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socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 37470
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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We are the major debtor in a bankruptcy. We sued the debtors

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We are the major debtor in a bankruptcy. We sued the debtors for water diversion. There is a judgement against them for $58 thousand. They filed chapter seven and a homestead exemption. They claimed their house was worth $75 thousand dollars. It was worth more and we made an offer to buy the house for $175 thousand. At the last minute the trustee finds that there is $10 thousand due on one of the lots and is just paying that from the proceeds. Now that reduces the amount we would recover. He is not pursuing this debt and is letting the debtors walk away with their $120 thousand all their assets in excess of $75 thousand and all bills paid. The debtors did not report any of this on their filing. Is this misconduct? By the trustee,the debtor. Should we back out of the sale?
Submitted: 2 years ago.
Category: Bankruptcy Law
Expert:  socrateaser replied 2 years ago.

I assume from the text of your question that you meant, "We are the major creditor in a bankruptcy."

I. In which state jurisdiction is the property located?

2. If the trial of your water diversion was by jury, then was there a special verdict made determining whether or not the defendant's actions were intentional or negligent?

3. If the trial was by judge, without a jury was the court's findings and conclusions (or statement of decision) that your judgment against the debtors for water diversion was intentional or negligent?

4. If your answers to both #2 and #3 are "no," then does the judgment make any statement as to the defendant's conduct being intentional or negligent?

5. If your answers to either #2 or #3 are "yes," then was the finding of the defendant's conduct "intentional" or "negligent?"

Thanks in advance.
Customer: replied 2 years ago.

1. Yes, we are the major creditor and have a purchase agreement to purchase the debtor's home and property.

2. We are located in Cibola County, New Mexico

3. Our case was heard by a Special Master who found in our favor, upheld by the 13th district court judge and affirmed by the New Mexico Appeals Court.

4. The Special Master found that actions of Defendants constituted trespass by water. He never used the words intent or negligent. However he cited several incidents of Defendant's behavior resulting in trespass by water (e.g., placing rocks along the fence, garage partially built in the road right of way, a diversionary rock wall built to devert water, etc.)


The trustee did not discover other parties on the debtor's deeds until after we made the offer to purchase. Therefore, we believe the Debtors purgered themselves when they signed the Chapter 7 Petition certifying it true and correct when there were other parties on their deeds, one of which submitted a claim for $9,500.

There is also another creditor who submitted a $500 secure claim that was not listed in the Petition.

Further, the debtor significantly underestimated the value of tools and other assets (e.g., $8000 vehicle, $3000 ATV, tools 30K, 3 other vehicles, etc.). Debtors have moved assets to 4 locations. The trustee said he would not pursue them stating all of it resembled furniture that is unlimited in Chapter 7.


Thank you for your questions. I hope this helps.

Expert:  socrateaser replied 2 years ago.
Okay, thanks.

I don't know what the status of the Chapter 7 is, however, your bankruptcy attorney could file an "adversary proceeding" with the bankruptcy court, provide a copy of the judgment to the bankruptcy court, and assert that the judgment against the debtor is for a willful and malicious injury -- which is nondischargeable under Bankr. Code 523(a)(6).

The "malicious" component of Section 523(a)(6) "requires that an intentional act be `performed without justification or excuse.'" Tso v. Nevarez (In re Nevarez), 415 B.R. 540, 544 (Bankr.D.N.M. 2009).

If you prevail, then the debt is nondischargeable, survives bankruptcy and you can continue to pursue the debtor for your money.

Hope this helps.
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 37470
Experience: Attorney and Real Estate Broker -- Retired (mostly)
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