Bankruptcy Questions Answered

Can Trustee Indirectly Attack Homestead Protection By Amending A Trust Agreement

I saw an interesting post by south Florida banrkuptcy attorney Jordan Bublick. I refer many people living in sourth Florida to Mr. Bublick for bankruptcy. The post,  Homestead Held in Revocable Trust, discusses a court decision involing a Chapter 7 debtor who owned his primary residence in a living trust. Many courts in Florida previously held that a home owned by the debtor's living trust qualifies for homestead exemption in bankruptcy. Mr. Bublick reports that thisj judge implied that a Chapter 7 trustee can take over the debtor's rights to amend his living trust and by amending the trust agreement possibly strip homestead protection.

When a debtor files Chapter 7 the Chapter 7 trustee takes over all of the debtor's legal rights and powers. Most living trust agreement reserve to the debtor the right to take property out of trust and the right to amend the trust agreement. A court could find that the debtor's right to amend the trust is not protected by homestead exemptions even if the result of the amendment is to diminish the debtor's homestead rights. In my own opinion, I think this argument would fail because courts very liberally construe homestead protection for the benefit of a debtor's family dependents. In any event, Mr. Bublick makes an interesting point.