Tag Archives: trustee

Can I Keep “Cash for Keys” Money I Receive After My Bankruptcy Is Over?

Cash for KeysASK LEON 

Bankruptcy expert Leon Bayer answers real-life questions. 

Dear Leon, 

My husband and I just got a Chapter 7 discharge. We were previously in foreclosure and walked away from our home.  

Before we left, our mortgage lender offered us a series of payments payable in two week increments if we moved out voluntarily. The longer we stayed, the less we would get. We did a final walk through with the bank representative (we were supposed to leave the house in “broom clean” condition) and then he handed us the final check. The total amount the lender paid us was $8,310. 

Here’s my question: Can we keep this money or do we have to give it to the bankruptcy court? 



Dear Crystal,

I have great news for you. You can keep the money you received from the lender’s “cash for keys” deal and don’t have to report it to the bankruptcy trustee, if the following are both true:

  • your house was correctly listed in your bankruptcy case, and
  • the court made an order “closing” your bankruptcy case.

Cash for Keys

The deal the lender offered to you is referred to as “cash for keys.” In a cash for keys deal, the lender offers money to induce you to voluntarily leave the property. Cash for keys deals are common in foreclosures, evictions, and deeds in lieu of foreclosure.

In a typical cash for keys deal, the lender sets a deadline for you to be out. You don’t get the money until you vacate. “Broom clean” means you have tidied up the place, didn’t damage anything, and didn’t leave a pile of junk behind. There is typically a final inspection where you hand in the keys and the lender hands you a check.

Assets in Your Possession When Your Bankruptcy Case Closes Are Yours to Keep

The filing of a bankruptcy case creates an estate composed of everything you own. You can exempt certain assets from the bankruptcy estate – if assets are exempt you can keep them. After you get a bankruptcy discharge the court normally issues an order closing your case. The law says that upon closing the case, all assets still in your possession that you listed in the bankruptcy (whether exempt or not), will revert back to you.

If you correctly listed your home in the bankruptcy and the court issued and order closing your case, then you had every right to enter into the cash for keys agreement. The resulting money is yours to keep and you don’t have to report it to the bankruptcy trustee.

Leon Bayer is a Los Angeles bankruptcy attorney.  He is a partner at Bayer, Wishman & Leotta, a California law firm specializing in bankruptcy.  The opinions and advice in this blog post are from Mr. Bayer alone, and should not be attributed to Nolo.  By answering a question on this blog, Mr. Bayer does not become your lawyer.

Utah and Washington Say ReconTrust Cannot Conduct Foreclosures

Generally, states have had a hands-off policy when it comes to the interplay between federal and state law in the area of foreclosure. However, certain states are now saying no to national banks that try to sidestep state law when conducting nonjudicial foreclosures.

The Utah Lawsuit 

In a recent case, Federal National Mortgage Association v. Sundquist, the Utah Supreme Court ruled that a national bank (ReconTrust, which is a wholly-owned subsidiary of Bank of America) did not have the authority to conduct foreclosures in the state because it did not meet the qualifications of a foreclosure trustee under Utah law.

Utah law says that only Utah attorneys and title companies may act as foreclosure trustees. Even though it did not qualify as either of these, ReconTrust conducted foreclosures in Utah anyway. It said that it could do so because it was a national bank and the National Banking Act preempted state law.

The Utah Supreme Court disagreed and stated that federal law does not preempt the relevant Utah statutes. The result?  ReconTrust cannot act as a foreclosure trustee in the state.

Learn more in Nolo’s article National Bank Cannot Conduct Nonjudicial Foreclosures in Utah.

The Attorney General Lawsuit in Washington

In 2012, the Washington State Attorney General sued ReconTrust for failing to meet the obligations of a foreclosure trustee under the state’s Deed of Trust Act. ReconTrust settled the case and has since ceased operating as a foreclosure trustee in the state of Washington.

Learn more in Nolo’s article National Bank Cannot Conduct Nonjudicial Foreclosures in Washington.

Will More States Follow Utah and Washington’s Example? 

