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