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Cheerio

What are the chances of the Trustee selling my home in a Chapter 7? I have about $115,000 in equity.

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I am a single parent with 2 dependents.  I have about $115,000 in home equity.  What are the chances of the Trustee selling my home in this situation?  Even if the I get some money as part of my exemption I won't qualify for a new home. If I can get a friend or relative to finance a mortgage loan under their name would I be able to use that money as down payment and as long as I am on the Title and live in the home would that justify my exemption to be valid and not be taken back by the Trustee?

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6 hours ago, Cheerio said:

I have about $115,000 in home equity.  What are the chances of the Trustee selling my home in this situation?

Without knowing how much debt you have it is impossible to say.  

6 hours ago, Cheerio said:

If I can get a friend or relative to finance a mortgage loan under their name would I be able to use that money as down payment and as long as I am on the Title and live in the home would that justify my exemption to be valid and not be taken back by the Trustee?

The chances of a mortgage underwriter inking a loan for a friend or relative on a property they don't own are zero.  Even if they handed money over to you the trustee could potentially seize it as an asset.   The other problem is that attempting to let someone else get a mortgage on the home to swallow the equity (if that is what you are thinking of doing) could be seen as an attempt to hide the asset from the court and creditors and the trustee would have the power to undo it.

You really should discuss all your financial options with a qualified bankruptcy attorney.  With that much equity you might be able to do a line of credit to tackle some of this debt without putting your home at risk.

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From my reading of California homestead exemptions, if you used the 704 exemptions, having at least one minor child appears to allow for a $100,000.00 exemption.   Someone from California please chime in on this.

Assuming my reading is correct and further assuming your estimate of  the total equity ($115,000) is also correct, it is absolutely in the best interest of the creditors for the Trustee to  sell the home.  He/she will sell it,  pay off the existing liens, closing costs, sales commission and your homestead and then give the remaining funds to the creditors.  I assume you understood this when you elected to file a Chapter 7 (instead of a Chapter 13) and are prepared to find other accommodations.

Edt to add:  I also assume you have already filed.  If not, you need to seriously consider a Chapter 13 if you want to keep the home.

Des.

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You would appear to qualify for a $100,000 homestead exemption. Depending upon your other assets, you may be able to direct some of your wild card exemption toward your real property as well. You should, if you haven't already done so, consult with a California bankruptcy attorney who works with the Trustees in your District.

That said, whatever equity you believe you have in the property is just the initial inquiry. The trustees in my District are always more interested in what the house would sell for, rather than "market value." I don't recall one not asking that question. Remember, this house would be sold at auction and the sale price at those things is almost always considerably less than market value. Not only that, the estate would have to pay for costs associated with recovering the property, preserving the property, selling the property, etc. With what amounts to a very small amount of money for the trustee to work with (non exempt portion of your asset), I really doubt that there would be anything left to pay your creditors. I don't think there is enough money there for the Trustee to waste his/her time.

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2 hours ago, nascar said:

Remember, this house would be sold at auction and the sale price at those things is almost always considerably less than market value

Not quite true.  A realtor will be appointed.  The realtor will list the home on the MLS just like any home for sale.   The listing will indicate that the sale is subject to bk court approval (which may or may not chill the value of the offers - my experience, it doesn't really).  Once a buyer is found and a contract is signed the Trustee will file a "363 sale motion".  The sale will be subject to "higher and better offers", but the home will sell for market price or just slightly less - but not as a "forced sale" such as a foreclosure.  This is done all the time.  Just had one where a bidder showed up at the hearing (sale of a commercial not residential building) and the sale price did go up a bit.

2 hours ago, nascar said:

Not only that, the estate would have to pay for costs associated with recovering the property, preserving the property, selling the property

Not quite correct.  There is no "recovering the property" since the property already belongs to the bk estate.  There is no "preserving the property" unless, of course, the debtor vacates and it takes a long time to sell.  As to the cost of sale, nothing different than a typical commission to a typical realtor.   Typically, the only issue is whether or not the debtor continues to service the mortgage between filing bk and the time the property is sold.

Again, if OP has filed a 7, and there is equity over the homestead OP needs to be prepared to lose the property in exchange for that $100,000.00.

Des.

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If you are a bankruptcy attorney who works in California, I certainly defer to your opinion of the matter. It goes without saying that we do things differently here (that's an understatement). You indicate that the property already belongs to the BK estate. For what its worth, I didn't read anything that would direct me to that conclusion. Is it also your opinion that the o/p's wild card exemption could not be used to cover the balance of the equity? You seem to have disregarded that exemption in your commentary. Thanks for the input.

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The minute you file a Chapter 7 BK, all your property reverts to the BK estate for the trustee to decide how to handle it. That is why the trustee can challenge your valuation of a piece of property in your claim that it is exempt and you are not allowed to sell or otherwise dispose of a piece of property until either the case is dismissed or the trustee abandons the property.

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5 hours ago, nascar said:

You indicate that the property already belongs to the BK estate. For what its worth, I didn't read anything that would direct me to that conclusion. Is it also your opinion that the o/p's wild card exemption could not be used to cover the balance of the equity? You seem to have disregarded that exemption in your commentary.

1. Not a California attny but. . .

2. My reading of 704 shows no wild card.  The $100,000 homestead exemption falls under  CCP 704.730 or 704.950.

3. My reading of 703 limits the wildcard to $1,350.00 plus the unused portion of the homestead. The homestead under 703 exemptions is limited to $25,575.00. CCP 703.140(b)(5).

4. OP states that equity is $115,000.00. Must assume OP was smart enough to use 704 thus protecting $100,000.00 not the smaller amount given under 703.

5. Property is property of the estate. OP's first reference is "I have about $115,000 in home equity. What are the chances of the Trustee selling my home in this situation." See 11 USC 541 for what constitutes property of the estate.

OP. . . please keep us updated on what happens as we may be able to give you additional insight.

Des.

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" Again, if OP has filed a 7, and there is equity over the homestead OP needs to be prepared to lose the property in exchange for that $100,000.00. "

It is not that cut and dried. There are other factors that play into the equation. The bottom line is that the trustee must be able to obtain a net balance or else he cannot seize and sell the property.

Based upon the above scenario, he will not obtain a net balance therefore, in all likelihood, the property would not be sold.

Regarding exemptions, all property belongs to the  estate which the trustee controls. The debtor then removes property from the estate back to themselves through the exemption schemes which of course, a trustee or any individual with standing, may challenge.

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I spoke to an attorney who said that after the cost of selling the home ( 7%) there would not be enough equity to pay the $100K exemption.  I am in the process of filing Chapter 7 and will update you guys how things go.  Thank you all for your input.

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