Utah and Washington are not the only states that impose certain requirements and restrictions on foreclosure trustees. Many other states have similar rules. Given the results in Washington and Utah and, it’s likely that more states will challenge national banks who conduct foreclosures when they haven’t met state criteria to do so.

What Does This Mean for You?

What does this mean for you? If you are in foreclosure and the foreclosing trustee has not complied with state law, you may be able to delay the sale of your home.

Learn more in Nolo’s article State Law Determines Who Can Conduct Nonjudicial Foreclosure.

by Guest Blogger & Nolo Contributing Editor Amy Loftsgordon


Negotiating With the Bankruptcy Trustee to Buy Back Nonexempt Cars


Bankruptcy expert Leon Bayer answers real-life questions.

Dear Leon,

Help! I filed Chapter 7 bankruptcy, and I have run into big trouble with the bankruptcy trustee. I have three cars (all nonexempt) that I want to keep if I can reach a fair deal to buy them back from the trustee. I have a 1986 Toyota pickup (hunk of junk), 1991 motor home (hunk of junk,) and my main vehicle which is a 2006 Toyota RAV 4.  The trustee and I agree that a fair buyback amount for the RAV 4 is $7,000. But the trustee insists I must also buy back the two other vehicles in an all or nothing deal, for $21,000. Can the trustee insist that I do this in order to get my RAV 4 back? Is there anything I can do?  

— Stanley

Dear Stanley,

There are things you can do. But first you should understand the bankruptcy trustee’s role and obligations. First, the bankruptcy trustee has the discretion to use “ordinary business judgment” when it comes to selling assets. This allows a trustee to decide the best way to sell a group of assets — individually or as one lot. A trustee also has a duty to maximize the money and assets in your bankruptcy estate by selling nonexempt assets for the best price possible.  (To learn how Chapter 7 bankruptcy works, the difference between exempt and nonexempt property, and more, see Nolo’s Chapter 7 Bankruptcy area.)

A trustee can’t legally give anybody a ”sweetheart deal.” A trustee also has the discretion to abandon any nonexempt assets (which mean they go back to the debtor) where such assets have “inconsequential value.”

Here, the trustee may feel that the value to the estate is maximized by selling everything in one single lot, the same way delinquent storage lots are sold to the public, ”winner take all.”

However, the trustee may believe your “junk” cars have no real value, and is playing poker with you to get a better price. You may have some good cards of your own to play.

Negotiate With the Trustee

You can make a counteroffer to the trustee.  For example, in this situation I might tell the trustee that my client will not pay more than the $7000 already offered; if the trustee doesn’t accept this offer within 24 hours, it will drop to $6000; and if not accepted at all, the trustee can come pick up the whole kit and caboodle immediately.

If the trustee is bluffing to squeeze more money out of you, this might force the trustee’s hand.

Bid at the Auction

If the trustee proceeds to offer the vehicles for sale, it is typical that the vehicles will be towed away to an auction yard.

Guess what? You are entitled to bid at the auction. You can attend the auction with your $7000, and bid under the same bidding rules as anyone else.

And you might even be able to buy the RAV 4 for far less than the $7,000 you originally offered. Here’s why. Bidders at these auctions typically inspect the items, but are not allowed to take a test drive and aren’t even allowed to start the engines. Items are sold ”as is.” This works to your advantage because other buyers can’t really be sure of what they might be buying.

You alone know the actual mechanical condition of each vehicle. That gives you a tremendous bidding advantage. At the price point where strangers will stop bidding, you may keep bidding confidently and win the auction because you know what you are really getting. At the end of the day, you may come out a very big winner, and the trustee may learn not to be so darn cocky.

Best of luck to you, Stanley!

Guest blogger Leon Bayer practices bankruptcy law in Los Angeles, California.  He is a partner at Bayer, Wishman & Leotta.  

The opinions and advice in this blog post are from Mr. Bayer alone, and should not be attributed to Nolo.  By answering a question on this blog, Mr. Bayer does not become your lawyer.