Exempting the Pink Panther

[bornfree2]

For an understanding of what attorney's fees get paid in bk see:

Travelers Casualty & Surety Co. of America v. Pacific Gas & Electric Co.

https://www.law.cornell.edu/supct/html/05-1429.ZS.html

and cases interpreting the decision.

Unless there is a basis in contract or statute - no fees.

Des.

I cant conceive of a scenario where there would be a contract between Debtor and Trustee...but between Debtor and Creditors Im sure they got that in one of the statement agreements. So based on this info, seems Debtor may be more at risk for paying attorney fees if in an AP with a creditor than in dispute with Trustee.

[despritfreya]

For an understanding of what attorney's fees get paid in bk see:

Travelers Casualty & Surety Co. of America v. Pacific Gas & Electric Co.

https://www.law.cornell.edu/supct/html/05-1429.ZS.html

and cases interpreting the decision.

Unless there is a basis in contract or statute - no fees.

Des.

[justbroke]

Yes, there are exceptions to the American-rule... especially when dealing with contracts. Other cases are may include malicious prosecution. You have to go in thinking that you are responsible for your own fees. This is likely why bankruptcy attorneys don't do many adversary proceedings purely on contingency (unless it's a winner winner chicken-dinner).

[bornfree2]

If the debtor is objecting, then the American-rule prevails.

For california, seems it can go both ways.

Back to the case of the painting... in some circumstances it's best for the Chapter 7 debtor to convert to Chapter 13.

Or self liquidate and sit on a large pile of cash whose value is undisputed - cash value = cash value. Then apply the wildcard to the pile. Then take some cash to a good lawyer.

Oh if i were a rich man...

[justbroke]

If the debtor is objecting, then the American-rule prevails. If the Trustee has to hire an attorney to go after property, then the bankruptcy estate pays (from the proceeds). The Trustee needs to be careful when determining the cost of liquidating something that has a partial exemption. The Trustee will weigh the cost of selling the property. They must also consider any existing liens (especially with homes).

This is why I keep saying that a smart Trustee would rather not deal with something too contingent and might ask if you just want to negotiate on paying the Trustee something.

Back to the case of the painting... in some circumstances it's best for the Chapter 7 debtor to convert to Chapter 13.

[bornfree2]

The Trustee would pay the exemption amount by check.

Who pays for all the litigation costs in this kind of back and forth- the trustee motions, hearings, appraisals, auction, etc. Is the amount deducted from what Debtor is owed?

[justbroke]

The Trustee would pay the exemption amount by check.

[bornfree2]

I believe that the Trustee, in a liquidation scenario, always has the upper hand in the negotiation. I have witnessed Chapter 7 Trustees in Florida not negotiate, and just tell the debtor to go to the auction and make a bid. Of course there are likely scenarios where one could be successful with this type of Trustee.

Yeah like dropping a Rule 2004 on Debtors behind. Yikes!

But back to original post, its still unclear how Debtor is paid back exempted value of an item that goes to auction. Does trustee write a check directly to Debtor or do they go through the court as a kind of escrow?

[justbroke]

I believe that the Trustee, in a liquidation scenario, always has the upper hand in the negotiation. I have witnessed Chapter 7 Trustees in Florida not negotiate, and just tell the debtor to go to the auction and make a bid. Of course there are likely scenarios where one could be successful with this type of Trustee.

[bornfree2]

Not sure what word or term lawyers use for 'playing out scenarios' but that is what i meant by 'war gaming'.

Negotiation is certainly an area I need to mature in. I think its easier for a lawyer to do this on behalf of their client because they are not emotionally invested. Naturally if someone comes after my life/property my gut reaction is defensive.

I do see wisdom in losing some property in return for winning the prize of larger debt cancelation. But you know the old saying 'give an inch, they take a mile'...

