Monday, May 23, 2011

Chip Parker is Now Attacking Bankruptcy Trustees

The bankruptcy trustee has every right to demand rent or vacation of the house if the homestead exemption was not applied, despite what Chip thinks.

The Supreme Court of Florida stated last month its decision in Osborne v. Dumoulin, — So. 3d –, 2011 WL 320986 (Fla. 2011). In the Osbourne decision, Chief Justice Canady explains that a bk debtor need not do anything affirmative to not claim or receive the benefit of the homestead exemption. A homeowner can choose the $4,000 wildcard exemption if it provides a greater protection than the homestead exemption would. Actual abandonment of the home is not necessary. HOWEVER, the Court states, “When the debtor in bankruptcy does not claim the homestead exemption, the debtor effectively surrenders the homestead to the trustee for administration.” The trustee can sell the home whether occupied or not.

Some trustee have told me that they intend to offer to sell a quitclaim deed to the property to the debtor’s mortgage holder.  If they can also evict the Debtor’s this will be more attractive to the creditor’s.

In the Iuliano case, the Trustee argued - a debtor who does do not claim his homestead as exempt in his bankruptcy petition, but refuses delivering exclusive possession to the Trustee for administration, is impeding the Trustee’s administration of the property.

Federal District Judge Moody stated:

11 U.S.C. § 542(a) requires a debtor to deliver to a trustee the property of the estate, “unless such property is of inconsequential value or benefit to the estate.” Where the estate has no equity in an asset, so that unsecured creditors are unlikely to benefit from a sale of the property, it is generally recognized that abandonment is the appropriate method of dealing with the asset, not liquidation. [Cite omitted.] Where there is no equity, it makes no sense for a Bankruptcy Court to order the surrender of possession of property to the Trustee.

The trustee will still be able to evict the Debtors once he has a buyer for the property.