Can trustee require current financials - 18 months post discharge (Chap 7)

[freeatlast09]

Very strange request - anyone with experience in this?

Case facts: Chapter 7 Filed May/2009 – Discharge Aug/2009 (not closed)

House surrendered and vacated right after the 341 (June 2009). Trustee converted us to an asset case & listed the property with a local Realtor for more that we owed. ($390k list/owed $330k) Of course, it didn’t sell at that ridiculous price.

Forward to now and the list price is $260k. The trustee’s real estate agent contacts us and says they have an offer, but BOA is requiring quite a bit of paperwork from us to proceed with a short sale. (Current tax returns, bank statements, pay stubs, hardship letter etc…) Now bear in mind, that this mortgage was discharged over 18 months ago and we have no obligation to pay it. So my questions are:

1. Why would we have to provide any docs to prove we can’t pay a debt that was already discharged? (Also keep in mind, they are asking for loads of financial info that occurred after the discharge.)

2. Why is this trustee even selling a negative equity property? How can he get any money for creditors? (I’m sure the real estate agent gets their commission, but nobody else makes a penny on this deal.)

Thoughts?

PS Our lawyer gave us a vague answer about cooperating ‘is a dicey deal’ and suggested we look into the government short sale participation program as he’s had other clients get up to $3500 by helping with the short sale.

[justbroke]

I don't think you're obligated to work with the lender. Your lawyer needs to provide a more solid answer about whether your cooperation with a Realtor is compulsory, under the terms of your discharge, or would be totally voluntary.

If it's voluntary, I agree that seeking other routes, such as Deed in Lieu, is probably better. I can't believe the Trustee still has the case open hoping to make a dime. LOL

The debt is discharged. I see no reason to "cooperate" unless compulsory. Keeping in mind that I'm not your attorney.

[freeatlast09]

Thanks justbroke - yes - if I see an order from a judge that states we must cooperate, then we will. We haven't actually heard from the trustee - only the real estate agent and she 'thinks' we are required to cooperate, but she is checking with the trustee on that. I can see why BOA may want this info for a regular short sale, but for a mortgage that was already discharged? I think they're just spying on all of us.

[justbroke]

Your finances are irrelevant since the debt was discharged. I would definitely apply some pressure on your own attorney to contact the Trustee and ask what's up? You should not need to cooperate with that type of request since it is irrelevant!

[despritfreya]

The Trustee SHOULD NOT be attempting to sell the property short. The Trustee's job is to liquidate assets for the benefit of the unsecured creditors. If there is no recovery for the unsecured creditors the Trustee SHOULD abandon the property. Period, end of story. Further, the Trustee has the authority to do what needs to be done to effectuate a sale. The Trustee is selling the estate's property NOT the debtor's property, and, since the lender does not have to agree to a short sale, it is the Trustee's job (not yours) to try to cut a deal.

I would tell my client NOT TO give any information as it relates to a short sale. My client would have surrendered the property and if some realtor wants to make a few bucks, that realtor needs to do it WITHOUT having my clients doing any work, UNLESS there is a guarantee that my clients would be receiving compensation, say, no less than $5k, for their time and effort - and that $$ would have to be paid up front.

If the Trustee insists you cooperate you should file an Application to Abandon the property and get the matter before the Judge. Let the Trustee explain why he wants to liquidate property that is of "inconsequential value and burdensome to the estate" just so that he and his good buddy, the realtor, make some $$. This is garbage and, as you can tell, has pissed me off. Wish I was your attorney.

Des.

[AngelinaCat]

Freeatlast09, please take Des' advice. Your trustee is attempting to do something very unethical, at the very least...

Good luck to you.

[freeatlast09]

Des: thank you for your thoughts & ideas. We wish you were our attorney too. Not that our attorney was bad - he just doesn't have your 'fire'.

The rest of our bankruptcy process was fairly painless. It's just this negative equity house thing that's been holding up the closing of our case. We've never understood it since the day he hired the Realtor and made us an asset case knowing there would be no possibility of anything for unsecured creditors. We came to the same conclusion you did - he's just making a few dollars for his real estate person and himself, but we had no idea he'd drag this on for almost 2 years now.

We'll see what we hear from the trustee and will definitely take your advice about the Application to Abandon property if he tries to push us on this issue.

Thanks again!

AngelinaCat - thank you for your good thoughts.

[freeatlast09]

Just an update in case anyone is following this thread.

We hadn't heard anything until today. The real estate agent calls again and says 'we still need your updated financials'. We again said we would not provide that info since it is irrelevant to the sale. The agent says they talked to the trustee who in turn tried everything to make the sale go through, but BofA will not proceed with the sale without the documents so we are obligated to provide them. Of course, we have not heard from the trustee or the court about this.

I guess we're going to have to move forward with the Motion to Compel Abandonment. What a headache!

