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Trustee Wint Close Case/Do I Pay Mortgage

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  • Trustee Wint Close Case/Do I Pay Mortgage

    I have the most aggressive trustee. I researched his cases and he is cruel and brilliant. He is keeping our case open as we pay the mortgage and building equity. At the time we filed we didn't have equity in the house though the trustee said we did. The mortgage was for $80,000, we owe $64,000 and he says it's worth $154,000 and we say it's worth $80,000 and we submitted a report from a realtor saying it was actually worth $69,000 -$74,000. We have a $40,000 exemption. It's been 10 months since we filed and we keep paying the mortgage and building equity for him to possibly take.

    My my attorney suggested that I stop paying the mortgage which will make the mortgage company force the issue. I haven't paid in two months and I'm getting scared. I think my attorney pulled this strategy out of his ass. I know I should talk to him, but I'd like to here what others have to say. I'm from Georgia.

  • #2
    Very interesting. I envision a possible similar scenario in my case.

    I take it you have received your discharge.

    Not sure if the Georgia courts allow it before the chapter 7 closes, but one possibility might be to file a chapter 13 after you miss a few payments. The dreaded chapter 20. Might protect your house that way?

    Did you reaffirm your mortgage?
    Did the trustee ever issue a no asset report? Just curious.


    • #3
      Debt has been discharged, I didn't reaffirm, there was no "no asset" form.

      This is is a nightmare. The Trustee is a genious who manages to sell debtors' houses without giving them their exemption money.


      • #4
        Your attny is not pulling this out of his rear end. I trust that when all is said and done, assuming you keep the home, you are banking those payments as opposed to spending the funds on something else. If you get to keep the home you will need to bring those missed payments current.

        As to the home, your opinion of value is not important. What is important is what the Trustee thinks. As to your exemption, I would argue that the Trustee cannot sell the home without giving you the full amount. I have heard of situations where a trustee, by cutting a deal with the lender, argues that, but for the lender agreeing to give a kick-back, there was no equity in the property therefore the debtor is entitled to nothing.

        Has the Trustee issued a claims bar date? If "yes", what is the last date to file a "timely" claim?



        • #5
          I think you'reright about my attorney - not paying the mortgage is probably the correct way to go. Having an attorney is like having health insurance nowadays, it's nice but I can't afford to use it.

          I think I went through a day-long panic, because not paying the mortgage just stresses me. I'll continue with our plan and hope the Trustee will be forced to move when the lender gets involved. I'm definitely saving the payments and since I've never heard of a "claims bar date" I believe it hasn't been filed.

          I think the trustee is trying to get a higher settlement from us by dragging this out and telling us he is going to sell the house. What he says he can list it for is completely unrealistic and I am very familiar with the housing market in our area. We did make an offer over a month ago and he hasn't returned any calls from my attorney. I wonder how long he can drag this out.

          I apreciate any thoughts or input.


          • #6
            I do have a related question. We filed 10 months ago and continued to pay the mortgage. My attorney said that all the money we paid would add to equity and would be taken by the Trustee. Is there a specific law or case related to this?


            • #7
              Originally posted by Beautyberry View Post
              I do have a related question. We filed 10 months ago and continued to pay the mortgage. My attorney said that all the money we paid would add to equity and would be taken by the Trustee. Is there a specific law or case related to this?
              There is ample case law that the accumulation of equity in property of the estate belongs to the estate. The most likely reality however, is that a good portion of that monthly payment over the past 10 months went to interest on the loan with a smaller portion going to principal. Typically, the increase in equity is due to market conditions.

              Last edited by despritfreya; 07-04-2017, 09:25 AM. Reason: Removed question as to what state as earlier post indicates Georgia.


              • #8
                I find this conversation to be so confusing. How is it that a trustee can do this? Are they able to leave the case open forever? I am just not wrapping my head around this. It seems so shady and wrong. Shouldn't the value of your home at the time of filing be what counts?


                • #9
                  Chrysalis, the law states that the trustee is to "close an estate as expeditiously as is compatible with the best interests of the estate." But he can keep it open as long as he wants and can stretch it out in tricky but legal ways. I have about the worst Trustee in the country and he has found ways to take houses without paying out the exemption. He has also found ways to void the mortgage and then take the house. He has managed to keep cases open for years.

                  This isn't typical.

                  I'm in a bit of a panic about not paying my mortgage. This guy is a genious and the judges seem to like him. I'm worried he already has a strategy in place to deal with this tactic.


