Ran across this last month:
Chapter 7 Trustees Attacking Debtors' Right To Stay Put In Their Upside Down Homestead Property
The Florida Supreme Court’s expanded debtor’s $4,000 wildcard exemption earlier this year giving debtors substantially more exemptions to apply to their cars and personal property. Any debtor who does not need to use their homestead exemption can take the wildcard exemption; joint debtors have a combined additional $8,000 of available exemptions.
Chapter 7 bankruptcy trustees get compensated based upon the amount of non-exempt assets they capture and administer in the bankruptcy estate. The more that courts expand debtor exemptions the less property is available for trustees. Trustee pay goes down.. The wildcard exemption expansion is not good for bankruptcy trustees.
In today’s real estate market, most bankruptcy debtors live in upside down homestead properties. The debtor does not have to be current on his mortgage to stay in his house during bankruptcy, and a large percentage of Chapter 7 debtors, being in financial trouble for one reason or another, will remain in possession of their upside down house, default on their mortgage, and also claim the wildcard exemption because they have no homestead equity. Such debtor who defends a mortgage foreclosure case in state court can remain in their home for a year or more during and after filing bankruptcy. When a debtor does not claim homestead exemption on an upside down house in order to get the wildcard exemption the debtor is betting that the Chapter 7 trustee will not attempt to administer the homestead because there is no value for creditors.
Many of the bankruptcy trustees are trying to obtain money for the bankruptcy estate of debtors who want to remain in their upside down homes while claiming the wildcard exemption.. For example, I have heard one trustee who sold the bankruptcy estate’s rights such a home to a third party investor. The investor acquires title subject to the mortgage in default. The bankruptcy debtor becomes a tenant. The investor can charge the debtor rent, or evict the debtor and find a higher paying tenant. The investor can fight the foreclosure and collect rents while fighting with the bank.
Another possibility is for a trustee to sell the estate’s ownership to the mortgage lender. This lender is facing a long and expensive foreclosure battle with the defiant debtor. If the mortgage lender buys the trustee’s ownership position the lender can take immediate possession and eliminate the debtor’s foreclosure defenses. Trustees may have difficulty explaining this plan to a mortgage lender and then getting approval from the lender’s bureaucracy.
If bankruptcy trustees and bank work together they can fight back against debtors trying to “surrender” a house to maximize exemptions and also squat in the house to maximize free living during a foreclosure.
As far as I know, none of these trustee tactics to get money from the upside down homeowner has been tested in court. Most bankruptcy debtors do not have the financial resources to pay their attorney to litigate this type of issue. The debtors usually decide to pay the trustee money or cooperate with the trustees efforts to sell the trustee’s interest in the homestead rather than pay an attorney to fight the issue in court.
and today the counter:
http://www.*************************...-florida-home/
Can my Chapter 7 trustee kick me out of my Florida home?
by Chip Parker, Jacksonville Bankruptcy Attorney · Posted in Bankruptcy Basics
inShare0
Cash or Keys?
Not if you hire an experienced bankruptcy lawyer.
As I previously reported, we have a problem in the state of Florida with a few rogue bankruptcy trustees using unsavory tactics to shakedown Chapter 7 debtors.
Specifically, in the State of Florida, a debtor can choose between his homestead exemption and his wildcard exemption. The homestead exemption grants the debtor protection of all his home equity while the wildcard exemption grants $4,000 per debtor that can be applied to any property.
Since, according to CoreLogic, half of all Florida homes have zero or negative equity, the home equity exemption is worthless. Therefore, debtors are opting to select the wildcard exemption to protect more of their personal property from the bankruptcy estate.
The trustee’s job is to maximize the bankruptcy estate for the benefit of creditors, and he’s none too happy about the size of the estate being shrunk by up to $8,000 in a joint case where debtors elect the wildcard exemption. While the mainstream trustees have accepted this new reality, the rogue trustees have deployed guerrilla-like tactics against Florida debtors.
Specifically, the rogue bankruptcy trustee demands that the debtor “turn over the keys” to their home if they fail to claim the homestead exemption. Now, we all know the trustee doesn’t want the house or the keys. He is merely attempting to extort money from a frightened debtor with visions of being booted to the curb.
In a recent Jacksonville case, Jacksonville bankruptcy lawyer Ed Jackson demanded (in a motion) that the trustee “administer or abandon” the house, and Judge Paul Glenn agreed. He ordered the trustee to present a “bona fide contract to sell or otherwise administer” the debtor’s house within 60 days.
So, can the trustee get a real estate agent to agree to short sell an underwater house? Sure, but no credible realtor would ever testify that the bankruptcy estate would get any money from the short sale. Therefore, the house would be “inconsequential” to the estate and therefore NOT subject to administration. Checkmate! Debtor wins.
If a bankruptcy trustee demands that you turn over the keys to your home because the house isn’t claimed as exempt, what should you do?
The issue is whether the house will generate money for the estate. A house will only generate money if it can be sold at a net profit for the estate or if it is rented for an amount greater than the mortgage payment and maintenance costs (that means homeowners association dues, taxes, insurance, etc.).
Therefore, the first thing you do is file a Motion to Compel Trustee to Abandon or Administer Property. Second, set the trustee’s deposition, and ask him to explain his plan for generating money for the bankruptcy estate.
Some trustees are ruthless, but they are all smart. None of them want to look stupid at a deposition, and the rogue trustee knows a decent lawyer will box him in a corner. Rather than lose some teeth in a street fight, the trustee will back down.
If your bankruptcy lawyer won’t go to bat for you, it’s time to start looking for new representation.
