I was recently been discharged from chapter 7 bankruptcy. However, there is non exempt property, a vacation house, which we have not been able to sell. The bankruptcy trustee listed the home on M.L.S. for 6 months and there were no offers and only a couple of showings. The bankruptcy trustee did not relist the property but instead said he would file a notice of appointment to cloud the title or an offer can be made to buy debtors portion. I should note that my wife did not file bankruptcy and is co-owner (not on mortgage, just deed) with trustee. My question is why would trustee want to cloud the title and can he?. It seems contrary to what is supposed to happen if a property is not able to sell. Shouldn’t he abandon the property? I am also currently several months in arrears in mortgage payments and would like to sell or modify, but having a clouded title seems to leave this open ended indefinitely?
Your situation is somewhat complex, but I guess my first question is why isn’t your bankruptcy attorney helping you? Generally, you probably shouldn’t be in this position in the first place. In any event, let’s address the basic issue; if an asset is non-exempt, then it is forever part of the bankruptcy estate and the trustee can keep a bankruptcy case open indefinitely (theoretically). In practice, the bankruptcy judge will probably inquire after about 4-5 years why the case hasn’t closed.
The real question, does the home have equity? I am guessing your bankruptcy attorney listed the value of the property as more than the amount owed on the mortgage, which is potentially mistake number 1. Granted, if the home is really worth more than is owed, then list the value accordingly; but if the matter is open to debate (which it almost always is in this real estate market), then you never place a value of non-exempt assets on the bankruptcy petition as more than zero. Reason being, you want to put as many legal barriers as possible between the trustee and the trustee’s right to sell the asset. Doing so would have allowed a judge to decide the value of the property and whether the bankruptcy estate had any claim.
Next question, what to do now? When dealing with non-exempt assets, you always need to be prepared to call the trustee’s bluff. Keep in mind, for a trustee to sell a piece of real estate the trustee must potentially become responsible for the mortgage payments. So, if you are willing to stop making mortgage payments (which you did) and allow the property to foreclose, you can motivate a more favorable buyout settlement with the bankruptcy trustee. If the home forecloses, the trustee gets nothing. Granted, you lose the home, but at the same time, you will lose the home if the trustee sells it. What have you lost?
Consider your overall financial circumstances and future? First off, given that the home is a vacation home, your odds of modifying a mortgage is practically nil, so that plan is a non-starter. As for selling it, if no one is buying, you couldn’t sell it, the trustee has not sold it, what are you trying to hold on too?