sale to give me something. Trustee settle with creditors for what is leftover and wipe out all my other debts. That is the theory anyways.

Has anyone out there done this??

I ask because, the original lawyers I met for regarding this (part of free legal aid thing who eventually turned down my case) told me that in their experience that trustees will "burn through the entire asset" leaving nothing left for me as per the homestead exemption. In other words, legalized stealing.

And the lawyer I have now (a half priced lawyer who in my opinion doesn't give a shit what happens), after he mentioned a bunch of other stuff that made no sense at all for my case until I finally got him to listen to what I was saying, went out of his way to say that he can't guarantee I would get anything at all of the homestead exemption. At this point that is not even my main focus - would I like to get the exemption so I have something to rebuild my life over with?? Of course yes. But at this point I just want all this over with, stop all the collection calls, stop all the impending lawsuits, take the house already, start my life over even with nothing.

Has anyone else out there done anything like this? If so, how, and how did it work out? I will have specific questions but first want to see if anyone else out there even has gone down this road. I chose this method after reading about it in a foreclosure book, and it makes perfect sense for my situation, since I am basically giving up and accepting that I cannot sell my house quick enough, or for enough $$, to even bother trying.

[keptdigging]

No experience with this at all unfortunately. The scenario I can see is that the TT sells cheap (say only gets $90 K), mortgage payoff and penalties plus costs of sale eating it all up.

You've got to get your $20K before unsecureds get anything, but a bk sale is a fire sale. When I first read this I thought your atty made no sense, but in this real estate market, maybe.

[tobee43]

I'm looking for any comments from people who are in, or have been in, a situation similar to myself and want to tell about what happened to them.

I am confused and not sure my atty will act in my best interests. So I want to try to be as educated as possible to make sure things don't get mishandled in my Chpt 7 bk. As I already asked about in another thread, my atty/his secretary did not even fill out the forms correctly for my situation.

Basically, my situation:

- foreclosure proceedings started about a month ago; i don't know how much time it will be until the next steps happen (judgement/sheriff's sale)

- i owe 75k on my mortgage

- house has equity in it, as is could sell perhaps for 160k (according to realtor), if spruced up could sell for 180k-200k or more (but houses in this pricerange here are not selling at all)

- i have additional unsecured debts over like 120k, most delinquent for months that i cannot pay, lawsuits soon to come or other collection actions

- i am unemployed (and have given up on trying to get a job - at least until after i am out of here and move in with a relative in another state)

- have no assets (other than the equity in my house) that would be considered nonexempt

I want to give up my house in Chpt 7 for a trustee to take and sell. Have that sale payoff the mortgage rather than have it seized and sold at a sheriff sale or whatever. Use the federal homestead exemption of 20k applied to whatever funds are leftover from the sale to give me something. Trustee settle with creditors for what is leftover and wipe out all my other debts. That is the theory anyways.

Has anyone out there done this??

I ask because, the original lawyers I met for regarding this (part of free legal aid thing who eventually turned down my case) told me that in their experience that trustees will "burn through the entire asset" leaving nothing left for me as per the homestead exemption. In other words, legalized stealing.

And the lawyer I have now (a half priced lawyer who in my opinion doesn't give a shit what happens), after he mentioned a bunch of other stuff that made no sense at all for my case until I finally got him to listen to what I was saying, went out of his way to say that he can't guarantee I would get anything at all of the homestead exemption. At this point that is not even my main focus - would I like to get the exemption so I have something to rebuild my life over with?? Of course yes. But at this point I just want all this over with, stop all the collection calls, stop all the impending lawsuits, take the house already, start my life over even with nothing.

Has anyone else out there done anything like this? If so, how, and how did it work out? I will have specific questions but first want to see if anyone else out there even has gone down this road. I chose this method after reading about it in a foreclosure book, and it makes perfect sense for my situation, since I am basically giving up and accepting that I cannot sell my house quick enough, or for enough $$, to even bother trying.

actually kev...i don't think you will find people with this "exact" scenario...everyone's road has different turns and twists to it.

i understand your question, however, i have one question....

why NOT just surrender the house with the BK????.....the house is a "secured" property ....the house itself is the collateral....once you surrender it...you will have no financial responsibility. end of story....

the trustee cannot question your surrender...if the trustee has chose to want to sell the house for the equity...i would likely think the bank would surely fight the court. after ALL it's a secured debt and the house is the banks....NOT the courts. (that would be my argument)....someone else may have a different view which i most certainly would welcome.

just SURRENDER the house....finished deal....clear the slate..........