                  • #10
                    Beautyberry, I am so sorry for what you are going through. I have been on this forum for many months now, and I have seen nothing like it. We are finally filing tomorrow, and honestly now I can't stop thinking about your case! I just don't understand how this is an okay thing to do. I mean, if they feel your home is worth more value, shouldn't there at least be a step (pretty early) in the process where they give you the chance to file a 13 instead, so you can keep your home? Ours isn't much and I'm not in love with it, by any means, but this is where we've raised our kids and it's a place we can actually afford. I'm picturing being forced out of here ~ and that doesn't feel like a fresh start financially at all! How in the world are you not entitled to at least the amount of your equity exemption? Nope, don't get it. (Btw I know you can't read emotions on the internet so I'd like to make a public announcement that no, I am not in a complete panic about this. I am actually doing considerably well considering what we are about to do...)


                    • #11
                      Chrysalis, we just ran into bad luck with this trustee. I know of two other people who filed after me and are now on their way to rebuilding their lives. I have to add that being able to not pay the exemption happens only in certain situations and I was worried that not paying the mortgage might make that more likely. Likely, everything will go well for you. I wish you the best ๐Ÿ˜ƒ.


                      • #12
                        Originally posted by Chrysalis View Post
                        I find this conversation to be so confusing. How is it that a trustee can do this? Are they able to leave the case open forever? I am just not wrapping my head around this. It seems so shady and wrong. Shouldn't the value of your home at the time of filing be what counts?
                        Here is the law in the 9th Cir.:

                        In re Hyman, 123 B.R. 342, 346 (9th Cir.BAP, 1991), affโ€™d In re Hyman, 967 F.2d 1316 (9th Cir. 1992)

                        "C. Postpetition Appreciation of Assets With Non-Exempt Equity Accrues to the Benefit of the Estate

                        Postpetition appreciation accrues to the benefit of the estate. Section 541(a)(1) of the Code provides that a debtor's estate is comprised of all legal or equitable interests owned by the debtor as of the commencement of the case. When such assets become productive after the filing, the estate is supplemented by all "proceeds, product, offspring, rents, and or profits of or from property of the estate . . ." Section 541(a)(6). Hence, where an asset of the estate is sold by the trustee the estate is entitled to the proceeds of that sale. . . According to the legislative history of this section, "proceeds" . . . (has) a meaning that is "exceedingly broad.". .

                        It is. . . true that exempted property must ultimately "revest" in the debtor; but this is inherent in a statutory structure that vests "all legal or equitable interests of the debtor in property" in the estate at the commencement of the case. Code Section 541(a)(1). Hence several cases state that property claimed as exempt revests in the debtor upon the failure of any party to object within a specified period.

                        These cases, however, should be interpreted as simply accurately describing two rules in one sentence. In other words, the 30-day period fixes the right to an exemption and the statute as a whole requires that the property somehow revest. The timing of the reversion, however, is not apparent by the interplay of these two rules; it is not necessarily prior to abandonment by the trustee or immediately following the 30-day period.

                        The dissent appears to be concerned that trustees will hold property, which does not have any realizable equity on the date the petition is filed, hoping to gain advantage of post-petition appreciation. This concern . . . (is met by the requirement that) a trustee has an affirmative duty to collect and reduce to money the property of the estate and to close the estate as expeditiously as is compatible with the best interest of parties in interest. Therefore, a trustee is not in a position to unnecessarily delay the liquidation of estate property.

                        Further, if a debtor does become concerned that a trustee may act in dereliction of duty and not liquidate particular property within a reasonable time, the debtor may force the issue by requesting that the trustee abandon the property pursuant to 11 U.S.C. ยง 554(b). See B.R. 6007(b). In In re Pauline, 119 B.R. 727 (9th Cir.BAP 1990), the Panel recently upheld a trial court order requiring a Chapter 7 trustee to market the homesteaded realty within a defined period of time or it would be deemed abandoned. . . In the context of a motion seeking abandonment, evidence that no potential sale within a reasonable period of time could provide any benefit for the estate, after paying costs of sale, the payoff of encumbrances and satisfaction of the allowed homestead exemption, will no doubt determine the final outcome."

                        (Internal citations omitted.)

                        OP is in the 11th Cir. I do not know what that Circuit holds but I am sure his/her attny does.



                        • #13
                          Originally posted by Beautyberry View Post
                          Chrysalis, we just ran into bad luck with this trustee. I know of two other people who filed after me and are now on their way to rebuilding their lives. I have to add that being able to not pay the exemption happens only in certain situations and I was worried that not paying the mortgage might make that more likely. Likely, everything will go well for you. I wish you the best ๐Ÿ˜ƒ.
                          Thank you. I wish you all the best as well, and I do hope that you will come back and keep us updated. I know I will be thinking of you and wondering, for sure.


                          • #14
                            despritfreya ~ thank you for that. I hope you know how much your presence is appreciated here. Have a great Holiday!


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