Trustee is suing my family for my share of non exempt asset

[Cassie15]

My Chapter 7 was discharged last November, however the case is still open. I listed my share of a vacant lot that was inherited and now owned jointly by myself and 3 siblings.
The property was once valuable, but is now waterlogged and virtually worthless. I had assumed that once the trustee did his due diligence, he would abandon any interest in the property.

The trustee has somehow determined that this property is valued at $175,000 and he is suing my family to force them to sell so he can take my share. That is not so much of an issue as we have no interest in keeping this lot and have had the property listed for sale for several years, with no buyer. My attorney tells me not to worry about it, but my family is concerned. He can only force a sale and keep my share of the proceeds.

1: That he can deduct fees and costs from the sale proceeds, which could be quite costly.

2. That he can force them to buy out my share, or that he may be able to keep the property regardless of their ownership. He is claiming that title is "clouded". When my mother passed away, she did not grant the property to us in her will. Instead, it was granted to us in probate by an "order assigning residue of estate". There was never a deed recorded. He is seeking to quiet title to declare that my sibling each have a 1/4 interest and the BK estate has 1/4 interest.

This is obviously causing a great deal of tension in the family

Anyone have any thoughts on this? Sorry for the length of the post

[justbroke]

The trustee has somehow determined that this property is valued at $175,000 and he is suing my family to force them to sell so he can take my share.

Don't think of it as "suing (your) family to force them to sell". I believe the Trustee is asking for 1/4th (25%) of the value. How your siblings, or YOU, for that matter, want to deal with paying the Trustee, is up to you. This can be done by sale (of course), or obtaining a loan.

That is not so much of an issue as we have no interest in keeping this lot and have had the property listed for sale for several years, with no buyer. My attorney tells me not to worry about it, but my family is concerned. He can only force a sale and keep my share of the proceeds.

Usually people end up selling a jointly owned property, where the debtor has an interest... because they have no other way to raise the money necessary to get the Trustee off their back.

1: That he can deduct fees and costs from the sale proceeds, which could be quite costly.

Only from YOUR share. So, if the property does sell for $180K, the trustee would get 25%. From that 25% ($45,000), the Trustee takes about $3,250. The rest, $41,750 would go to the creditors. If the Trustee sells the property, he also has to pay all the other fees out of your Share. So if he needs to pay a Realtor commission, appraisal, etc, it also comes from the $41,750 that's left.

Nothing would come out of the $135K due and owed to the other siblings.

2. That he can force them to buy out my share, or that he may be able to keep the property regardless of their ownership.

He's not forcing them to buy out your share. It's your siblings choice to decide whether to sell or buy out. They could even take a loan against the property (equity) to buy your Bankruptcy Estate's "share".

He is claiming that title is "clouded". When my mother passed away, she did not grant the property to us in her will. Instead, it was granted to us in probate by an "order assigning residue of estate". There was never a deed recorded. He is seeking to quiet title to declare that my sibling each have a 1/4 interest and the BK estate has 1/4 interest.

If a new deed was never recorded, yes, that's always an issue. I purchased property from my Grandmother's estate, but the title was cloudy because it passed from her to my grandfather in a living trust. Then he died and the title was never updated to be in the names of the children. That also went to probate, but was never corrected. Titles are almost always "forgotten" when it comes to probated estates. The Trustee is correct to seek to quiet the title and to get it titled properly. He has to, because the title is probably still in Mom's name!

This is obviously causing a great deal of tension in the family

Unfortunately, it is what it is at this point. The family needs to relax as it does not jeopardize their interest in the property.

[lrprn]

Several observations.....

How did the trustee get a value of $175,000 for a piece of property that can't be sold after two years because of its condition?

Ask your lawyer about having an independent real estate appraisal of the lot to rebut the value your trustee has placed on the land. From your description of the property, my guess is that it's worth MUCH less than your trustee thinks it is.

Your trustee can force the lot sale if you can't protect the land value with your exemptions (and it sounds like you can't). Understand that your trustee is doing this because he/she smells potential money around the property. Trustees get a % of whatever they sell, so there's personal motivation here for your trustee to push this to its conclusion.

If your trustee can charge fees and costs *if* a buyer is ever found is a question for your lawyer or a real estate lawyer. A real estate lawyer can also give you some insights around the 'clouded' title and what ways of dealing with the title will give you and your family the best outcome in the long run.

I hope everything works out in your favor in the long run. This is going to take a while to settle, so be patient, hang in there, and be sure to post here when your frustration levels hit highs periodically and also when you have updates to share.

[justbroke]

Yep, I forgot that you should get your own appraisal of the property. There are many things still to work out. As lrprn writes, this won't be settled tomorrow.

[Cassie15]

Thanks everyone for your replies. My family is in the process of obtaining an appraisal on the property. My lawyer has assured me that the trustee cannot take any interest in the property that my siblings have, but they are not satisfired with this.
I'll post updates once my family has gotten their own legal advice.

