Brian D. Lerner Immigration Attorney & Deportation Lawyer Blog

Where different debtors filed for Chapter 7 bankruptcy at a time when the value of the equity in their homes was less than the amount they were eligible to claim, respectively, under the federal or Arizona homestead exemptions, leaving no value in the homestead properties that could be claimed by the bankruptcy estate, but the value of the properties subsequently increased before the cases were closed so that the debtors had equity in excess of their exemptions, the trustee could force a sale of the properties in order to recover the excess equity because the exemptions allowed the debtors to claim an interest in dollar amounts, not specific properties. The fact that the value of the claimed exemption plus encumbrances equaled market value at the time of filing did not remove the entire asset from the estate. Assuming estoppel is available as a remedy in bankruptcy proceedings, debtor could not estop trustee from selling debtor’s home where debtor made no showing that the trustee–who left the case open for years–intended for the debtor to act as if he would be able to retain the property permanently; that the debtor had a right to believe the trustee, by her inaction, intended the debtor to believe she had released all rights to the homestead; or that the debtor was ignorant of the true facts. Any duty to police misconduct by the trustee fell upon the U.S. Trustee in debtor’s district, and abandonment of an asset is not a remedy for a trustee’s alleged misconduct.

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