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File Chap 11 or 7? Default Judgement. Property worth $6 million. $3 Million in Deb

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    File Chap 11 or 7? Default Judgement. Property worth $6 million. $3 Million in Deb

    Questions: To fight a default judgment, and there is a chance to be vacated; a property that is worth $6 million, $3 million debt; is it too dangerous to file Chapter 11, owe no other debts and no foreclosure; bank payments up to date:
    Is it too dangerous to file a 11 and can be converted to a chapter 7, liquidation will result in a $ 2 million IRS capital gain tax.
    Then the owners and the vexatious litigator creditor will get nothing too.

    I am afraid to file, it might be very foolish, the BK trustee 7 will get a $600,000 fee.
    Advise from anyone.
    Last edited by LadyInTheRed; 07-23-2018, 05:05 PM.

    #2
    bankruptcyme, I moved your questions to a new post. Please don't bring up a new topic in an unrelated thread. Also, please don't post your email address. Forum members can reach you by PM, but they should instead respond to your question in public.

    If the default judgement can be set aside, you should do that instead of file BK. Or, would the Plaintiff eventually get a judgement anyway, making setting aside the default only a delay tactic?

    What makes you think the Chap 7 trustee would get a $600,000 fee on the sale of a $6M asset? The Chap 7 trustee gets a commission based on what is disbursed to creditors. The fee is on a graduated rate:
    • 25% of the first $5,000 disbursed
    • 10% of the next $45,000
    • 5% of the next $950,000, and
    • 3% of anything over $1,000,000.
    If property sold at $6M and there were not costs of sale, and the entire $6M was disbursed to creditor's, the trustee would receive $203,250. But, there will be costs of sale, so the fee would be less. Do you realize that if the Chap 7 trustee sells the property, the bankruptcy estate, not you, would pay the capital gains tax? Of course, you will get what is left after all creditor's are paid off, so it does reduce what you will receive.

    If the property is worth $6M and you have $3M in debt and/or a judgement that you are unable to pay, it seems that selling the property would make more sense than filing bankruptcy, even if you do have a big capital gain. Or, if the property generates income, have you tried to negotiate payment arrangements with the creditor?
    LadyInTheRed is in the black!
    Filed Chap 13 April 2010. Discharged May 2015.
    $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

    Comment


      #3
      bankruptcyme, I just read some of your old posts from 2009. At that time you were talking about real estate held in 3 LLC and foreclosures. I was going to come back to tell you this and am now even more certain that it is the best advice anybody here can give you: Go see an experienced bankruptcy attorney!
      LadyInTheRed is in the black!
      Filed Chap 13 April 2010. Discharged May 2015.
      $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

      Comment


        #4
        I agree. OP needs an attorney--one of the best in the business--to sort this out. Most people come here with typical consumer debts, and own little or nothing compared to their debts. This is outside of the scope of what most of us can advise on.

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          #5
          Thanks! 99% of lawyers are incompetent, totally missed the deadline and get default judgments. Bankruptcy lawyers only make money of their foolish clients file bankruptcy.

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            #6
            I was told by another lawyer yesterday that most Chapter 7 court appointed trustee are so greedy and hungry for fees, they will sell and such you dry before they will even dismiss the case; these trustee all have their own crooked real estate broker, that will charged another 6% and want to sell to themselves and their best friends

            Comment


              #7
              Originally posted by bankruptcyme View Post
              Thanks! 99% of lawyers are incompetent, totally missed the deadline and get default judgments. Bankruptcy lawyers only make money of their foolish clients file bankruptcy.
              Then I guess you will proceed pro se.

              As to the bk (Chapter 11 in your case), two party disputes are disfavored and rarely end in favor of the debtor.

              If you have a valid defense to the entry of the judgment then the proper place to litigate that defense is in the court that issued the judgment or through a timely appeal.

              Des.

              Comment


                #8
                Hello despritfreya

                Thanks for your comment. You made a lot of sense. Old saying is that if you have any kind of equity, you cannot file; The court and the trustee and the lawyers are all in the corruption racket; the court will make you broke and suck you dry before you get a dismissal.

                I still believe the BK chapter 7 trustee get 10% of the real estate gross sales price, regardless of what the liens or the distributions are.

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                  #9
                  I find this perception that panel trustees are money grubbing villians out to screw debtors any way they can to be puzzling. Yes they are incentivized to find assets to pay your debts, and they work for your creditors in essence, but they are not all powerful, or operating completely outside any scrutiny.

                  The US Trustee audits them, they are routinely hauled before a judge to argue their position, and there are procedures for filing complaints that the UST must follow. Like any pubic official, there can be rogue operators, but they will not get away with it forever.

                  Do debtors occasionally get screwed by trustees? I think reasonable people can see it differently, but to assume that trustees will do whatever to get your assets to enrich themselves in violation of the law stretches credulity.

                  I'm not blindly defending trustees, and I have reason to mistrust them based on direct experience, but over time I think the system works, not perfectly, but eventually.

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