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  1. #1

    Default Trustee Wants to List Bankrupt Homeowner's House on the Market

    My question involves bankruptcy in the state of: maryland

    Hi All. My elderly mother takes care of my sisters kids and is way over her head in debt. I recommended that she look into bankruptcy. After seeing a lawyer, they determined that she should file chapter 7.

    She owes 88 ish on her house that a local realtor did an analysis on and came to the value being 110k. The homestead exemption was used along with the wildcard on her car which is worth around $6000. The trustee said that Zillow values the house around 155 (way off) and then asked a realtor friend of his to stop by and look at the house. While visiting, he agreed the house was around 116k and left. A few days later, her lawyer was told the house would be put on the market because he believes its worth more. Problem is, he would not reveal the amount they thought it was worth. Is that legal?

    The house two houses down just sold for 116 and it’s bigger with more yard. Both homes need a new roof, carpet, etc. the other home has a garage and finished basement while my moms is half finished. It makes no sense that my moms can go anywhere above 120, max.

    My moms lawyer said she’s at a loss of words because a trustee has never done this in her experience. She has seen it for other situations, but never with my moms. She said she has not worked with this trustee before. She said we could pay back debt, take the car off the wild card and sell it, switch to chapter 13 or roll the dice and let the house be listed and see what happens. Taking off the wildcard would then be applied to the house.

    I’m confused why they don’t have to reveal their opinion on the value? Because they aren’t, it makes me think they are scaring my elderly mom and forcing her into 13. Losing her car would not be a huge deal but she does use it a lot. I want to give her the best advice and appreciate any help.

    Thank you
    P.s.
    This whole process is extremely “shady”. This very rich old trustee is telling my 82 year old mother that he’s taking her house. He then finds his “friend” to come out and look at the house. Mind you, this guy works in a different county. The original realtor who did the analysis said “The house is not worth more than $120k Max”.

  2. #2
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    Default Re: Trustee Wants to List Bankrupt Homeowner's House on the Market

    So the issue here is that your mother contends that between the amount she owes on the home ($88,000) and the $23,675 federal homestead exemption (since your state has no homestead exemption), with a home value of approx. $110,000 the home should be protected from bankruptcy. Meanwhile, the trustee is taking the position that there is $4,325 or (potentially a lot) more in unprotected equity in the home, and that the unprotected equity should be applied for the benefit of creditors.

    It sounds like the trustee told you that he believes the house to be worth approximately $116,000, based upon the appraisal. It also sounds like her lawyer has a sense of how much equity the trustee believes there to be in the home, because the lawyer has suggested that the amount could be covered by the portion of the wildcard exemption that would otherwise be applied to your mother's vehicle.

    The primary options are to try to work out a financial settlement with the trustee, to convert to Chapter 13 (which will also remove the case from this particular, aggressive Chapter 7 trustee), listing the home and seeing whether offers come in above what your mother believes the home to be worth, or getting an independent appraisal and bringing a motion with the bankruptcy court to ask the court to resolve the issue of the home's reasonable market value and to order the trustee to relinquish any claim to the home above that value. Or she can simply assert that the home has no value to the estate and file a motion for the court to direct the trustee to abandon the property. Either way, there may be a cost to your mother in bringing and arguing the motion -- I can't speak to whether that's covered by her existing fee agreement and negotiated fee.

  3. #3
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    Default Re: Trustee Wants to List Bankrupt Homeowner's House on the Market

    1 - If your Mom's lawyer doesn't now how to challenge the trustee's decision then your Mom needs a different bankruptcy lawyer.

    2 - Tell your Mom to get a professional appraisal on the house, not just guesswork. She'll pay $400 to $500 for it but it will give her lawyer something official to work with.

    3 - The alternative is for your Mom to withdraw the bankruptcy and you and your sister come up with the money to pay her debts so she doesn't lose her house.