Chapter 7 Trustees Attacking Debtors' Right To Stay Put In Their Upside Down Homestead Property
The Florida Supreme Court’s expanded debtor’s $4,000 wildcard exemption earlier this year giving debtors substantially more exemptions to apply to their cars and personal property. Any debtor who does not need to use their homestead exemption can take the wildcard exemption; joint debtors have a combined additional $8,000 of available exemptions.
Chapter 7 bankruptcy trustees get compensated based upon the amount of non-exempt assets they capture and administer in the bankruptcy estate. The more that courts expand debtor exemptions the less property is available for trustees. Trustee pay goes down.. The wildcard exemption expansion is not good for bankruptcy trustees.
In today’s real estate market, most bankruptcy debtors live in upside down homestead properties. The debtor does not have to be current on his mortgage to stay in his house during bankruptcy, and a large percentage of Chapter 7 debtors, being in financial trouble for one reason or another, will remain in possession of their upside down house, default on their mortgage, and also claim the wildcard exemption because they have no homestead equity. Such debtor who defends a mortgage foreclosure case in state court can remain in their home for a year or more during and after filing bankruptcy. When a debtor does not claim homestead exemption on an upside down house in order to get the wildcard exemption the debtor is betting that the Chapter 7 trustee will not attempt to administer the homestead because there is no value for creditors.
Many of the bankruptcy trustees are trying to obtain money for the bankruptcy estate of debtors who want to remain in their upside down homes while claiming the wildcard exemption.. For example, I have heard one trustee who sold the bankruptcy estate’s rights such a home to a third party investor. The investor acquires title subject to the mortgage in default. The bankruptcy debtor becomes a tenant. The investor can charge the debtor rent, or evict the debtor and find a higher paying tenant. The investor can fight the foreclosure and collect rents while fighting with the bank.
Another possibility is for a trustee to sell the estate’s ownership to the mortgage lender. This lender is facing a long and expensive foreclosure battle with the defiant debtor. If the mortgage lender buys the trustee’s ownership position the lender can take immediate possession and eliminate the debtor’s foreclosure defenses. Trustees may have difficulty explaining this plan to a mortgage lender and then getting approval from the lender’s bureaucracy.
If bankruptcy trustees and bank work together they can fight back against debtors trying to “surrender” a house to maximize exemptions and also squat in the house to maximize free living during a foreclosure.
As far as I know, none of these trustee tactics to get money from the upside down homeowner has been tested in court. Most bankruptcy debtors do not have the financial resources to pay their attorney to litigate this type of issue. The debtors usually decide to pay the trustee money or cooperate with the trustees efforts to sell the trustee’s interest in the homestead rather than pay an attorney to fight the issue in court.
and today the counter:
http://www.*************************...-florida-home/
Can my Chapter 7 trustee kick me out of my Florida home?
by Chip Parker, Jacksonville Bankruptcy Attorney · Posted in Bankruptcy Basics
inShare0
Cash or Keys?
Not if you hire an experienced bankruptcy lawyer.
As I previously reported, we have a problem in the state of Florida with a few rogue bankruptcy trustees using unsavory tactics to shakedown Chapter 7 debtors.
Specifically, in the State of Florida, a debtor can choose between his homestead exemption and his wildcard exemption. The homestead exemption grants the debtor protection of all his home equity while the wildcard exemption grants $4,000 per debtor that can be applied to any property.
Since, according to CoreLogic, half of all Florida homes have zero or negative equity, the home equity exemption is worthless. Therefore, debtors are opting to select the wildcard exemption to protect more of their personal property from the bankruptcy estate.
The trustee’s job is to maximize the bankruptcy estate for the benefit of creditors, and he’s none too happy about the size of the estate being shrunk by up to $8,000 in a joint case where debtors elect the wildcard exemption. While the mainstream trustees have accepted this new reality, the rogue trustees have deployed guerrilla-like tactics against Florida debtors.
Specifically, the rogue bankruptcy trustee demands that the debtor “turn over the keys” to their home if they fail to claim the homestead exemption. Now, we all know the trustee doesn’t want the house or the keys. He is merely attempting to extort money from a frightened debtor with visions of being booted to the curb.
In a recent Jacksonville case, Jacksonville bankruptcy lawyer Ed Jackson demanded (in a motion) that the trustee “administer or abandon” the house, and Judge Paul Glenn agreed. He ordered the trustee to present a “bona fide contract to sell or otherwise administer” the debtor’s house within 60 days.
So, can the trustee get a real estate agent to agree to short sell an underwater house? Sure, but no credible realtor would ever testify that the bankruptcy estate would get any money from the short sale. Therefore, the house would be “inconsequential” to the estate and therefore NOT subject to administration. Checkmate! Debtor wins.
If a bankruptcy trustee demands that you turn over the keys to your home because the house isn’t claimed as exempt, what should you do?
The issue is whether the house will generate money for the estate. A house will only generate money if it can be sold at a net profit for the estate or if it is rented for an amount greater than the mortgage payment and maintenance costs (that means homeowners association dues, taxes, insurance, etc.).
Therefore, the first thing you do is file a Motion to Compel Trustee to Abandon or Administer Property. Second, set the trustee’s deposition, and ask him to explain his plan for generating money for the bankruptcy estate.
Some trustees are ruthless, but they are all smart. None of them want to look stupid at a deposition, and the rogue trustee knows a decent lawyer will box him in a corner. Rather than lose some teeth in a street fight, the trustee will back down.
If your bankruptcy lawyer won’t go to bat for you, it’s time to start looking for new representation.
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