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cfortunato
cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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My husband and I have filed Chapter 7 Bankruptcy in Kentucky.

Resolved Question:

My husband and I have filed Chapter 7 Bankruptcy in Kentucky. We are surrendering our home and have listed all credit card and medical bills on our bankruptcy. My husband took a loan from his 401k and we purchased a mobile home with it. He could only borrow 1/2 of his 401k value so we borrowed $22,000 to purchase the mobile home. We are living in it on a rented lot. Also, his mother deeded her property to him over 5 years ago and she retained a life interest. He has 3 siblings and at her death he is supposed to sell it and divide the proceeds with his 3 siblings. The PVA value of her property is $33,000 but we provided pictures and details about her house - built in the 40's, not in good shape, etc. The trustee agreed to the value being $25,000. However, she calculated the remainder interest at .66236 making my husband's interest worth $16,559. Our attorney said we have a remaining exemption of $11,975 that was available to be used to partially shield his ownership in the property leaving his non-exempt equity in the property to be $4,584. The trustee is willing to relinquish all claims against the property in exchange for payment of $4,584. We were very disappointed that our attorney sent this information to us in a letter rather than talking to us in person about this. We called him for a further explanation and didn't get it. He said he would look into it further and call us the next business day. He didn't call and we called his office and even went to his office and got no response. His secretary did allow us to set up an appointment over a week later but the appt. is not until next week. There have been many other discrepancies in what his staff told us and what he told us during the entire bankruptcy process. At this point I have no faith in our attorney and his staff. Can you please tell us if the information concerning our being liable for $4,584 is correct? Also, where does the trustee think we can come up with the money to pay that? We are bankrupt and cannot obtain a loan anywhere. Thank you very much. Marie
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 1 year ago.

cfortunato :

Hi - my name is XXXXX XXXXX I'm a Bankruptcy attorney here to assist you.

cfortunato :

If your husband owns only 1/4 (.25) of the remainder, how is it that the trustee has based her calculation of your husband's share at .66236 of the remainder?

Customer:

The deed from my husband's mother only has his name on it - not any of his siblings are listed on the deed. It is just an understanding with his mother that upon her death he is to sell the property and share the proceeds with her. I don't think the bankruptucy trustee would go along with that since only his name is XXXXX XXXXX deed. What do you think? Thank you.

cfortunato :

Thank you for your response.

cfortunato :

The Bankruptcy trustee does not have much leeway as far as making concessions to debtors regarding their assets.

cfortunato :

Since the deed is in your husband's name only, the trustee does have the right to value the remainder as belonging solely to your husband.

cfortunato :

Without regard to the understanding with his mother and his siblings.

Customer:

Where does the amount of exemption come from? Our attorney says there is a remaining exemption of $11,975. How is that amount calculated?

cfortunato :

You and your husband had an available total of $23,950 exemption for miscellanous personal property (not including your car(s)).

cfortunato :

Perhaps he already applied $11,975 to other personal property you own?

Customer:

I don't know. What types of personal property might that be? We are reaffirming on our 2009 Chevrolet Malibu. We have the mobile home we just bought for $22,000 but borrowed that amount from his 401k plan. We have to pay back the $22,000 by making $160 monthly payments.

cfortunato :

Actually, since the remainder interest belongs to your husband only, only his $11,975 exemption could be applied to the remainder.

cfortunato :

Not the total $23,950 - one half of which belongs to each of you.

Customer:

Ok, I was wondering if that was how that was calculated. Hmmm, any way my $11,975 exemption could be applied since in Kentucky, I have a marital interest in the property? I worked for a civil attorney for 12 years so I have a little bit of legal knowledge but not in the bankruptcy area.

cfortunato :

In general, all property acquired during a marriage belongs to both spouses. However, there are a few exceptions to this rule, including inheritances and gifts.

cfortunato :

Any inheritances and/or gifts received by one spouse only remain the separate (not marital) property of that spouse only.