[justbroke]

As to a request for abandonment - one must be careful. I am following a case right now where the attorney (yes, the attorney) filed a Motion to abandon the homestead just 1 month into the case. Stupid. It takes a Trustee a lot more than 1 month to investigate so, naturally, the Trustee is now wondering if there is more than $250k in equity in the property. The Trustee objected to the request. A Hearing on the Motion was held last week and the judge continued it for 60 days. Now that the Trustee has keyed into the issue, you can bet he/she is watching and the home will have more equity 60 days from now (assuming the market doesn't collapse).

This illustrates the concern I had with "overvaluing" something to try to hedge on the valuation... could bring unwanted or unwarranted attention.

Yet another reason to hire an experienced bankruptcy attorney.

[despritfreya]

great post. anything to decipher the procedure is of great aid for war gaming possible moves and outcomes. Motion to abandon fee is $188. It soon becomes apparent what property is just not worth fighting to keep.

I don't like the word "gaming". Trying to game the system will just lead to disaster - hence the reason my Firm makes a lot of money attempting to clean up the mess those "smart" people create when doing something stupid.

As to a request for abandonment - one must be careful. I am following a case right now where the attorney (yes, the attorney) filed a Motion to abandon the homestead just 1 month into the case. Stupid. It takes a Trustee a lot more than 1 month to investigate so, naturally, the Trustee is now wondering if there is more than $250k in equity in the property. The Trustee objected to the request. A Hearing on the Motion was held last week and the judge continued it for 60 days. Now that the Trustee has keyed into the issue, you can bet he/she is watching and the home will have more equity 60 days from now (assuming the market doesn't collapse).

In one of my cases my client and I made the decision not to raise the red flag. The case was an asset case. 1.5 years into it, the home had more equity than the allowed exemption. We never requested an abandonment and, in the end, the trustee forgot about the home and closed out the case after distributing the money that was collected from other assets. We could have filed to abandon 6 plus months into the case but, knowing that the market was taking off, we did not want to open the door. The decision to do nothing worked. As a side note: had the Trustee looked into the property, my client would have settled with the Trustee by kicking into the bankruptcy the non-exempt value - probably with a "cash out" refinance.

Des.

[bornfree2]

@despritfreya - great post. anything to decipher the procedure is of great aid for war gaming possible moves and outcomes. Motion to abandon fee is $188. It soon becomes apparent what property is just not worth fighting to keep. Especially if it will prolong the case and bring too much unwanted attention.

[justbroke]

despritfreya interesting on the process. I have been in valuation hearings but only in the Chapter 13 context for lien stripping, and only in Chapter 7s for issues related to redemption. Thank you for the clarification the difference when it comes to exemptions. I'm learning!

[despritfreya]

These are valuation hearings. If the Trustee gets to a hearing on this, then they will hire an appraiser, obtain a written estimate of value, and the appraiser will testify as an expert at the evidentiary hearing.

JB - It is extremely unlikely for there to be a valuation hearing when determining if there is non-exempt value for the estate. This is how it typically works:

• Debtor believes the exempt (or non-exempt) asset has no value to the estate. The technical phrase is that the asset is "burdensome and of inconsequential value to the bankruptcy estate" and therefore should be abandoned.
• Debtor asks the Trustee to abandon the asset.
• The Trustee either says "yes" or "no" to the request.
• If the answer is "no" and the Debtor wants to go down the path of abandonment, he/she files a Motion to Abandon (paying the required filing fee and noticing the Motion to all creditors and interested parties on a "bar date" notice - the noticing aspect depends upon local procedure).
• The Trustee (or any creditor) either responds or does not respond to the Motion.
• If no response, the Court enters an Order abandoning the asset.
• If the Trustee (or some creditor) responds the Court sets the matter for Hearing (again - look at local procedure).
• At the Hearing the Court will most likely either continue the matter so that the parties can come to some agreement or direct the Trustee to market the asset to see if it can be sold (Debtor gets the exemption amount at time of sale).
• Typically the Court will give the Trustee several months - whatever the judge deems to be "reasonable" - in which to find a buyer and, if no buyer is found, will authorize the abandonment.

Of course, this all depends upon local procedure. A mini trial on valuation is not utilized as it is costly and ineffective since, "value" is what someone will pay for the asset not what some "expert" says it's worth.

Des.