ABANDON REAL ESTATE PROPERTY
“ compels” the Bankruptcy Trustee to give the exempt house back to the Debtor. Once the home is no longer part of the Bankruptcy Estate, if the value goes up above the exempt amount it does not matter. The increase in value belongs to your client.
What Judges Think About Motion to Compel the Trustee to Abandon Real Property
I was at a Bankruptcy seminar where there was a question and answer session with several Bankruptcy Judges. One of the questions for the panel was“ What was the most common malpractice mistake bankruptcy attorneys make?” The Judges agreed that it was bankruptcy attorney’ s failure to file a Motion to Compel Abandonment to remove the home from the bankruptcy estate.
One Judge said he was sick to his stomach when he had to tell a husband and wife in their 80’ s that the Bankruptcy Trustee did have the right to sell their home and kick them out. The Bankruptcy Judge explained to them that, because their home had increased in value, there was now equity above what the homestead exemption protected. Because of that, the Bankruptcy Trustee could sell their home.
Would you want to be that bankruptcy attorney? Probably not. Especially when the clients find out they could have kept their home, had the bankruptcy attorney just filed a Motion to Compel the Trustee to abandon the home at the beginning of the case.
Some bankruptcy attorneys like the one I described, simply do not know about the issue. Other bankruptcy attorneys know the issue, but are afraid they will lose the potential client if they charge more than the bankruptcy attorney down the street charges for the added services.
Not filing a Motion to Compel Abandonment for your clients may be fine in clearly“ no asset” cases if the home is upside down in value and there is no chance of any reachable non-exempt equity in the foreseeable future. In many cases however, you put your client at great risk if you do not file a Motion to Compel Abandonment of the home. I have found that, once explained, clients are generally willing to pay for the extra services involved to protect their most important asset, their home.
I see many bankruptcy attorneys miss the boat on this issue. The Bankruptcy Trustee’ s sure know about it. You should too.
National Association of Consumer Bankruptcy Attorneys Winter 2016 CONSUMER BANKRUPTCY JOURNAL 39