[Cassie15]

What if the property doesn't sell?

As I mentioned before, the property has been listed for sale for at least 3 years at 60K, vs the 175K the trustee thinks it is worth. The realtor who currently has it listed thinks the lot is worth much less, but my sibling who is the personal rep for the property, will not agree to lowering the price.

What happens if the trustee takes over the sale of the property - it doesn't sell...can he force my family to buy out what he perceives as the value of my share, whcih would be over 40K...???

I know I should be asking my attorney this, but all he tells me is "not to worry"..he's been telling me this all along, and things keep escalating...and the lawsuit does not have me named, only my siblings

[JRScott]

Well honestly if I was your siblings I'd take the market listing for the last 3 years showing it on the market for 60k and that it hasn't sold. 60k is 15k a piece though so if you still couldn't exempt that amount you might have trouble but he might decide its not worth the fight.

Has your siblings sought legal help in the matter?

[Cassie15]

Only from YOUR share. So, if the property does sell for $180K, the trustee would get 25%. From that 25% ($45,000), the Trustee takes about $3,250. The rest, $41,750 would go to the creditors. If the Trustee sells the property, he also has to pay all the other fees out of your Share. So if he needs to pay a Realtor commission, appraisal, etc, it also comes from the $41,750 that's left.

Nothing would come out of the $135K due and owed to the other siblings.

Have been reading and re-reading this lawsuit..it does specifically state that
"all court costs of this action and attorney fees of this action shall be deemed costs of the sale which must be deducted from the proceeds of the sale before any proceeds will then be distributed to the defendants and the the estate"

I'm going to get quite a legal education before all of this is over, if I don't have a nervous breakdown first

[justbroke]

Have been reading and re-reading this lawsuit..it does specifically state that
"all court costs of this action and attorney fees of this action shall be deemed costs of the sale which must be deducted from the proceeds of the sale before any proceeds will then be distributed to the defendants and the the estate"

I'm going to get quite a legal education before all of this is over, if I don't have a nervous breakdown first

Strange, but oh well. You are in a tough place.

I don't know what to say on the proceeds. Did your sibling retain a lawyer? Is the land "partition-able" so that you can just subdivide it (that would be a county/city matter on the smallest lot size)? Just wondering.

[Cassie15]

Siblings are seekin legal advice

Well honestly if I was your siblings I'd take the market listing for the last 3 years showing it on the market for 60k and that it hasn't sold. 60k is 15k a piece though so if you still couldn't exempt that amount you might have trouble but he might decide its not worth the fight.

Has your siblings sought legal help in the matter?

Yes. they have sought legal help, ..but they live in a different states. They are being told so many different things..and they are not even talking to attorneys in my state. My attorney has offered to oversee this, at 1/2 of his normal retainer, which I have offered to pay for ( just what I need after financially recovering..but I must clean up my own mess so to speak) However, they want to talk to other attorneys. I don't really care about my share, as I was warned in the beginning that i would lose it..I am just worried about my siblings having to cough up cash and destroying family relationships.

My sibling sent a 30 page fax with all the info the trustee requested, and if the trustee had truly done due diligence, he would know this lot is virtually worthless..but I am told by my attorney that once he gets his mind set, he hammers on.

[justbroke]

So sorry to hear. In reflection, I probably overstated some things earlier, as to a Trustee being able to force a sale. I wish you the best in sorting this out. Let us know how it goes, because it is very interesting.

[Cassie15]

Strange, but oh well. You are in a tough place.

I don't know what to say on the proceeds. Did your sibling retain a lawyer? Is the land "partition-able" so that you can just subdivide it (that would be a county/city matter on the smallest lot size)? Just wondering.

Unfortunately, the land is not partion-able..that would have made things easier. The crazy thing is that my siblings are worried about legal fees being deducted from net proceeds if the trustee is able to sell it..if we haven't been able to sell it for several years, and the trustee can find a buyer ( which I doubt he will),they will be ahead of the game..

[justbroke]

Just think of the upside if the Trustee can actually get $175K for it. That's 3 times more than you thought it was worth. I don't know... just trying to be positive I guess.

[Cassie15]

Update

Well,, nothing is resolved yet. My siblings spent too much time trying to get legal advice so they did not respond to the complaint in a timely manner. So a default judgement was ordered and the trustee is going to do his thing.

I am not sure what happens from here...the property is already listed for sale ( for way less than what he has valued it at), so I don't know if he is going to hire another realtor and take charge of the listing???? My siblings are still worried that this is going to cost them financially...they don't seem to understand. 2 siblings things I am lower than a bug under a rock, the other one has been understanding at least.

Will keep you posted... I will be so happy when Pacer shows a "closed" status

[justbroke]

Keeping watch.