6th Circuit: Chapter 7 Trustee Could Not Forcefully Evict Debtors from Homestead by Tendering Payment Equal to the Value of their Exemption

6th Circuit: Chapter 7 Trustee Could Not Forcefully Evict Debtors from Homestead by Tendering Payment Equal to the Value of their Exemption

The Debtors encountered financial distress during the “Great Recession” that began in 2008. Unable to pay their debts, they filed for Chapter 7 bankruptcy seven years later. The bankruptcy trustee of the Debtors’ estate, sought to evict the Detbors from their residence in order to make the property easier to sell for the benefit of their creditors. In his motion, the trustee  stated that he “desire[d] to sell the property, but c[ould] not do so with the Debtors still living there.” He further asserted that the value of the residence was “close to $200,000,” which would have made its sale considerably more valuable to the Debtors’ unsecured creditors than if the property was worth only $108,000 as claimed by the Debtors.In response, the Debtors moved to compel the trustee to abandon the property based on their contention that the fair market value of the residence, less the balance due on the mortgage loan, left no net equity for the estate. The bankruptcy court agreed that the net value of the residence was inconsequential from the viewpoint of the unsecured creditors. It therefore granted the motion to compel abandonment. The district court concurred. The Debtors appealed to the Sixth Circuit.

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