Rolling the Dice with Chapter 7 Bankruptcy
One of the scariest things about Chapter 7 for many debtors is the fact that a trustee may choose to put your house on the market to see if she can recover money for your creditors. As a general rule in Georgia, if you have less than $21,500 equity in your house and you are single or if you have less than $43,000 equity and you are married, the trustee is not going to waste her time trying to sell your house.
However, who determines the value of your house? The first place a Chapter 7 trustee may look is the tax assessors value of your house. A second source of valuation would be for her to have her real estate expert conduct a drive by appraisal of your house to see if they agree with your valuation. If they disagree, they have the right market your house and test the waters.
In this current depressed real estate market, Chapter 7 trustees rarely try to market anyone’s house.
About seven years ago, I had a bankruptcy client from Dalton, Georgia whose property had significantly declined in value since she purchased it. After she moved into the house, the local power company installed high power electrical lines right next to her home. Then, to make matters worse, the local gas company installed an above ground gas line right along it as well. This new gas line was right next to her master bathroom! What kind of person in Dalton would ever want to purchase a house like this?
Even with all these problems, the Chapter 7 trustee wanted test the waters by putting the property on the market because it was in a nice area of Dalton. In this case, I tried to convince the client to let the trustee market the property because I believed that no one in their right mind would ever buy it for a price that was higher than she paid.
This client did not want to risk her home being bought out from under her. As a result, we ended up converting the case to Chapter 13 and paying the unsecured creditors the same amount of money that they would have received if the trustee had obtained his unrealistic sales price.
If you ever think your home might sell for more than what you owe plus the exemption amount you are allowed under Georgia law, don’t file Chapter 7 unless you are willing to give the trustee a chance to sell it.