Trustee Wants To Sell My Interest In Property

[nlanier]

Since the trustee, wants to sell my interest in the property, I got up the courage to ask my brother if he wanted to buy me out. He said no because of issues with my sisters. However, I told my sisters and they want to sell. They have not put it on the market yet but are researching the market to go forward. My attorney called me saying that the trustee wanted my certificate of shares (I never received it). Also, he wants the valuation of the property, etc. I asked her to talk to him in regards to letting my sister put the house on the market. I will sign over my shares to him, and after it sells he gets the monies I owe. Can the trustee just takeover and sell the property without my siblings having any rights?

I told my attorney that I might consider Chapter 13 to protect my siblings. Financially this would not be in my best interest. But it is hard for me to let him sell this property without considering my siblings.

What are your thoughts?

Thanks for your help!

[AngelinaCat]

I would have said no a few months ago, but I was corrected by Despritfreya, a contributor to the forum, who happens to be a practicing BK attorney. Let me look up what was said, and I shall get back.

[AngelinaCat]

Okay, here is the thread:

http://www.bkforum.com/showthread.php?72870-Ch-7-Asset-case-Opinion-on-what-I-should-offer-TT-for-land

Please pay attention to posts #4, 5, and 6.

Thanks.

[AngelinaCatHub]

The Trustee cannot harm your siblings property rights. They are not in BK. If they wish to sell the property anyway, your share will become your asset. You may in the event, have to pay out the fair market value of that share, or, it would be liened. This will not close your case for some time but you would still be discharged except for that asset. There is no reason to panic over this. We have been through far worse and survived.

It would simplify things if the property does sell. If it is not salable, the Trustee may actually abandon it to press on to other things. This is possible but an unknown possibility. 'Hub

[despritfreya]

This is very complicated but here are my thoughts. . .

1. The moment you filed your shares "transferred" to the Trustee since he stepped into your shoes. He now holds all rights in the closely held corporation that you had. He controls those rights.

2. In an earlier post you stated that there was a corporate resolution that the shares could not be transferred or sold. This causes a concern. If the resolution specifically states that only you cannot transfer the shares my guess is that such would be deemed "voidable" as you are being treated differently from the other equal shareholders. This is just a gut reaction and could be totally wrong. If none of the shareholders can transfer shares then maybe ok but. . .

3. Since the Trustee steps into your shoes (this is not a transfer - he takes over your equity position in the entity), it may not be the inability to sell the shares that matters. What does the operating agreement state as to whether or not you can force a sale of the property or force an accounting if there is a falling out between shareholders? What rights did you have as it relates to the property. Those rights now belong to the Trustee.

The issues raised here are complex and, while I was asked to comment, it is difficult without knowing all of the details and seeing all of the documents associated with the closely held entity. I cannot comment on your attorney but I do recommend you sit down with him/her and go over all of the entity documents. If you get a feeling that these issues are over his/her head, there is nothing wrong with asking him/her if he/she can run it by a more seasoned bk litigator.

Edt: An additional thought. . . In your earlier post you stated that this property was left to you and your siblings through a will. What did the will say? Was it left in equal portions and then you and your siblings decided to transfer the property to an entity? Or, was the property in an already established entity and you and your siblings were given shares through the will?

If the property itself was left to you individually and then you and your siblings set up an entity to hold the property, the transfer, assuming it happened within the last 4 years (if your State's conveyance statute uses a 4 year window) can be set aside and the property sold with the proceeds split between the Trustee and the other siblings.

Just goes back to my initial thought that the issues are very complex.


Des.

[nlanier]

It states in the bylaws that shares can not be sold to another shareholder. Also, at the annual meeting 2009, it was stated that shares would be excluded to third parties. My attorney sent the bylaws and minutes to the trustee. He still advised my attorney to ask my siblings if they would like to buy me out. If not, he would proceed to take control of my shares. He says, there is no where that states that he cannot take control of my shares.