If Des is around I'd love to hear any other thoughts.

[despritfreya]

Just an update in case anyone is following this thread.

We hadn't heard anything until today. The real estate agent calls again and says 'we still need your updated financials'. We again said we would not provide that info since it is irrelevant to the sale. The agent says they talked to the trustee who in turn tried everything to make the sale go through, but BofA will not proceed with the sale without the documents so we are obligated to provide them. Of course, we have not heard from the trustee or the court about this. I guess we're going to have to move forward with the Motion to Compel Abandonment. What a headache!

Yes, I guess you are. Is your attorney on board with this?

I suspect that this matter is being driven by the real estate agent who wants a commission. It makes absolutely no sense for the bk estate to invest time and money for an endeavor that will not allow for any payment to unsecured creditors. Your attorney should be communicating with the Trustee to find out why the Trustee thinks this property is of any value to the estate and further inquire as to why he thinks a debtor needs to supply post petition financial information that has no impact on the administration of the case.

Please keep me posted.

Des.

[freeatlast09]

Thanks Des.

In answer to your question - our attorney sidesteps any questions about the trustee. When the trustee initially switched us to an asset case we asked our attorney why they would do that since it would provide nothing to the creditors, he answered with "Well, they're not supposed to do that just to benefit the real estate agent." From his tone I certainly inferred that it must occur quite often though. I think he may be afraid of making waves since he has lots of cases with this trustee?

I checked on Pacer and this particular real estate agent has been given 80+ listings from this trustee over the last 36 (or so) months. Of those, approx 40 are closed with no distribution to unsecured creditors. All started as no-asset and switched to asset cases then 'no distribution' at the end. It looks like sometimes the house was sold short while other times the mortgage holder foreclosed and the trustee abandoned the property. In any event, unsecured creditors received nothing.

We're waiting to hear back from our attorney on this.

Thanks much for the info and thoughts.

[despritfreya]

I checked on Pacer and this particular real estate agent has been given 80+ listings from this trustee over the last 36 (or so) months. Of those, approx 40 are closed with no distribution to unsecured creditors. All started as no-asset and switched to asset cases then 'no distribution' at the end. It looks like sometimes the house was sold short while other times the mortgage holder foreclosed and the trustee abandoned the property. In any event, unsecured creditors received nothing.

Wow. That is just so wrong. Glad the Trustees in my jurisdiction don't pull this garbage. . . at least not with any of the cases we file.

Des.

[GWBcasualty]

Thanks Des.

In answer to your question - our attorney sidesteps any questions about the trustee. When the trustee initially switched us to an asset case we asked our attorney why they would do that since it would provide nothing to the creditors, he answered with "Well, they're not supposed to do that just to benefit the real estate agent." From his tone I certainly inferred that it must occur quite often though. I think he may be afraid of making waves since he has lots of cases with this trustee?

I checked on Pacer and this particular real estate agent has been given 80+ listings from this trustee over the last 36 (or so) months. Of those, approx 40 are closed with no distribution to unsecured creditors. All started as no-asset and switched to asset cases then 'no distribution' at the end. It looks like sometimes the house was sold short while other times the mortgage holder foreclosed and the trustee abandoned the property. In any event, unsecured creditors received nothing.

We're waiting to hear back from our attorney on this.

Thanks much for the info and thoughts.

Maybe you should call the FBI tip line... just sayin'

[freeatlast09]

Maybe you should call the FBI tip line... just sayin'

That has crossed our minds...or at the very least contacting the investigative unit of a tv station.

Des: one last question and I'll stop bugging you. If you were to recommend a time to file the Motion to Compel Abandonment, when would that be? I'm assuming the Trustee would have to file something to compel us to turn over the documents? Would you file then... or be proactive and file now? ... or wait until he has communicated something to our attorney? or... would you tip your hand slightly and make the real estate agent aware that we may do this?

Thanks so very much - we really wish you were our attorney.

[justbroke]

I suspect that this matter is being driven by the real estate agent who wants a commission. It makes absolutely no sense for the bk estate to invest time and money for an endeavor that will not allow for any payment to unsecured creditors.

I don't even know why a "sound" Chapter 7 Panel Trustee would dabble in the unknown. That attorney, Trustee, must have a really good practice on the side where they make a lot of money. This is why the overwhelming Trustees will run, not walk, away from an underwater property.

However, this case appears to be special. If the Trustee is feeding his "friends" listings so that they make commission and without regard to the Estate, perhaps this should be brought up to the Office of the United States Trustee (OUST) not the FBI. The OUST would decide if the FBI should investigate. From the looks of this, this is nothing more than enrichment of a business friend. It does not help the Estate at all.

It's a shame.

[freeatlast09]

perhaps this should be brought up to the Office of the United States Trustee (OUST) not the FBI. The OUST would decide if the FBI should investigate.

That's food for thought. Thanks.