《楊清泉律師專欄》Inactive open bankruptcy case bad for homestead exemption (PART I)

What a strange and incomprehensible title for a bankruptcy article? What is to be discussed is a situation in a Chapter 7 bankruptcy where the case remains open for a long time even though discharge has been entered and debtor has a residence with equity that he has claimed as exempt. So, what is the problem? The problem is that if the case remains open while nothing is going on in the case, debtor’s residence may be appreciating in market value which causes the equity to go over the exemption amount. To illustrate, let’s assume that you filed a chapter 7 case six months ago. In your bankruptcy petition, you declared that the fair market value of your residence at the time you filed your bankruptcy was $400,000. On schedule A and D, you declared further that there was one mortgage on the residence with a balance of $300,000. Thus, your equity in your home six months ago was $100,000. You claimed a homestead exemption using 704.730 for $100,000, the entire equity of your home. No problem. The chapter 7 trustee does not object to your homestead exemption within 30 days of the 341-A hearing, thus losing his right to thereafter object to your claim of exemption forever. No creditors object within 60 days of the 341-A hearing so there are no adversarial complaints. The U.S. Trustee does not file a motion to dismiss your case. Eventually, the court enters an order discharging all your debts 6 months after the 341-A hearing. There is absolutely no activity in your case after discharge but for some reason the chapter 7 trustee has not closed your case. Your case is now an INACTIVE OPEN BANKRUPTCY CASE.

《楊清泉律師專欄》INACTIVE OPEN BANKRUPTCY CASE BAD FOR HOMESTEAD EXEMPTION(PART II)