Can trustee require current financials - 18 months post discharge (Chap 7)

[Resigned2BK]

The Trustee SHOULD NOT be attempting to sell the property short. The Trustee's job is to liquidate assets for the benefit of the unsecured creditors. If there is no recovery for the unsecured creditors the Trustee SHOULD abandon the property. Period, end of story. Further, the Trustee has the authority to do what needs to be done to effectuate a sale. The Trustee is selling the estate's property NOT the debtor's property, and, since the lender does not have to agree to a short sale, it is the Trustee's job (not yours) to try to cut a deal.

I would tell my client NOT TO give any information as it relates to a short sale. My client would have surrendered the property and if some realtor wants to make a few bucks, that realtor needs to do it WITHOUT having my clients doing any work, UNLESS there is a guarantee that my clients would be receiving compensation, say, no less than $5k, for their time and effort - and that $$ would have to be paid up front.

If the Trustee insists you cooperate you should file an Application to Abandon the property and get the matter before the Judge. Let the Trustee explain why he wants to liquidate property that is of "inconsequential value and burdensome to the estate" just so that he and his good buddy, the realtor, make some $$. This is garbage and, as you can tell, has pissed me off. Wish I was your attorney.

Des.

Hey, this is pretty funny! I was running a search on Des's quote about inconsequential value and this particular thread and forum in general were alluded to at this bankruptcy blog.

http://www.fileyourbankruptcy.org/trustees-and-being-a-trusted-member-of-the-bankruptcy-system.html

They don't link back here at all but clearly they took Des's statements verbatim and made up a whole blog posting about it.

[keepsmiling]

This is a fascinating and important thread. Perhaps it can be a sticky as some kind of warning. I still think these shady dealings need to be brought to national attention. Can't believe the original intention was to line realtors' and tt's pockets. They tt's can always make more money by representing debtors as well. Doesn't Seattle have some watchdog reporter to talk to????

[freeatlast09]

So--one question: are you going to go ahead and file that complaint? I'd love to see it happen! I'd probably send a copy of the complaint letter to the local TV station's investigative unit just for kicks.

Well... my old thread has been bumped to the top again. Yes - I'm still around, but haven't been very active on the forum - extremely busy with work.

In answer to the above question, we haven't made a final decision about filing the complaint. We're still a few months short of the 1 year wait that Des recommended so we'll decide by then. I'm going to do some digging and see what the TT and the real estate agent have been up to since our case finally closed.

Now, if we could just get BofA to finally take the house back. We called them last week after 3 years of no payments and the response was - we'll get to it when we get to it. The fun continues...

[Resigned2BK]

I just had to revive this thread due to several e mails I received from the bk attny roundtable and, of course, to ask OP for an update.

Today there was a thread on the “attny roundtable” relating to the subject of this thread (coincidence only). I have tried to put the posts in the order in which they were received. The posters (names removed) are all respected attorneys who regularly post to the “roundtable”. . . but I have to tell you, they have nothing on this Forum.

For your reading pleasure:

1. On 5/25/2011 12:41 AM, Dan C wrote:

Chapter 7 debtor is $200k upside down on her residence after refinancing to pay off divorce settlement. Debtor claimed no exemption in her residence, and stated intention to surrender. Lender (no 2nd) got relief from stay 45 days after filing. The mortgage debt is non-recourse here in Washington.

If the trustee short-sells the house after discharge, would the debtor be liable for cancellation of debt tax liability? IRS Publication 908 (Bankruptcy Tax Guide) seems to say that a short sale by the trustee would be taxable if at all to the trustee, not to the debtor. Otherwise, the debtor would presumably still be insolvent after discharge when the house is sold as the secured debt is not discharged, so the insolvency exclusion for COD should apply.

Any input appreciated.

2. Sent: Wednesday, May 25, 2011 7:14 AM by J Subject: Re: Short sale tax liability in Ch 7:

I am a bit confused. Why would the trustee short sale a house. Generally the seller in a short sale gets NO proceeds from closing (sometimes gets an incentive but that would not apply here). What is the benefit to the bankr estate and/or creditors?