[KevFinnerty]

actually kev...i don't think you will find people with this "exact" scenario...everyone's road has different turns and twists to it.

i understand your question, however, i have one question....

why NOT just surrender the house with the BK????.....the house is a "secured" property ....the house itself is the collateral....once you surrender it...you will have no financial responsibility. end of story....

the trustee cannot question your surrender...if the trustee has chose to want to sell the house for the equity...i would likely think the bank would surely fight the court. after ALL it's a secured debt and the house is the banks....NOT the courts. (that would be my argument)....someone else may have a different view which i most certainly would welcome.

just SURRENDER the house....finished deal....clear the slate..........

Right, that is what I want to do (I think). Even if I don't get the $20k exemption. At least I can start over from there. It's just I can't quite seem to get a straight answer to this whole thing, and the atty's admin person filled out the form like I was "retaining" the house instead of surrendering it. Which made no sense to me (this is in another thread up here).

[iv65536]

From what I gather, the thought is this: The trustee will likely try to sell the house, but if the trustee does not believe he will be able to clear more than the mortgage and the exemption on the home, the trustee will simply abandon it and the unsecureds will get nothing.

[tobee43]

Right, that is what I want to do (I think). Even if I don't get the $20k exemption. At least I can start over from there. It's just I can't quite seem to get a straight answer to this whole thing, and the atty's admin person filled out the form like I was "retaining" the house instead of surrendering it. Which made no sense to me (this is in another thread up here).

have the atty's office change it to SURRENDER.....

the PP suggesting the trustee might sell it...i'm still not certain since once you have surrendered the property to the bank the trustee cannot go after the bank. or if they can...let them and get yourself out of it by turning over the collateral ....remove yourself and let them fight over your assets...

[KevFinnerty]

Well, what I want is to surrender it to the trustee to sell (not to the mortgage holder), so that he then pays off the mortgage, then takes whatever fees he wants, THEN have something left from that to give me my homestead exemption, THEN give the rest to the unsecured creditors if anything leftover.

That does hinge #1 on the trustee seeing enough equity in it to want to do that and I think he will (but I don't know for sure). I'm learning slowly that the bk system doesn't work the way it is supposed to on paper though. I think that the trustee himself will be able to make $$ doing this thus they will want to do it - however in doing so they will probably find a way to keep that all for himself (or his "friends" who he can employ to facilitate selling it), from what I am hearing.

[angles]

This is an interesting topic, because I always had the impression that if the filer exempted a portion of the home s/he would receive that exemption if the home were sold and if the primary loan was paid off first. So then in this case and potentially others, a trustee might consider selling any property that on paper shows that it may yield some money (the justification for liquidation) but in reality look at the entire amount as something he can burn through with administration fees for his business leaving little or nothing for the filer. if that happens, then it seems that the BK laws sort of defeat the purpose of having exemptions in the first place.

[tobee43]

Well, what I want is to surrender it to the trustee to sell (not to the mortgage holder), so that he then pays off the mortgage, then takes whatever fees he wants, THEN have something left from that to give me my homestead exemption, THEN give the rest to the unsecured creditors if anything leftover.

That does hinge #1 on the trustee seeing enough equity in it to want to do that and I think he will (but I don't know for sure). I'm learning slowly that the bk system doesn't work the way it is supposed to on paper though. I think that the trustee himself will be able to make $$ doing this thus they will want to do it - however in doing so they will probably find a way to keep that all for himself (or his "friends" who he can employ to facilitate selling it), from what I am hearing.

kev...i don't think that is really the way it works.

if the trustee feels he can sell the property to pay some of your creditors, the house, more than likely will be assigned to someone to handle your estate...he or she doesn't do it themselves.

also...if all your assets are in this property, we all know how long it takes to sell or even the chances of selling may be slim to none....they may just let it go.


if you do have the equity, and the property sells, the bank is in line first and then more than likely anything left would be distributed to your other creditors....but first the bank would have to foreclose...(i believe) and go through hoops to get this all done. it's a good concept, i just don't know how it would or play out. your atty can let the trustee know that's what you would like to do, and then see what the response is. should be interesting.