  4. #4

    Default Re: Trustee Wants to List Bankrupt Homeowner's House on the Market

    Thanks for your replies. I did bring up getting an appraisal but wasn’t sure what I could do with that. From your posts, it sounds like the appraisal would be best to:

    1. If it’s at the level or lower, file a motion to the court
    2. It’s higher than expected, give the car up OR convert to a 13

    Is this accurate? And a huge THANKS to both of you.

    Two questions:

    1. The trustee already took out realtor market analysis and rejected it by getting his own. Do appraisals hold more weight?
    2. Can my mother file a motion to request the trustees market analysis? If we had their amount, these decisions wouid be much easier.

    Thanks

  5. #5
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    Default Re: Trustee Wants to List Bankrupt Homeowner's House on the Market

    The Chapter 7 Trustee has the absolute right to attempt to sell the home. In most (but not all) jurisdiction, the Trustee cannot complete a sale unless he can pay the allowed exemption out of the net sale proceeds before anything goes to creditors. What his analysis does or does not say is not important. What an appraisal does or does not say is not important. What is important is whether or not he finds a buyer willing to pay the asking price, whatever that asking price is.

    If your mom does not believe there is value over the allowed exemption then she files a Motion to Abandon. The Trustee will object to the Motion. There will be a hearing on the Motion. Your mom's attorney requests that the judge set a time frame for the Trustee to obtain a proper sales contract that will provide for the exemption. If the Trustee cannot bring such a contract before the court within that time frame then the Trustee must abandon the asset.

    If your mom does not want to fight the issue then she makes an offer to the Trustee to buy back the non-exempt equity. Since there is a controversy over the value of the asset your mom starts the offer at a lower amount, say $3,000.00. If the Trustee is interested in negotiating he will make a counter-offer. My guess is that the parties will settle somewhere around $5,000.00.. This back and forth is a darn site cheaper than converting to a Chapter 13.

    If you mom's attorney is not familiar with the above approaches, time to find another attorney.

    Des.

  6. #6
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    Default Re: Trustee Wants to List Bankrupt Homeowner's House on the Market

    Quote Quoting needsomehelp
    View Post
    The trustee already took out realtor market analysis and rejected it by getting his own. Do appraisals hold more weight?
    If a motion is filed, the court will review the appraisals and other evidence submitted by the parties and attempt to determine the market value of the property. A professional appraisal holds a lot more weight than Zillow or an estimate made by looking at some comps in the area; but it costs money.
    Quote Quoting needsomehelp
    Can my mother file a motion to request the trustees market analysis?
    Were your mother to file a properly supported motion, the trustee will presumably respond with more to support his claimed value than "Because I say so" -- if he doesn't, the court is not likely to give his position much (if any) weight.

  7. #7

    Default Re: Trustee Wants to List Bankrupt Homeowner's House on the Market

    Hi All -

    Wanted to update and get some of your thoughts.. My mother got a formal appraisal that came in at 145k, much higher than the lawyer's real estate agent market analysis of 110k. (OUCH)

    Now knowing that she has too much equity, what is her best option here? Switch to 13?

    Thanks for all the help.

  8. #8
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    Default Re: Trustee Wants to List Bankrupt Homeowner's House on the Market

    We can't even begin to answer that without knowing what other debts there are, etc... She should consult her attorney.

  9. #9
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    Default Re: Trustee Wants to List Bankrupt Homeowner's House on the Market

    Quote Quoting needsomehelp
    View Post
    My mother got a formal appraisal that came in at 145k, much higher than the lawyer's real estate agent market analysis of 110k. . . what is her best option here? Switch to 13?
    Hindsight is 20/20. . .

    Quote Quoting flyingron
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    We can't even begin to answer that without knowing what other debts there are. . .
    Agreed. Please tell us how much is listed for her unsecured creditors.

    Des.

  10. #10

    Default Re: Trustee Wants to List Bankrupt Homeowner's House on the Market

    Thanks, I will have to get those details. From my understanding, she had 30k debt at the start of this. She wanted to protect her car (worth 5k) and house. She has a pension that I understand to be untouched at 2400/month. My advice from the start was to sell the house and move to something easier and cheaper, but she refused. if you need more details than this, please let me know. I will be talking to her at Easter dinner.

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