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Selling a Home After Chapter 7 Bankruptcy

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  • 09-06-2014, 09:32 AM
    tex11
    Re: Selling a Home After Chapter 7 Bankruptcy
    Quote:

    Quoting despritfreya
    View Post
    ...I am not sure what you are getting at.
    The exemption statute does not trump what is defined as property of the bk estate under 541.
    In fact, all property is property of the estate.

    True, that once an exemption is “allowed” that property may (and I stress the word “may”) no longer be property of the estate. However, even that concept is not definitive...

    despritfreya,

    I am not sure what you are getting at. The cases you cite are irrelevant to the issue here of EXEMPT homestead property. Your cites concern sales of NON-EXEMPT property, one of which was a grossly undervalued piece of real estate. Cites to EXEMPT property would be relevant.

    If you can cite a case which disallowed a homestead exemption as defined by MCL 600.5451(1)(m), then you may have a viable argument.

    Otherwise the plain letter of the Michigan statute is clear and unambiguous with regards to what property is EXEMPT, and the rights to sell and keep the proceeds of the sale.
  • 09-06-2014, 09:52 AM
    Mr. Knowitall
    Re: Selling a Home After Chapter 7 Bankruptcy
    I think despritfreya is thinking of a Chapter 7 case in which there is a significant delay between the entry of the order of discharge and the court's entering the final decree.
  • 09-06-2014, 10:12 AM
    flyingron
    Re: Selling a Home After Chapter 7 Bankruptcy
    I think we are quibbling about terminology that has ZERO bearing to the original posters question.

    The answer is (in colloquial terms), once this bankruptcy is over, he can sell the house. The money over and above what is necessary to pay the home equity loan is small enough that it is in the exemption limits and he can keep all of the proceeds as they are less than the homestead exclusion limits.

    Uncle should consult his attorney (and he will have an attorney for the bankruptcy) as to when he can place the property on the market and what if anything can be done to get that date made earlier.
  • 09-06-2014, 05:53 PM
    despritfreya
    Re: Selling a Home After Chapter 7 Bankruptcy
    In response to Mr. K, true this is what happens but the issue I think Tex raises is whether or not the homestead property even became property of the estate. It clearly did. All property of whatever nature is property of the bk estate under 541 (with the exceptions listed in that code section) and no state law can change that. Exempt property is simply property of the estate that a trustee cannot administer unless the property's value exceeds the allowed exemption.

    The cases cited deal with whether or not exempt property (including a homestead) are removed as property of the estate once the exemption is allowed. Exemptions, in general, are "allowed" 30 days after the initial 341 unless an objection is filed or a request for an extension of time to object is filed. As the cited cases demonstrate, courts, even ones sitting in the same State, are split as to whether or not, once the exemption is allowed, the property is removed from the bk estate thus an abandonment by operation of law takes place.

    In the 9th Circuit, the allowance of an exemption does not remove the property. I have one case right now where the original attny failed to obtain an abandonment of the property and, two years later (now that values are up), the Trustee wants to force a sale to capture the appreciation. We took over to work a deal with the Trustee to allow the debtor to secure financing in an amount sufficient to pay all allowed claims and the administrative expenses of the estate. This case alone is illustrative as to why it is so important for an attny to seek an abandonment of an exempt asset if there is a possibility of appreciation in value sufficient to take it beyond the allowed dollar amount.

    Lastly, and as a practical matter, unless there is an official abandonment OP's uncle (sorry, not "dad") will most likely be unable to close on a sale unless he obtains a Court Order allowing the sale or an official abandonment as a title company is going to be concerned over issuing title insurance. The problem with a court order to allow the sale is that uncle has no standing in a Chapter 7 to bring a 363 motion before the court. He certainly can try (I have done so on two occasions) but the end result may just be that he has to get the Trustee to endorse any order approving the sale (which is what I ended up doing).

    As to researching additional case law as suggested by Tex, I will decline that invitation as I think we have now beaten this matter to death and its time to move on. But. . . Tex, I do appreciate the banter. That is what this is all about.

    Des.
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