[tay666]

kev...i don't think that is really the way it works.

if the trustee feels he can sell the property to pay some of your creditors, the house, more than likely will be assigned to someone to handle your estate...he or she doesn't do it themselves.

also...if all your assets are in this property, we all know how long it takes to sell or even the chances of selling may be slim to none....they may just let it go.


if you do have the equity, and the property sells, the bank is in line first and then more than likely anything left would be distributed to your other creditors....but first the bank would have to foreclose...(i believe) and go through hoops to get this all done. it's a good concept, i just don't know how it would or play out. your atty can let the trustee know that's what you would like to do, and then see what the response is. should be interesting.

I thought the way it worked was.
If the house sold, first the bank would get what was needed to pay off the note.
The debtor would get their homestead exemption.
The remainder would be distributed to creditor after the trustee got his cut.

Forclosure would not be necissary as the mortguage would be paid off.

Example :
Home sells for $100,000 (after any fees to list and actually sell the property).
$50,000 is used to pay off balance of mortguage
$20,000 goes to debtor as their homestead exemption.

This leaves $30,000 as an asset of the estate.
The trustee gets his cut, and the rest is distributed amongst the creditors that filed a claim.

[tobee43]

tay...kev it talking about trying to rid the house to pay creditors....so if he surrendered the house it would not count it as exempt.

OP is wanting to give up the house.

[KevFinnerty]

I thought the way it worked was.
If the house sold, first the bank would get what was needed to pay off the note.
The debtor would get their homestead exemption.
The remainder would be distributed to creditor after the trustee got his cut.

Forclosure would not be necissary as the mortguage would be paid off.

Example :
Home sells for $100,000 (after any fees to list and actually sell the property).
$50,000 is used to pay off balance of mortguage
$20,000 goes to debtor as their homestead exemption.

This leaves $30,000 as an asset of the estate.
The trustee gets his cut, and the rest is distributed amongst the creditors that filed a claim.

That is how I thought it was supposed to work, and what I want to do.

In theory I believe that is how it works.

In practice though - it seems to be very much subject to things I don't understand and whims of the trustee. Also, it seems like the trustee's fees, or rather expenses that get incurred by the trustee and any realtors/administrators/whoevers that are employed to sell the house comes out "second"; that is after the mortgage is paid off, and before I would get any of the exemption, and before the unsecured creditors would get anything.

I discussed this further with the paralegal that is doing the filing. I really like her, she seems to know what she is talking about, and takes time to listen to me & explain things. I did not think the forms were filled out correctly to accomplish what I want to do but she was certain that they were (although it may not work out), it seems to me that there is a certain amount of game playing that goes on here with the forms. Even though I can't keep the house the forms will say "retained", NOT surrendered. The section beneath that that says "
If retaining the property, I intend to (check at least one):
- redeem the property
- reaffirm the debt
- Other. Explain____"

....is going to be left blank. She says this will be discussed at the 341 meeting. The trustee will decide what is going to happen.

[KevFinnerty]

tay...kev it talking about trying to rid the house to pay creditors....so if he surrendered the house it would not count it as exempt.

It wasn't explained to me that way but maybe you hit it right on the head. That would make sense - you have to say you want to RETAIN an asset in order to keep it (or any of it exempted). The trustee can still overrule you though, BUT have to give your exemption. If you say you are surrendering it, its gone, all rights given up.

I will keep you guys posted. Good thing I didn't try to do this myself/pro se. I would have filled out the form there as "surrendered".

[tobee43]

It wasn't explained to me that way but maybe you hit it right on the head. That would make sense - you have to say you want to RETAIN an asset in order to keep it (or any of it exempted). The trustee can still overrule you though, BUT have to give your exemption. If you say you are surrendering it, its gone, all rights given up.

I will keep you guys posted. Good thing I didn't try to do this myself/pro se. I would have filled out the form there as "surrendered".

please do kev...because i'm not certain as well....i would think that's the way it would work....

but ask your atty if you are surrendering if you can use it as an exemption...we were NOT allowed to. but it varies from state to state...so just make sure.

what you want to do makes excellent sense...that's probably why it WILL NOT work....LOL!!!!!!!!