Home: Can The Trustee Take It?

As a bankruptcy attorney in Jacksonville, Florida, I practice in several areas of debt relief, including foreclosure defense.  The following blog is created with the intent of provoking discussion, addressing bankruptcy, Trustees, and the debtors wishing to retain their homes, when the mortgage is upside down.

So do you want to be in bankruptcy? Of course not. And if you are also having your house foreclosed on, you certainly don't want that either. So when you go to your local attorney, you are advised as to whether or not you should file bankruptcy, and what chapter you can file. You may also be advised as to whether or not you can keep your house. If you are looking to discharge you debts through bankruptcy, and upside down on your house (that is, your 1^st mortgage is higher than the value of the real property), you may find this blog post interesting.

In Florida, there is reportedly a case where a debtor decided not to claim a homestead exemption on Schedule C of his bankruptcy paperwork, thereby allowing the debtor to claim a $4,000 wild card exemption; this is another way of saying the debtor can get though the bankruptcy and keep an extra $4,000 worth of property. The Trustee and the mortgagee came up with the bright idea of paying the Trustee to short sale the house. This would allow the mortgagee to foreclose on the house in a very efficient and timely manner, put some money in the Trustee's pocket, and avoid having to possibly fight a judicial foreclosure.

The problem with this lies with the duties of the Trustee, as the duties outlined in the bankruptcy code do not include the trustee acting as a foreclosure attorney. Another problem lies with the property itself. If there is no equity, is the property a bankruptcy asset. There is a very strong argument that can be made that the property, with no equity, is not an asset of the bankruptcy estate.

UPDATE:  The practice of at least one of the Trustees in the Jacksonville Division is to ask the bank to pay him to short sale the property.  This is possible if 1) the debtor does not claim the property as exempt homestead property, and 2) the bank agrees.  If you are filing the the Jacksonville Division, make sure you get the advise of an attorney before choosing to NOT claim your property as homestead.

A second case in Florida deals with the Trustee deciding to tell a debtor to get out of their house when the house is not claimed as exempt. Under the bankruptcy code, a trustee either has to administer the asset or abandon it. If the debtor simply moved out of the property, the debtor may be subject to fines and penalties for not maintaining the house. These fines and penalties would not be discharged in the bankruptcy because they occurred post petition. Of course, we still have the problem of whether or not the property is even property of the bankruptcy estate to begin with.

A third case deals with the trustee charging the debtor rent to stay in the house. That's right! The problem here is to some extent obvious; that's right, the house may not be a bankruptcy trust asset to begin with. But something you may not have though of is, does the Trustee really want to be a landlord, that is, they would be responsible to maintaining the property. As far as I know, the typical Trustee does not want to deal with landlord type problems; you know, the faucet leaks, the plumbing is stopped up, the grass need mowing, etc. It is also my understanding, in some jurisdictions, a landlord, or in this case perhaps a property manager, would need to be licensed by the state.

Should a Trustee be able to take a house with no equity? To what extent does the bankruptcy code require the trustee to maintain the asset? If you have any thoughts of enlightenment on this issue, please let me know below.

Other notable sites beginning with H:

Harassment by Creditors Southgate, Michigan Bankruptcy Attorney, Christopher McAvoy

Hardship Discharge Philadelphia Bankruptcy Lawyer, Kim Coleman

Hearing Omaha and Lincoln, Nebraska Bankruptcy Attorney, Ryan D. Caldwell

Home is Where the Heart Is San Francisco Bankruptcy Attorney, Jeena Cho

Homeowner's Association Dues Marin County Bankruptcy Attorney, Catherine Eranthe

Homestead Colorado Springs Bankruptcy Lawyer Bob Doig

Honest but Unfortunate Debtor Wisconsin Bankruptcy Lawyer, Bret Nason

Honesty Cleveland Area Bankruptcy Lawyer, Bill Balena

Honesty (and Fraud Avoidance) Philadelphia Suburban Bankruptcy Lawyer, Chris Carr

House Northern California Bankruptcy Lawyer, Cathy Moran

House Los Angeles Bankruptcy Attorney, Mark J. Markus

Household New York Bankruptcy Lawyer, Jay S. Fleischman

Household Metro Richmond Consumer and Bankruptcy Attorney, Mitchell Goldstein

Household Size Hilo Bankruptcy Attorney, Stuart T. Ing

How Much Is Your Home Worth? St. Clair Shores Michigan Bankruptcy Attorney Kurt OKeefe

Household Median Income Livonia, Michigan Bankruptcy Lawyer, Peter Behrmann

Hearings Birmingham Bankruptcy Attorney, Elizabeth Johnson

Hijacking Christine A. Wilton, Lakewood, Ca Bankruptcy Lawyer