This is a recurring problem recently. Make sure you have claimed the homestead exemption, provide the trustee with proof that you are making the payments on the house, and oppose the trustee's motion to sell. The means test results do not necessarily mean you cannot convert to Chapter 13. If you can find the means to make a small Chapter 13 payment, even with the help of a family member or friend, you should be able to convert so long as no bad faith is involved. These are my two cents - I have not encountered this problem in any of my cases but we always exempt the home even if it's only $1.
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I agree with Attorney Larkin. You need experienced bankruptcy counsel if you hope to get through this. If I were you, I would give her a call.
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You may be able to stay in your Chapter 7, but you are going to have to find an experienced attorney to help you. And, you need to it quickly. Find another attorney, get a Broker's Price Opinion on your house and do it now. Good luck.
We are just seeing this happen, here, in Florida, when a clients choose to exempt their personal property (called a wildcard exemption here) rather than claim the house. I agree with Ms. Larkin. I'd immediately amend schedules to exempt your homestead, & argue it was an unintentional mistake not to exempt, and fight the short sale. If that didn't work, I'd convert to a chapter 13. A chapter 13 should prevent the chapter 7 trustee from short selling the property, as chapter 13 debtor's property vest with the debtor.