Asset case - now what? (losing house)

[KevFinnerty]

The trustee just changed my case from "No Asset" to an asset case, which was expected since there is equity in my house (see my other threads if curious for more background).

I'm wondering what happens next. Assuming the only asset the Trustee is pursuing is my house (everything else I have should be exempt), what is the timeline and how does this sort of thing work? Anyone have a similar experience to tell us about?

I am assuming that the Trustee will contract with some kind of real estate company and put my house on the market. I am still living in the house though. Will he kick me out then sell it? Or can I stay here until it sells? I tried to ask the lawyer's office but they basically said to just wait to hear from the Trustee, that they hadn't heard anything yet from him other than the change in the case.

[scorpion35]

The trustee just changed my case from "No Asset" to an asset case, which was expected since there is equity in my house (see my other threads if curious for more background).

I'm wondering what happens next. Assuming the only asset the Trustee is pursuing is my house (everything else I have should be exempt), what is the timeline and how does this sort of thing work? Anyone have a similar experience to tell us about?

I am assuming that the Trustee will contract with some kind of real estate company and put my house on the market. I am still living in the house though. Will he kick me out then sell it? Or can I stay here until it sells? I tried to ask the lawyer's office but they basically said to just wait to hear from the Trustee, that they hadn't heard anything yet from him other than the change in the case.

i think he will give u a chance to buyback the equity u have
in other words u give him cash u keep the house

[KevFinnerty]

i think he will give u a chance to buyback the equity u have in other words u give him cash u keep the house

Thanks for replying. Guess I should give more background on my case in this thread.

I am unemployed. I am basically broke with practically no $$ to even live on - am over 100k in debt - also owe 75k on the mortgage (the house is already in foreclosure) - that is why I had to declare bankruptcy. I cannot pay my creditors, or the bank/mortgage.

I am asking if anyone has experience with how it works when a trustee takes a house (he is taking it to sell it, pay off the mortgage, then use the equity leftover to pay creditors). Wondering how the process works, when do I get kicked out, what can I expect to happen, etc.

[ValleYum]

Ugh, Kev - I am so sorry. Your situation plain sucks.

I saw where you were filing using the Federal exemptions.

If you used the Federal homestead exemptions won't you get to exempt $20,200 worth of equity and double that amount if you are married?

If so, shouldn't you receive (after the Trustee sells your house and takes his cut or maybe even before IDHAFC) the amount of your exemption whether you are an asset case or not?

Gah! I hate that the BK process can be a whiter shade of pale and not just 'black and white'. I will keep you in my thoughts, Kev. (I am the type of person that I keep worrying that after my 341 I will be the woman with the cardboard sign on the exit ramp of the freeway. LOL - but not really.)

[despritfreya]

KF,

If I recall correctly, the sale of the home is what you wanted so that you could get your allowed homestead. Sounds like things are now going in your direction.

Your Trustee already has a realtor he normally works with. He will file a Motion to Employ the Realtor for the purpose of marketing and selling the property. The Realtor will list the home for sale. You will continue to reside there until just before close of escrow - assuming a buyer is found. Remember, the Trustee cannot sell the property if the sales price does not guarantee you the homestead amount. Once the Realtor has a contract the Trustee will file a Motion to Sell. A Hearing will be held and, once approved by the Court, the sale will close.

None of the above happens over night.

Des.

[kw1025]

The trustee will not want to take your house. You have will have the option to "buy Back" the equity in your house which exceeds the homestead exemption. Your attorney can arrange this. Example. Your house worth $100,00. You owe $50,000. You homestead exemption is $25,000 = you have $25,000. That $25,000 equity can purchased by you for sometimes 50%, or around $12,500 depending on how your market looks.

[KevFinnerty]

Ugh, Kev - I am so sorry. Your situation plain sucks.

I saw where you were filing using the Federal exemptions.

If you used the Federal homestead exemptions won't you get to exempt $20,200 worth of equity and double that amount if you are married?

If so, shouldn't you receive (after the Trustee sells your house and takes his cut or maybe even before IDHAFC) the amount of your exemption whether you are an asset case or not?

Yes (thanks), that is what I am hoping for, the best of the bad outcomes of my situation, I am losing the house no matter what but at least I may get something out of it.

Although my lawyer has told me that it is possible that there will not be any $$ for my exemption left over after the mortgage is paid off, the trustee takes a cut, and some kind of administrative fees are paid, and of course the creditors need to get a chunk too.

