Wednesday, October 5, 2011

Can A Trustee Make You Leave Your Home in Chapter 7?

With the continuing bad economy, people are finding themselves in a situation where their real estate values are decreasing faster than their principal balance on their mortgage. They also find themselves in a situation where their unsecured debts, like credit cards and medical bills, with increased interest rates on the debt owed, is becoming unmanageable. That is when they start looking for answers to their debt problem with local bankruptcy attorneys.

When one files bankruptcy, there are certain things that the bankruptcy code allows one to keep, while secured debts on personal property may be either surrendered, redeemed, or reaffirmed. The amount of how much property one can keep while filing bankruptcy varies state to state depending upon their particular laws.

In Florida, if one has homestead property, the homestead is exempt. That's right, you can keep your home. However, if you are upside down, that is, if your mortgage balance is higher than the value of the real property, then one can simply avoid claiming the property as homestead and receive an additional $4,000 exemption, known as a wild card exemption; that's another way of saying you can keep an additional $4,000 of personal property.

This sounds simple, however, there is one trustee in the Jacksonville Division that has been sending letters out to debtors telling them to vacate their house when it is not claimed as exempt. How can he do that? Well, technically, the trustee has a choice of either administering the property or surrendering the property. This means the trustee has to either maintain the property for the estate and, most often, sell the property to receive funds to distribute to creditors, or surrender the property to the debtor, as it has no value to the estate. The real problem lies when the Trustee tells someone to vacate the premises when the Trustee has no intention of administering the property. That is, no one to maintain the property, pay expenses, cut the grass, and sell it. This, theoretically, exposes the owner, the debtor, to liability.

So, what is one to do? If you have an idea, please comment below.

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