Legal Question in Bankruptcy in North Carolina

This is a question that deals with both the exemption schedules and the authority of the trustee. When you file a petition in bankruptcy, you are required to list all of your assets and all of your debt. This includes interest in real estate. Thus, on the date you file there is a snapshot of your financial circumstance. You would then show that you own a 1/3 interest in real estate which is subject, of course, to the debt of a creditor who has a valid lien. Accordingly, the value of your interest in your home is 1/3 of the equity (fair market value less debt). You have the right to exempt that equity in an amount up to $18,500.00. The amount of exemption is doubled if you are 65 or older and are a surviving joint owner. If you have more than the amount you can exempt, the trustee has the right to administer the property. He can sell the entire asset, pay off the liens and distribute the funds as follows: 1/3 to first son, 1/3 to the second son and 1/3 less your exemption to you. Usually, if there is a lien, there is not enough net equity of the debtor to make it worth while for the trustee. If there is sufficient equity, then the options are to borrow the amount necessary to pay the trustee the excess net equity and retain the house. You will have to negotiate the fees and costs he would incur in a sale, such as realtor fees. The second option is to convert to a Chapter 13, wherein you pay into a plan, your net disposable income over a period of 3 to 5 years an amount equal to the excess equity. You have a right to do this. The third option is to dismiss the bankruptcy, which requires the consent of the court.

The trustee cannot remove the son's names from the title unless he files an Adversary Proceeding and can demonstrate that the debtor transferred the interests to the son(s) for less than fair value (such as a gift) within 2 years of the filing or during a longer period of time if the debtor was insolvent and did so with the intent to defraud creditors.

Thus the answer is yes, the trustee has power to sell and power to set aside a deed, but only under certain circumstances. You should make sure you are represented during this stage and keep the lines of communication open with the trustee. Usually, the trustee will opt for the short way out if he has a good case and will walk away from a bad case. It sounds like the Meeting of Creditors was continued to allow him to review additional documents and investigate values to determine if he has a case and if so, how strong it is.

If the trustee can demonstrate actual fraud in the disclosure of assets, liabilities, and transfers, he could not only set aside the deed and sell the real estate but also prevent discharge. In an egregious case, he could refer a case for prosecution.