Property of Bankruptcy Estate

[undrdog]

My question involves bankruptcy in the state of: CA

"All your property is now the property of the bankruptcy estate until your case is closed by the court. Any claim of exemption pursuant to FRBP 4003 has become effective, or the statutory notice for an abandonment by the trustee has become effective you cannot sell, transfer, refinance, or otherwise encumber any of your property."

This is mentioned in guidelines referenced in a notice of creditor's meeting. I want to know the extend of legal ownership the debtor has on mortgaged property in default.

Can the debtor continue collecting rent? Can the debtor evict a tenant of the property in foreclosure?

[Mr. Knowitall]

The debtor landlord can collect rent, which is subject to claim by the bankruptcy court / trustee. The debtor landlord can evict a tenant.

[undrdog]

The debtor landlord can collect rent, which is subject to claim by the bankruptcy court / trustee. The debtor landlord can evict a tenant.

Do you have a reference?

Thanks.

[jk]

Do you have a reference?

Thanks.

"All your property is now the property of the bankruptcy estate until your case is closed by the court. Any claim of exemption pursuant to FRBP 4003 has become effective, or the statutory notice for an abandonment by the trustee has become effective you cannot sell, transfer, refinance, or otherwise encumber any of your property."

I see nothing that states the party cannot continue to do business as the landlord with the exception of having work done on the property where there could conceivably be a lien placed against the property for some reason.

Unless you can construe accepting rent or evicting a tenant as selling, transferring, or otherwise encumbering the property, to be referring to accepting rent or evicting a tenant, it sounds like the notice given does not attempt to interfere with the normal business activities concerning operating a rental property.

[undrdog]

So he still owns the place even though it now belongs to the bankruptcy estate?

I also would like to know is what happened to the auction and the foreclosure?

The date in the bk docs states it was 10/12/2011 as does the notice of trustee sale and recorded in the county assessor's online index. This bankruptcy filing was done on 11/8/2011. Isn't it a bit late?

...sorry...I'll specifiy...isn't it a bit late to include the real estate property in the bankruptcy?

[despritfreya]

As it relates to the rents belonging to the estate see 11 USC 541(a)(6).

I believe a 7 was filed. If so the debtor should not be collecting future rents and, if he does, those rents either belong to the estate or to the mortgage company (lien holder) if it has a valid and enforceable "assignment of rents" clause.

More often than not (usually due to the debtor filing pro se or if, with an attorney, the attorney’s lack of understanding of the Code) a debtor will continue to collect rents. If the amount is large enough a Trustee will demand the turnover of the money. If the amount is inconsequential the Trustee will abandon the property. Once abandoned the rights to the rents is returned to the debtor, subject to the lien holder's assigment of rents.

As it relates to the lien holder after a Chapter 7 bk is filed, quite frankly, I have never seen a lender assert a right to rents on a residential type mortgage when all they really want is either regular monthly payments or the lifting of the stay so that they can foreclose.

Now, from your other post, the debtor has claimed an exemption in the "back rents", not the future rents. I cannot tell you if that is a valid exemption or even if the Trustee would care if it is not a valid exemption. Nor can I tell you if the future rents have to be paid to either the debtor or the Trustee or the mortgage holder. Such depends upon the facts of the case and the Trustee’s preference. You may want to contact the Trustee.


Des.

[undrdog]

As it relates to the rents belonging to the estate see 11 USC 541(a)(6).

I believe a 7 was filed. If so the debtor should not be collecting future rents and, if he does, those rents either belong to the estate or to the mortgage company (lien holder) if it has a valid and enforceable "assignment of rents" clause.

There is not any assignment of rents noted with the county assessor.

More often than not (usually due to the debtor filing pro se or if, with an attorney, the attorney’s lack of understanding of the Code) a debtor will continue to collect rents. If the amount is large enough a Trustee will demand the turnover of the money. If the amount is inconsequential the Trustee will abandon the property. Once abandoned the rights to the rents is returned to the debtor, subject to the lien holder's assigment of rents.

Are you referring to 11 USC 541(a)(6)?

[despritfreya]

There is not any assignment of rents noted with the county assessor.

Probably won't find one at the county assessor. You need to review the recorded deed of trust/mortgage instrument at the county recorder's office (assuming the assessor is not also the recorder). Be careful. Assignment language, while usually obvious on the first page of the document, can be buried in it. Also there may be notice requirements of the lender before it can assert a right to the rents.

Are you referring to 11 USC 541(a)(6)?

Yes, that is the section I cited to.

Des.

[undrdog]

Probably won't find one at the county assessor. You need to review the recorded deed of trust/mortgage instrument at the county recorder's office (assuming the assessor is not also the recorder). Be careful. Assignment language, while usually obvious on the first page of the document, can be buried in it. Also there may be notice requirements of the lender before it can assert a right to the rents.

That's the deed of trust the default is associated with, correct? And it's the deed of trust I need to read, not the default, correct? Just want to make sure I'm ordering the right document.

Thanks

[despritfreya]

That's the deed of trust the default is associated with, correct? And it's the deed of trust I need to read, not the default, correct?

Correct.

Des.