Chapter 7 Bankruptcy Trustee Arturo Cisneros
Trustee Cisneros counsels debtor’s attorneys to take the full value of 704 exemptions when exempting a residence. In other words, if a debtor is entitled to a $75,000 exemption and there is only $60,000 in equity, Trustee Cisneros wants the full value of the exemption placed in schedule “C” and not just the amount needed to exempt the equity. In this case, the amount would be $75,000.
Fully exempting a residence—why would a trustee want an “full exemption” the real property?
By the Debtor’s attorney fully-exempting the real property, this helps the debtor, but seems to be counterintuitive to trustees interest.
AS mentioned before, we in the Inland Empire are in a Rising real estate market. Real Property values have risen by 10-20% in the last year. So the equity a house does not have at the time of filing of the case, may crept up such that in 6 months or a year later, the house may actually have equity.
The US Trustee audits each bankruptcy case and may question the business judgment of the interim trustee for not administering the asset for the benefit of the creditors. However if the house is fully exempted, then there is a cushion for the equity to be protected, and there may not be an inquiry by the US Trustee into the regular trustee’s work. In addition, if the full exemption is not taken, then the Trustee may have to get a formal appraisal on the real property and do extra work, that would not have to be done had the full exemption been taken.
Always take the full exemption on the 704’s homestead exemptions.
If you use Best Case software, be sure to over-ride the default setting.
This small adjustment will help the clients and the Trustee will thank you for helping him administer the case.