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If the only non-exempt asset for m chapter 7 case is a house, does the chapter trustee get paid before or after my exemption?

Corona, CA |

I filed the case myself.

The trustee put my home for sale. The only lien to be paid is the amount owed the bank ($650,000). There is an offer for $850,000.

Trustee agrees my homestead exemption is $150,000.

After sales commission and costs, there seems to be an equity of $200,000.

Does the trustee normally get paid before my homestead of after?

The trustee says I must reduce my homestead exemption to about half ($75,000) or she will not sell the property.

Do I have to do this? It seems like the trustee is putting her interest before mine.

Is there anything I can do?

I don't find any attorneys who will take a contingency for pay.

Attorney Answers 6

Posted

If you want the trustee to sell the property for you, you'll have to agree to waive part of the exemption so that it's worthwhile to the trustee. What I don't understand is why you're willing to let this happen when you could pocket a $200,000 profit by selling to the same buyer after your case is over with.

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7 comments

Asker

Posted

The trustee wants to sell the house and I listed it as my asset. I can't stop her and there are other personal reasons I had to do this. Doesn't she have to sell and pay off the lens and my few unsecured creditors?

Brian Campbell Fenn

Brian Campbell Fenn

Posted

Yes, of course the trustee wants to sell it. But, based on your facts, it sounds like you can prevent it. I think you have some misunderstandings as to how bankruptcy works. The good news is that it sounds like it's not too late to remedy the situation.

Asker

Posted

I may not have put my question correctly. English is my second language. I want to know in course of things,does a homestead get paid before a trustee? Sorry for my confusion.

Brian Campbell Fenn

Brian Campbell Fenn

Posted

I understood your question, but I really think you are misunderstanding how bankruptcy works. Please speak with an attorney before you do anything else (even if it's not me). You are possibly putting over $100,000 at risk by contributing down this path. The trustee cannot force you to reduce your exemption amount.

Walter C Oney Jr

Walter C Oney Jr

Posted

Yes, the trustee has to pay you for your exemption before anything else. We didn't answer that question directly because it seems to us that you've reasoned incorrectly to get to the point where this appeared to be the only question you needed answered in order to determine your course of action. Definitely see an attorney before you do something foolish.

Brian Campbell Fenn

Brian Campbell Fenn

Posted

By the way, I (and many other attorneys) will talk with you at no cost.

Carl H Starrett II

Carl H Starrett II

Posted

The trustee know that you must be paid first. Don't waive anything without talking to an attorney.

Posted

Something is not adding up here. I see several issues. Remember that the trustee is most definitely NOT on your side and should not act in your best interest. They are acting in the best interest of your unsecured creditors.
Based on the limited facts you've provided, it sounds like you can avoid having the home sold altogether and look to do so on your own after the bankruptcy and AFTER your unsecured debts have been discharged.

This is a delicate situation, and you MUST speak with an attorney in your area immediately. My colleague is exactly right. This seems to be a very inefficient way to sell your home and eliminate debt. I'd be happy to speak with you if you have questions.

Brian C. Fenn <b><a href="http://www.fennlawfirm.com">FENN LAW FIRM</a></b> 29222 Rancho Viejo Rd. Ste. 102 San Juan Capistrano, CA 92675 Tel/Fax: (800) 994-9079 brian@fennlawfirm.com

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1 comment

Brian Campbell Fenn

Brian Campbell Fenn

Posted

From my experience, if a client came to me with $200k of equity in their home and could take advantage of the $175k homestead exemption, after factoring in the costs of sale of the home at 8%, the trustee would take one look at it and move on. If you haven't already, please talk to an experienced attorney about this matter. Based on the information you've provided, you can stay in Ch 7, keep your home, and eliminate your unsecured debt. After the bankruptcy is over, you can sell your home in the traditional way and keep the proceeds all for yourself. Of course, this information is based on limited facts, and you should speak with an attorney before moving forward.

Posted

The homestead exemption gets paid to you first. Why would you even consider reducing your claimed homestead exemption at all????? If the trustee found a buyer for your home for $850000 then you should be able to as well once your bankruptcy case is discharged and closed. There must be other facts or issues that you are not stating here, or your question does not make much sense.
Please consult with an attorney.

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Posted

Bankruptcy attorneys generally do not take cases on contingency. Most Bankruptcy attorneys will take your case for a flat fee and handle everything for you. The trustee is compensated based on a percentage of the money she distributes to creditors. The more money she distributes the more she makes. The trustee represents the bankruptcy estate and not you. The trustee does not have your best interest in mind. The trustee is obligated to do whatever she can to get the creditors the most money. If the trustee wants you to change your objections she should file a objection to them and take it in front of the judge. If you want to save your home you should probably be in a Chapter 13. Even if you change your exemption to $75,000 the trustee is required to pay you this first as a lump sum so it may be in your best interest to amend you exemptions and take the money which is considered post peition income and will not be touched by your creditors. You will come out of the bankruptcy debt free and with $75,000 to put down on a new house at todays prices.

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3 comments

Asker

Posted

Yes, I see. The Trustee must pay my exemption before she takes a commission?

Brian Campbell Fenn

Brian Campbell Fenn

Posted

Yes, but why would you allow her to encourage you to reduce your exemption amount???? That's just giving your money away!

Asker

Posted

I will not reduce the exemption. I think if she can't get a lot of money in her commission, she does not want to continue. Thanks.

Posted

The trustee is not your friend and is representing the interests of your creditors. I cannot imagine why you would even consider reducing your claimed exemption just to help the creditor. This is your money and you should be able to keep it.

You need representation right away. The National Association of Consumer Bankruptcy Attorneys has qualified members In your area that can help you.

First, the firm is a debt relief agency according to the U.S. Bankruptcy Code. We help people file for bankruptcy. We also do other stuff and we do it well, but Congress wants me to post this notice. Second, nothing on this site is legal advice. You are not my client unless you enter into a written agreement signed by you and me.

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Posted

Clarify:

Why is the Trustee agreeing that your homestead exemption is $150,000, but is telling you to reduce it to $75,000 or they will not sell the property. This does not make sense.

BW

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