Ch. 7 Homestead Exemption nightmare - help!

[cherir]

Let's see.........how to explain this:

My husband lost his job in Iowa and started a new job in Arkansas on January 30. My children and I officially moved down in March, 2006 In the process, our home in Iowa did not sell, not even in a short sale situation, and is now being foreclosed and the trustee has abandoned it, lifted the stay, yada yada and the foreclosure is proceeding.

At the time we moved here, it was considered likely we would sell the Iowa house and based on my husbands income, we were able to purchase a home in Arkansas, where we now live.

Just to add in case it matters, the US Trustee has found no presumption of abuse in our case.

When we filed chap. 7 in July, our attorney used Federal exemptions, which Arkansas allows, after consulting with an Iowa attorney. At the 341, our trustee said "No, under the new rules, you have to file under the state where you lived the majority of the last 2 years". That would be Iowa.

So, our attorney amended our exemptions to using Iowa exemptions and filed them along with an objection to the trustee motion to turnover all assets.

Pacer shows that the trustee got copies of all that today, and quickly withdrew her petition for us to turnover all assets. HOWEVER, she said that since we are now under Iowa exemptions and our current house is not in Iowa, we must now turn it over to her and she is petitioning the court to do so.

We are understandably upset. What are people supposed to do that have to move to another state? They aren't allowed to claim a homestead in their new state? We didn't move here for our health or to enjoy retirement. This was the only place my husband found a job. Is this impacted because we were unable to sell our Iowa home?

I am assuming the trustee wants to determine if there is any equity in this property. Although we have only owned it 9 months, the market in our area has appeared strong, so I have no idea how much of an increase there may have been. We have not a dime to pay to keep this house (in the event we are officially an ASSET case, due to equity).

This is all so confusing. Our loan payoff is $198,000+ and we paid $210,000 for it 9 months ago. Providing the trustee gets an appraisal that shows some equity, at what point do they decide it isn't worth it? The appraisal will have to show that is just sold 9 months ago and there can't be a huge room for increase. Remember, we are in rural Arkansas, not California. This house was also downsized by about $150,000 from what we owned in Iowa, so we made every attempt to decrease our living expenses.

Or is it possible our attorney will argue that we should be allowed to keep the house, irregardless of equity - does he have a leg to stand on with the homestead exemption??

Why of why do I check Pacer when the atttorney's offices are closed for the day?

[HHM]

Sorry, I am little to lazy to go look on my own...

How much is the Iowa homestead exemption and would it be enough to cover your existing equity in your AK home.

Has the bank in Iowa completed the foreclosure?

If the foreclosure is not complete, I suspect the problem is that, as of right now, you own two homes, one in Iowa and one in AK.

Thus, (note, I am not an expert in this area), I think the Trustee has a relatively strong "technical" argument in that, your residence for BK purpose is where you lived the longer of yada yada yada...and for you that would be Iowa, and strictly speaking, until the Iowa foreclosure is complete, that house may be considered your primary residence. As a result, you have no way to exempt the equity in the AK home.

I hope you have a lawyer that is willing to go to bat for you on this (and is not some BK Mill) as it may take some clever legal wrangling. I think you have the better "persuasive" argument and nearly all BK judges loath the new law, but your in a tough bind.

Unfortunately, had you waited to file BK until after the bank foreclosed, you would not be in this bind. I am sorry to hear about your situation. However, the good news is, after the trustee deducts the costs to sell your home, it may not be a good target. Your pretty tight on the equity in your AK home (about $12K), a 5% realty commission will eat up $10,500, plus closing costs, so there may not really be anything for the trustee to get. Unless AK is the only hot real estate market in the country, I doubt there has been much appreciation.

[SinkingFast]

This is just a guess here as to why the Trustee is objecting,..............

In Iowa, you have an unlimited Homestead Exemption. Under New Law, if you've owned the house more than 910 days, I believe it is, then it truely would be Unlimited. Less than 910 days, you'd be limited to $125K in equity.

In Arkansas, there's only a $2500 Homestead Exemption. Husband and wife cannot double.

http://www.bankruptcyforum.com/showthread.php?t=238

Based on the numbers you gave,.......... It looks, on paper, like you have $12K in equity in your present house. That's a significant amount of cash you "invested" in buying your house such a short time prior to filing BK. The look back period on property transfers is 1 year.

