Trustee Blog

Trustee is entitled to increase in Real Property Value

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Increase in value of real estate goes to trustee

Chapter 7 Riverside Trustee Stephen Speier

Mr. Speier, by virtue of being a Bankruptcy Trustee and a real estate agent sees many cases in which the value of the house is in question.

 

In a market, like we are in now where house prices are increasing, the value of real property may be different from the date of filing of the bankruptcy petition until a few months later. (In the calendar year 2013  over the calendar year 2012, the Inland Empire house prices increased from 10 to 15%.) There is a question as to who gets the increase in the equity of the real property. Does the debtor get to keep the equity increases after the filing of the case or does that increase in value belong to the bankruptcy estate and the trustee over and above of the exemption amount?

 

Trustee gets the increase in value of real property.

 

The Bankruptcy case call “Gebhart” entitled the bankruptcy trustee to the post-petition increase in value of property that at the time of filing was fully exempt, a bankruptcy trustee may be more prone to keep cases open longer than necessary in the hope of acquiring additional assets for the benefit of creditors. While the Ninth Circuit noted that “[a] trustee has a duty under 11 U.S.C. § 704(a)(1) to administer the case quickly and expeditiously,” in “Gebhart” the bankruptcy cases had remained open for two and three years subsequent to the debtors receiving discharge of their debts.

Practice Pointer:

Take the full amount of any homestead exemption available. If the debtor is entitled to $100,000 under CCP704, take the full $100,000 even if the Best Case software defaults to a lesser equity amount. So Over-exempt the property, since the trustee is entitled to the increase in the equity of the property.

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