I am hoping that he agrees that my sister can place the house on the market. Hopefully, my attorney can negotiate with him. I do get the impression that she wants this over, and I feel that she is pressuring me to ahead and let him step in.

Thank you for your help in giving me your opinions and advice. It really has helped me see this in a different light. Just knowing you are here means a lot.

[nlanier]

I just wanted to followup to questions

Yes, it was stated in the bylaws that the shareholders could not sell shares to other shareholders (including every shareholder not just me). But it did not state that it could not be transferred to a third party. At a shareholder meeting held in 2009, it was stated in the minutes that shares would not be sold or transferred to a third party.

The operating agreement does not mention anything regarding a forced sale or address falling out issues with shareholders. I only have rights to the 45 shares, and the trustee wants them.

I have went over the documents with my attorney. She stated that the wording was vague. I informed her that the bylaws were not written by an attorney. She said this is the problem because it does not protect me from the trustee. She did send all documents to him, and the minutes that stated third parties were excluded from transfers. But the trustee says there is no where it states that I have no recourse in the matter. He suggested if one of the shareholders wanted to buy me out that would be good. If not he will proceed.

I did ask the attorney to negotiate with the trustee regarding my sister selling the property. I have no problem with signing my shares over to him. So we will see how it goes. She seems to get anxious when the trustee is calling her about the case. It appears that she wants this over. Yes, I will ask her to consult with a more seasoned attorney.

The will stated that the house is left the children, and we own it equally. Shortly after my mother's death, my brother handled everything regarding the property, and wanted to form a corporation for tax purposes. We have been operating as a small corporation since.

You have given me some good advice, and I am very grateful. I hope that am little more clearer than before. I can't wait until this is over. I will ask my attorney to look into the State's conveyance statute.

I will keep you posted.

This is very complicated but here are my thoughts. . .

1. The moment you filed your shares "transferred" to the Trustee since he stepped into your shoes. He now holds all rights in the closely held corporation that you had. He controls those rights.

2. In an earlier post you stated that there was a corporate resolution that the shares could not be transferred or sold. This causes a concern. If the resolution specifically states that only you cannot transfer the shares my guess is that such would be deemed "voidable" as you are being treated differently from the other equal shareholders. This is just a gut reaction and could be totally wrong. If none of the shareholders can transfer shares then maybe ok but. . .

3. Since the Trustee steps into your shoes (this is not a transfer - he takes over your equity position in the entity), it may not be the inability to sell the shares that matters. What does the operating agreement state as to whether or not you can force a sale of the property or force an accounting if there is a falling out between shareholders? What rights did you have as it relates to the property. Those rights now belong to the Trustee.

The issues raised here are complex and, while I was asked to comment, it is difficult without knowing all of the details and seeing all of the documents associated with the closely held entity. I cannot comment on your attorney but I do recommend you sit down with him/her and go over all of the entity documents. If you get a feeling that these issues are over his/her head, there is nothing wrong with asking him/her if he/she can run it by a more seasoned bk litigator.

Edt: An additional thought. . . In your earlier post you stated that this property was left to you and your siblings through a will. What did the will say? Was it left in equal portions and then you and your siblings decided to transfer the property to an entity? Or, was the property in an already established entity and you and your siblings were given shares through the will?

If the property itself was left to you individually and then you and your siblings set up an entity to hold the property, the transfer, assuming it happened within the last 4 years (if your State's conveyance statute uses a 4 year window) can be set aside and the property sold with the proceeds split between the Trustee and the other siblings.

Just goes back to my initial thought that the issues are very complex.


Des.

[nlanier]

I received a letter in the mail yesterday from my attorney's office, and a letter from the bankruptcy court as well, that the trustee closed my case. The bankruptcy court is not going to pursue my interest in the house. I called my attorney's office and spoke with the paralegal. She stated that the trustee investigated and decided to close my case.

I am so relieved.

nlanier

[justbroke]

Very nice. This could have gone either way and I suppose the Trustee didn't want to deal with the costs of litigation to get at the shares.