Customer:

We are just so frustrated because the 2 times we met with our bankruptcy attorney we brought him a recorded copy of his mother's deed and both times he told us not to worry about it. It would be fine. Even after the creditors meeting he told us not to worry about it. Then we get the letter telling us to pay $4,584.

cfortunato :

I am always sorry to hear about dealings with attorneys who provide advise that results in detriment to their clients.

cfortunato :

Typo - "advise" should be "advice".

Customer:

I suppose if we are unable to pay the $4,584 to get the bankruptcy discharge then the bankruptcy case will be dismissed. Then the mortgage company will foreclose and they will sell the property at a loss and obtain a deficiency judgment against us. Then my husband's wages will be garnished up to 25% of his pay. And, the 2nd mortgage company will do the same. And, all the other creditors - credit card companies - will get in line too. And, I believe they could seize our mobile home and sell it. So, paying the $4,584 would be the best way to go. I just don't understand how they think we have access to that much money. (My only income is Social Security Disability.)

cfortunato :

Is there a mortgage on the property in your husband's name?

cfortunato :

If not, which mortgage are you referring to?

Customer:

On our home - the property we are surrendering - the mortgage is in both of our names. We have a 2nd mortgage as well in both of our names. His mother's property does not have a mortgage on it.

cfortunato :

Thanks for the clarification.

cfortunato :

You are wrong about your understanding concerning the $4584.

cfortunato :

If you are not able to pay the $4584, your case will not be dismissed.

cfortunato :

The trustee will sell your husband's interest in the property, give $11975 to your husband, and give the rest to his creditors.

cfortunato :

Your husband was given the option to pay the $4584 in order to keep the property.

cfortunato :

Your case cannot be dismissed because you are not able to (or do not want to) pay the $4584.

Customer:

Ok, that makes sense. Our attorney did not tell us that. So, to be clear, the property would be sold to someone else and they would own the property at his mother's death but she would still retain a life interest no matter who the property was sold to? Would the trustee sell the property at a Master Commissioner's sale?

cfortunato :

Yes - your mother-in-law would retain her life estate.

cfortunato :

The trustee will probably list the property with a realtor.

Customer:

Do you think the trustee would accept payments on the $4,584 since we would like to keep the property in my husband's name and keep his agreement with her to sell upon her death and divide proceeds with his 3 siblings.

cfortunato :

Yes - I am sure the trustee will accept payments, as trustees tend to not want to go through the time and expense of selling the property.

cfortunato :

However, I am not sure how long the trustee will give for the payments to be made.

Customer:

Ok, that is encouraging. I suppose the case would remain undetermined until paid in full. We could probably pay it off in 5 months or less with help from my parents.

cfortunato :

He will certainly give at least 6 months, and probably longer because of the nature of the property - there is limited demand for property that is encumbered by a life estate.

cfortunato :

In this event, you will receive your discharge right away, but your case will remain open until the $4584 is paid in full.

cfortunato :

The $4584 and payments for it will not affect your discharge.

cfortunato :

It is the discharge that matters the most - not the case closing.

cfortunato :

Try to get as much time as possible to pay the $4584, so that it is not hard on you or on your mother-in-law.

Customer:

Ok, that sounds much better than the letter we received merely stating we must pay the full amount. We will discuss all this with our attorney. I really, really appreciate your advice. I feel much better about it all since you believe we will be able to make payments. We have been so upset since we received the letter over a week ago on a Friday afternoon. We immediately called our attorney and he said he would look into it and call us back the following Monday. He did not call and when we called back, his office said he was out for the week and scheduled an appointment for the following week. The law office I worked for would never tell treat a client the way we have been during the several months of our dealing with him.

cfortunato :

I am happy I was able to set your mind at ease, and am sorry your attorney is not more responsive.

cfortunato :

Unfortunately, many attorneys are not responsive.

Customer:

Thanks again very much for your time. I believe you have answered all of my questions. Have a great weekend.

cfortunato :

You're welcome! And you have a great rest-of- the weekend also!

cfortunato :

But before you leave, please don't forget to provide a positive rating for my help.

cfortunato :

Thank you!

cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience: Bankruptcy professor.
cfortunato and other Bankruptcy Law Specialists are ready to help you

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