I have previously discussed how the trustees do not like the $4,000 wildcard personal property exemption when the debtor owns a Florida homestead but elects not to claim it as homestead in the bankruptcy. Trustees do not want to lose out on the collection of funds on personal property while the debtor is effectively still keeping the home that is undersecured. The home is not really sellable so there would be no asset for the bankruptcy estate.

However, in In re Luban, 2011 WL 4344548, 2011 Bankr Lexis 3509, (Case NO. 11-13633)(Sept 15, 2011), the trustee tried to sell the home to, as Judge Cristol described, a vulture investor, so that the debtor would then have to pay rent to the investor. The debtor was still making payments on the first and second mortgage. Judge Cristol found that the trustee’s conduct selling to a vulture investor was “misguided and wholly inappropriate”. The trustee, simply to obtain funds that would primarily pay for the trustee and professionals, would cause mortgage payments to go into default and could lead to the debtor and disabled child losing their home.

However, debtors should still be careful on relying too much on this decision. Judge Cristol found that the trustee’s fiduciary duty applies to all creditors including first and second mortgages. The debtor had been paying the mortgages. In many cases, the debtor is in default and perhaps even in foreclosure. Perhaps there would be a different result in such case. A debtor might still be trying to modify the mortgages, but the fact remains that there is still a risk if the debtor is trying to retain the home and exercise the wildcard personal property exemption. It is imperative to consult with your bankruptcy attorney