Why A Bankruptcy Trustee May Abandon A Nonexempt Property
A bankruptcy trustee is supposed to sell all your nonexempt properties and use the proceeds to settle your debts. However, there are situations where the trustee can abandon a nonexempt property. Here are three examples of such situations:
Selling the Property Is Extremely Difficult
The trustee can abandon the property if no one wants to buy it. This is because the trustee has no real use for the actual property; the trustee is only interested in the money the property can fetch. For example, the trustee cannot take your second home and give it to a creditor; they can only sell the property and use the proceeds to settle your debts. Therefore, the trustee can easily abandon your property if nobody is willing to buy it.
Consider an example where you have a vacation home that was constructed with asbestos (a cancerous material), and the trustee can't find a buyer for it. In such a case, the trustee may abandon the property and let you deal with it as you please.
There Is a Huge Lien on the Property
A lien is a legal claim that a third party has placed on your property. For example, if you lose an injury case and don't have insurance to pay the plaintiff's judgment, they may place a lien on your assets to recover their money. The government can also place a lien on your property if you have a huge backlog of unpaid taxes. The bankruptcy trustee may abandon a property with a lien if the value of the property is less than the lien on it; in such a case, the trustee won't get anything from the sale of the property.
The Property's Sale Can't Yield Anything for the Creditors
The purpose of selling a property is to get some money for the creditors. Therefore, if the sale of the property can't yield something for the creditors, then there is no use going ahead of the sale. Don't forget that you don't always get the full price of a property after its sale.
For example, when you sell a house, there are taxes to take care of, sales commission, listing fees, and many other charges. The trustee also has to be paid from the proceeds of the sales, and their commission depends on the value of the property. If a property isn't valuable, it's possible for all these fees and commissions to reduce its value to a point where the creditors remain with a negligible amount.
In most cases, the trustee realize if a property isn't worth selling. However, you can file for a property's abandonment if the trustee is claiming it, but you are convinced the property won't yield anything for the creditors. For more information, contact bankruptcy lawyer at a law firm such as Dunbar & Dunbar.