3. At 07:58 AM 5/25/2011, DP wrote:

Trustees have been known to try to cut carve-out deals. Courts have also been known to reject these efforts that don't benefit unsecureds.

4. From: D To: roundtable Sent: Wednesday, May 25, 2011 10:01 AM Subject: Re: Short sale tax liability in Ch 7:

The carve-outs are common in this district. The trustee just informed me that the bankruptcy estate, not the debtor, would get any tax consequences in this case.

5. From ???. Sent ???:

How exactly does a carve out work and how does the Trustee or Bankruptcy Benefit? How much can a trustee make? In my district the Trustee's apparently do this quite often (Western Washington Seattle).

6. On Wed, May 25, 2011 at 1:54 PM, D. wrote:

In a case where I represented an unsecured creditor Chase had 1st mtg for $590k and 2nd for $95k. The house sold for $470k, but Chase got only $424k with a $20k carve-out. Trustee's fees were $10k plus, and the net after the $10k that was left went toward a large IRS priority claim. There were motions but the trustee may not have actually appeared in court.

_______________________________________

Aside from the premise of the original post which is makes little sense since we all know there is no taxable event when a debt is discharged, you can clearly see that even us attorneys are stumped.

On second thought, I wonder if there is a tax burden since the estate is making a "profit" where none should exist. Thoughts?

Des.

Ack. Our case is in Western District Seattle!!!!! No wonder this is happening to us too!

Thanks so much, Des, for digging up this thread for me. Forewarned is fore armed. I'd be half tempted to send this thread on to our lawyer, but he'll probably charge us to read it. LOL.

[keepsmiling]

I was just about to ask that, doni!
I hope if free is still around, he reads it, files the complaint, and gets this tt put out of business.
Would be interesting to see where this wound up going in tt-land. Is this guy still working?

[doni49]

OMG! I just found this thread about an hour ago (since resigned resurrected it and brought it to the top of the list). I've read every last post over the past hour or so.

So--one question: are you going to go ahead and file that complaint? I'd love to see it happen! I'd probably send a copy of the complaint letter to the local TV station's investigative unit just for kicks.

[Resigned2BK]

I wonder if this was the reason our Trustee offered to help us with a short sale during our 341?

Oh, the things that make you go hmmmm...

No freaking way! You're south of me, otherwise I'd ask if you had R.B. as your trustee too!

[keepsmiling]

Yippee! Let's here it for truth, justice and the American Way

Here's hoping that this tt got himself a shiny new hole ripped in his hind quarters.

Freeatlast, now breathe at last--- finally.
Crazy.

[despritfreya]

Is the 1 year wait in case the Trustee would reopen the case out of spite and can only do so for 1 year?

Wouldn't put it past him.

Des.

[freeatlast09]

Now, wait 1 year then file a formal complaint with the UST. Attach to the complaint each and every response posted here. Just my 2 cents.

Des.

Is the 1 year wait in case the Trustee would reopen the case out of spite and can only do so for 1 year?

[despritfreya]

Now, wait 1 year then file a formal complaint with the UST. Attach to the complaint each and every response posted here. Just my 2 cents.

Des.

[ValleYum]

I wonder if this was the reason our Trustee offered to help us with a short sale during our 341?

Oh, the things that make you go hmmmm...

[BROKEDED]

I had almost forgotten about this thread. Glad to see that it appears to be resolved for you. Imagine how many people have felt compelled to give up their private info to a real estate agent thinking it would keep them from trouble.

[justbroke]

Just one word for this: incredible! I am happy to hear that at least that Chapter in this book is now done.

[freeatlast09]

Final update!

Last week: the real estate agent contacts us again - "need docs etc..." - almost like we had never replied to the last request(s). We forwarded our reply from several weeks ago stating we would not be providing anything.

48 hours later: house is off the market

Today: switched back to a no asset case - report of no distribution - case closed!

What a waste of two years for everyone involved. Thanks to all that offered advice and words of wisdom.

Now we just wait for BofA to do something. Maybe another two years will go by.