It sounds like the Trustee wants to have it both ways. He/She makes your attny research and apply the Iowa State's exemptions without allowing you your Iowa Homestead Exemption on the Arkansas property. BECAUSE, at this point in time, you technically own a Homestead in Iowa. Even tho with the Foreclosure in process, your intent to surrender the Iowa property seems pretty clear.

My guess,........... The Trustee wants MONEY!! And, he/she thinks they've found a way to get it.

[SinkingFast]

Just a quick note here. This website refers to a non Judicial "voluntary" Foreclosure.

http://www.stopforeclosure.com/Iowa_Foreclosure_Law.htm

Not sure if that's something you can persue at this point, but it might be worth asking about.

If you're filing Ch 7, the Lender on the Iowa property isn't gonna recover the deficiency anyway. They might just agree to get the process over and done with a bit cheaper for themselves.

[cherir]

Sigh....thanks for your responses. Our problem with selling the Iowa property was that the market tanked just as we moved, and we had 2 mortgages on the property with 2 different lenders. We actually had 2 very reasonable offers on the property during the possilbe short sale situation, but the 2nd mortgage holder was unbelievable. My attorney has honestly never seen any institution so incredibly stupid (it was a small credit union). Property will now be lucky to be sold for the payoff of the 1st mortgage, forget the 2nd mortgage. They will likely not get a dime, and could have had $20,000+ from the short sale opportunity.

Therefore, we were unable to voluntarily turn the property over to the lender, since there is more than one. The foreclosure process was delayed when we almost sold it in the short sale, and it seems that the sheriff's sale won't be until January or later.

We keep receiving letters from the foreclosure attorney (which our attorney says we should not be getting), but anyhow we think there is some kind of hearing tomorrow (in Iowa, not relating to bankrupty, not shown on Pacer) regarding the house, which I think is just finalizing their right to sell it at the sheriff's sale. (Husband gave paperwork to attorney and didn't keep a copy). Stay was lifted in mid-September and things have been creeping along in Iowa apparently.

What does it look like our options are? If the trustee decides to go after the limited equity, are we on the street? And if we have to move out and go rent somewhere, do our exemptions change and can we be thrown into a ch. 13? Has she gone over the head's of the US trustee in questioning our case or is this separate?

Thank goodness for anti-anxiety medication........

[cherir]

And, does it matter that she abandoned the Iowa property within the bankruptcy? We claimed only our Arkansas house, and took only $10,500 of the Iowa exemption (for our downpayment) which is covered by the Iowa limits. So we get NO exemption?

[SinkingFast]

Seems that's what the Trustee is shooting for.

To have you claim your Homestead Exemption on the Iowa house which you are surrendering to leave you flapping in the breeze on the Arkansas house.

BUT, as HHM said, with costs to sell, there really shouldn't be much there to go after. On average, Real Estate Agents charge 6-7% commission. There's recording fees, title insurance, maybe have to pay some buyer's costs, a repair or 2 that might be found, and POOF, there goes $12K out the window.

Call a couple of Real Estate Agents and have them run a Competitive Market Analysis on your house, including all fees to sell. Deduct out your current mortgage and see on paper where you stand. Sounds like you'll have virtually no equity left.

And don't let the Trustee bluff you. If the Trustee siezes the house, he/she has costs to sell too. They hire someone to sell the property as quickly as possible, but houses are the biggest drain on the BK system. They hang around longer than any other property and don't bring the price like if an owner were selling. Trustee's costs to sell a house runs around 10% total. All Trustees know that. They count on you not knowing and living in fear of loosing your home. It's a game of Chicken to see who flinches first.

So you may get to play "Let's Make a Deal" with the Trustee. That may be the easiest way out of this situation. Come to some mutually "agreeable" $$$ figure that you and the Trustee can settle on.

[arkienurse]

Afraid I can't be of any help, but anytime I see someone post from Arkansas ( AR not AK(Alaska) , sorry hhm that is a pet peeve of mine ) I feel compelled to say howdy .
And if you are in the southern portion of the state, we might be neighbors

Good luck with everything