[KevFinnerty]

Thanks Des. That is the FIRST time anyone has explained it to me in that depth. I wish you were my lawyer ;-)


I want to ask more specifically about what you mentioned here.

Remember, the Trustee cannot sell the property if the sales price does not guarantee you the homestead amount.

My lawyer had gone out of his way (and this was also told to me by a different lawyer originally but that is another long story) that it was possible that there would NOT be anything leftover after trustee sale to give me the homestead exemption. That the trustee would "burn through the asset funds" with fees of some kind and there would be little (if anything) to give me as the exemption amount.

Yet you're saying that the trustee CANNOT sell the house UNLESS he does so for an amount that GUARANTEES I get the full exemption amount?? Are you sure that is true???? That would be great but I was believing the possibility that if the trustee sold it I might get nothing out of it at all (but at least getting my debts cleared).

Until your comment I was wondering in this process how it worked as far as what price the Trustee would settle for in the sale. Would he just take any amount at all provided it was at least OVER the amount owed on the mortgage (that should be a slam dunk btw)? Or would he not budge from say 20K over that? Or 50k? Or 80k, or what? How would the real estate negotiations even go? Would the buyers know (I guess they would) that it was a bk case and that they had extra leverage over a normal transaction for negotiations or is that not even an issue?

I'm also wondering about the "lis pendens" status on my house because of the foreclosure - will that be lifted since the trustee is taking it rather than the bank going to a sheriff sale??? Because unless it is, I don't think it will sell for very much above what I owe on it. As I understand it, lis pendens status cuts down the pool of potential buyers too much (something about the title search preventing anyone from getting a mortgage on it thus leaving only investors/cash buyers), plus really weakens negotiations (the buyer knows they can just wait and try to steal it at auction so why give a decent offer?).

I should also add - I don't actually know for sure that the bank is "yielding" to the trustee and not pursuing their foreclosure. That itself is still something I don't have a real answer for and do not understand. I don't think they got a judgement yet, thus no date of sheriff sale either, but I was wondering how that would factor in if it was happening too.

[KevFinnerty]

The trustee will not want to take your house. You have will have the option to "buy Back" the equity in your house which exceeds the homestead exemption. Your attorney can arrange this. Example. Your house worth $100,00. You owe $50,000. You homestead exemption is $25,000 = you have $25,000. That $25,000 equity can purchased by you for sometimes 50%, or around $12,500 depending on how your market looks.

Thanks, I'm trying but I don't actually understand what you're saying...

How can I buy back my equity? Doesn't someone have to buy the house??? I have no money to buy it, or the equity, or even payback the 9 months I am behind on the mortgage :-(

Also the house is already in the process of being foreclosured.

[helpmeout]

Yes (thanks), that is what I am hoping for, the best of the bad outcomes of my situation, I am losing the house no matter what but at least I may get something out of it.

Although my lawyer has told me that it is possible that there will not be any $$ for my exemption left over after the mortgage is paid off, the trustee takes a cut, and some kind of administrative fees are paid, and of course the creditors need to get a chunk too.

That's not how it works, if the house sells for over the mortgatge, the next person in line to get paid after the mortgage is paid is you. You would get your exemption amount BEFORE any trustee fees and payments to other creditors. The Trustee can't charge a fee on the exempted amount. Nor can the Trustee pay any other creditor (other than the bank that holds the mortgage) any amount out of the exempted funds. And if the Trustee attempts to use exempted funds to distribute to creditors, your attorney needs to fight them.

Case in point, my house had equity at the time I filed. But by the time they took out the 10% realtor fee, the equity was less than the exempted amount (I used federal). My attorney told me that the Trustee wasn't going to go after my house (she was right) because the Trustee would get nothing if it sold for the appraised value as she would have to give me the balance after the mortgage was paid off. And this would be without the Trustee taking out the Trustee fee.

[despritfreya]

KF

Helpmeout has explained the issues. A Trustee simply cannot seize exempt property if he does not pay to the debtor the full allowed exemption after payment of any liens or encumbrances. If the liquidation of the property will not produce sufficient funding to

1) pay all liens and encumbrances
2) pay all closing costs and commissions
3) pay the Trustee's percentage for payment of 1 & 2 AND
4) pay the debtor the full allowed exemption

The asset is burdensome to the estate and should be abandoned.

