Thursday, July 07, 2011

Bankruptcy Trustee's Attempt To Boot Homeowner In Underwater Home Fails; State 'Wildcard' Exemption Allows Debtor To Stay Put

The Florida Bankruptcy Law Blog reports:
  • Some bankruptcy trustees have been trying to force debtors’ to turn over possession of real property even when the property appears to be under water. It seems that these bankruptcy trustees want to see if they can find a buyer and/or negotiate concessions or payment from the mortgage lender.


  • A recently decided district court case in the Middle District of Florida considered a Chapter 7 bankruptcy case wherein a trustee wanted debtors to surrender and move out of their upside down homestead so that the trustee can market the property.


  • The debtor’s objected on the grounds that the trustee cannot compel turnover of assets with no equity and no benefit to creditors. The trustee then argued that the debtors’ objection, itself, impeded the trustee’s administration of the estate and thereby disqualified the same debtors from the $4,000 wildcard exemption.


  • The district court ruled that the trustee had no right to compel turnover of an asset with no value, and that the trustee should abandon such assets.


  • The court indicated that a trustee could try to sell the debtor’s property but that the debtor should retain possession unless the trustee finds a buyer who will pay more than the mortgage debt. The debtor’s opposition to turnover did not forfeit his wildcard exemption.(1) 8:11-cv-193

Source: Chapter 7 Trustee Wants Debtors To Move Out And Turn Over Upside Down House.

For the ruling, see Iuliano v. Brook (In re Iuliano), Case No. 8:11-cv-193-T-JSM (M.D. Florida, Tampa Div. April 29, 2011).

In a related post, see Chapter 7 Trustees Attacking Debtors' Right To Stay Put In Their Upside Down Homestead Property.

(1) Among the cases cited by the District Court in reaching its conclusion:

posted by Home Equity Theft Reporter at 4:02 AM