Wrong Answer at 341 Meeting May Cost You Your Home
The 341 meeting of creditors in bankruptcy cases generally a simple meeting. In the northern part of the Eastern District of Pennsylvania, which covers Lehigh and Northampton County, one of the most dangerous questions to be unprepared for is “What is the value of your home?”
It seems like it should be an easy question, however because of the exemeptions in Chapter 13 bankruptcy, it is important to have an accurate valuation of your home and be able to justify it. This is also where preparation can prevent disaster.
I have a client who refused to prepare for the 341 meeting of creditors. Because they refused this 15-20 minute preparation phone call with me, my client may well lose his home because he gave the wrong answer to the property valuation question. It stinks, because the property valuation question is a subjective question, and therefore there is no correct answer.
The trustee asked “If you put your house on the market today, what could you sell it for?”
I took a Zillow valuation of the property and valued it at $123,000. I used another online valuation of the property, and it was valued at $127,000. I even pulled comparable sales of property and they were in the $100,000 to $120,000 range.
So how did my client answer the trustee when asked what the home could sell for? $170,000!
I’m sorry, even if a row house in Easton is built like the Taj Mahal, it isn’t selling for $170,000 in this market.
This could have been prevented if the client had bothered to respond to my phone calls or my letters. After filing this client was unable to be reached. He refused to take my calls. When I finally got him on the phone, he refused to prepare for the 341 meeting.
His answer to me was “Well I’ll tell the truth.” Telling the truth is good, knowing the truth is better, and the reality is that every homeowner would like to believe that their house is worth more than it actually is.
Because my client gabe the trustee this answer, the trustee is now working with $170,000 as the value of the house, and since he only owes $90,000 on it, he has $60,000 in equity (less the exemptions) that he needs to pay to the trustee. That translates to about a $1300 per month chapter 13 payment when his payment should not really be more than $400 per month.
I believe that this chapter 13 plan will fail, and if it does he will be the first 2009 client I have had not be able to work with a Chapter 13 plan, and that is because we are now forced to work outside the parameters that I filed it in. The Chapter 13 plan was based on the property value of $120,000, which was a valuation I took before filing. I used the full real estate exemption and the wild card exemption and rather than $60,000 in equity that needed to be paid to the trustee, the plan called for $4,000 in equity.
The bottom line is this, my client had every opportunity to prepare for the 341 meeting and simply chose not to. When your attorney calls and wants to prepare you for a hearing, the love of all that is good please take their call and spend the 30 or 45 minutes necessary to prepare for it, if not it might cost you your home.
To fix this, my client is probably going to have to pursue mortgage modification, which in his case may not be so bad, but once you start down the Chapter 13 Bankruptcy road, it is in your best interest to finish. The wrong answer at the 341 meeting may indeed cost my client his home, and the only person responsible for that is him.
If you’re having debt troubles or behind on your mortgage and you don’t want to cooperate with your attorney, please don’t call me, there are plenty of other people who want and need my help and are going to cooperate with what we need to do. However if you’re part of the 99% of people who will listen to their bankruptcy attorney, and you’re ready to find your way out of the debt maze, call me at 484-661-2891 or e-mail me at jim@padebt911.com for your free, no obligation consultation.
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