However, this leaves you back where you were before. . . losing the home to a foreclosure.

You may want to stipulate with the Trustee that he can sell the property so long as you receive $X out of it even if $X is less than your exemption. This way you get something instead of nothing as in a foreclosure, there most likely will not be excess proceeds to turnover to you. Understand????

Des.

[KevFinnerty]

That's not how it works, if the house sells for over the mortgatge, the next person in line to get paid after the mortgage is paid is you. You would get your exemption amount BEFORE any trustee fees and payments to other creditors. The Trustee can't charge a fee on the exempted amount. Nor can the Trustee pay any other creditor (other than the bank that holds the mortgage) any amount out of the exempted funds. And if the Trustee attempts to use exempted funds to distribute to creditors, your attorney needs to fight them.

Case in point, my house had equity at the time I filed. But by the time they took out the 10% realtor fee, the equity was less than the exempted amount (I used federal). My attorney told me that the Trustee wasn't going to go after my house (she was right) because the Trustee would get nothing if it sold for the appraised value as she would have to give me the balance after the mortgage was paid off. And this would be without the Trustee taking out the Trustee fee.

THANKS. What you are saying is how I originally thought this was supposed to work, yet when I discussed this with 2 different attorneys prior to filing BK both of them said that the Trustee takes his fees out BEFORE my exemption and that in their experience there probably would not be anything left because the Trustee and various administrative fees would be run up to exorbitant amounts. I decided to risk it anyway since I thought it was better than foreclosure.

[KevFinnerty]

KF

Helpmeout has explained the issues. A Trustee simply cannot seize exempt property if he does not pay to the debtor the full allowed exemption after payment of any liens or encumbrances. If the liquidation of the property will not produce sufficient funding to

1) pay all liens and encumbrances
2) pay all closing costs and commissions
3) pay the Trustee's percentage for payment of 1 & 2 AND
4) pay the debtor the full allowed exemption

The asset is burdensome to the estate and should be abandoned.

However, this leaves you back where you were before. . . losing the home to a foreclosure.

You may want to stipulate with the Trustee that he can sell the property so long as you receive $X out of it even if $X is less than your exemption. This way you get something instead of nothing as in a foreclosure, there most likely will not be excess proceeds to turnover to you. Understand????

Des.

Thanks, yes I understand now - FINALLY someone is explaining this stuff in a way that actually makes sense (and it matches how I originally thought this was supposed to work). I got totally different advice on this when I asked (2 different attys).

Being a cynic I have a feeling that it is possible that the Trustee/my atty may at some point "advise" me that a sale is possible where I can get something like $5k as exempt which is better than nothing (& somehow "legally" make extra $$ on this for themselves). Not saying that they would do that, but I will have to see how this goes.


This leads me to ask a different question.

Suppose (for whatever reason) the Trustee does NOT take/sell the house, and that it goes to foreclosure by the bank.

Then suppose that the foreclosure/sheriff sale does go for MORE than what the bank is owed (which I think could be likely).

What happens to that excess money? How does it get rolled into my bk case, how does my exemption get factored into it, etc. And could my bk case get closed prior to that happening? In which case it would be even more confusing/messy???

Sorry for all the questions, but I think I have gotten better and more useful advice from this forum than I have from any attorneys.

[despritfreya]

Suppose (for whatever reason) the Trustee does NOT take/sell the house, and that it goes to foreclosure by the bank. Then suppose that the foreclosure/sheriff sale does go for MORE than what the bank is owed. . . What happens to that excess money?

I cannot say for sure as I do not know how your State works.

In my State the excess proceeds are turned over to the Superior Court. The Court then sends a notice to all in the chain of title, including the former property owner. The notice advises the recipients that if they have a claim to the $$ they must respond by a specific date. The proceeds are then distributed to those who claim (and can prove) an interest, usually a 2nd lien holder, if any. If there is no 2nd lien holder or other encumbrances the excess proceeds are turned over to the former property owner.

I suspect that should there be excess proceeds and you do not have a 2nd, the $$ would go to you, up to the amount of your allowed exemption. Anything over that would go to the Trustee.

Des.

[KevFinnerty]

I suspect that should there be excess proceeds and you do not have a 2nd, the $$ would go to you, up to the amount of your allowed exemption. Anything over that would go to the Trustee.

Thanks Des. That makes sense to me.