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August 2006 - by John A. Palumbo
  
The Top 10 Assets Most Likely to be Abandoned (but shouldn’t be)

 
While the temptation to abandon those asset anomalies you have in various cases may be great, think twice before taking action because you could actually be abandoning real value for the estate if you do. You just need to think a little more creatively on how to handle these unique assets so they’ll add to the estate’s bottom line.

The fallout of the Bankruptcy Reform Act (BRA) has already been felt in all parts of the country as a decrease in number of new asset cases being filed. So that’s why, as trustees, you may want to take a closer look at those asset cases filed during the pre-BRA period, and dig deeper to recover the asset value that is there for the taking - if you know how to take it.

Here are the top 10 assets trustees are most likely to abandon because of the associated difficulties they can present when trying to administer them. They’re not like selling a Rolex to a watch dealer. These assets are a little more complex and require more tenacity on the part of the trustee. But they’re worth the second look.

1. Life Estates

In these cases, the debtor owns the property only during his or her lifetime. When the debtor dies, the property is transferred to his or her children or grandchildren. While this type of asset is not readily liquidated, it is marketable, if you have the patience and a good private investor in your hip pocket.

2. Criminal Restitutions

This is one of the more tricky assets to turn into cash. With no collateral, there’s no safety net if the person who owes this money to the debtor fails to pay it back. However, it shouldn’t be ignored because while restitution payments can be paid out for years, they can increase the bankruptcy estate in the long run if handled properly. Rather than holding the estate open for all those years, you should sell the income stream quickly even though it probably won’t net a lot, but that’s okay. Remember, it’s secured by a “criminal,” so any value is better than the promise to pay!

3. Divorce Decree Liens

Here’s another odd asset because it usually occurs when the ex-spouse owes the debtor money based on a trigger date in the future, for example when a child turns 18 years old, a spouse remarries, or when the property is sold at a certain date. This asset requires you to look a little harder to find the right investor to buy it because your local real estate agent won’t move it for you, that’s for sure.

4. Fractional Interest

This type of asset usually refers to a real estate property and the debtor owns a part of it, like one-third or one-half, for example. It can be a little more difficult asset to sell, but it can be sold. The debtor or family members are the most likely buyer candidates; however they often bluff the trustee into abandoning the asset. Don’t be full. The more solid potential buyers are high-risk investors and, although the group is small in number, they can help you increase the bankruptcy estate in a big way.

5. Survivorship Interest

This type of transfer is not utilized in all states, and because it depends on one party outliving the other, it’s more of a gamble when it comes to getting value from it. Again, by looking to the private, high-risk investor, you can realize a value from this otherwise abandoned asset.

6. Remainder Interest

This would be considered the opposite of a life estate as the property will be lived in by a relative or other person and only goes to the debtor once the life tenant dies. By knowing the age and health of the life tenant, you can make a better determination of the asset’s value, but it’s difficult to get this type of information. Your best bet is to involve a private investor who has more tenacity and deeper pockets than most so you can “pocket” some value for the estate.

7. Time Shares

This seems to be a prerequisite asset to own when filing for bankruptcy. While small, there is still a market available to help you liquidate this asset. To learn more about time shares and bankruptcy, read my free report, “How to Triumph over Time Shares” by logging on to www.Chapter7assets.com/timeshares. It will give you tips on how to find value in these risky investments.

8. Life Insurance Policies 

The value of these assets are not easily determined, however, in 50% of cases, there is something to sell, such as the cash value of the policy, so it’s worth it to investigate before abandoning this asset. Some investors find the best course to take is to take over the policy and premium payments and the long-term risk that goes with it. Taking the investor up on his offer can help you accomplish your goal of settling your bankruptcy estate.

9. Over-Debited Real Estate

While it may seem a no-brainer to abandon this asset, in today’s real estate market with double-digit appreciation growth year after year, don’t be too hasty to throw it aside. Many sophisticated investors can turn this seemingly hopeless situation into a small asset distribution for the estate by knowing how to negotiate with the lenders and mitigate loans.

10. Limited Liability Corp. (LLC) Interest

This asset is perhaps the most mysterious of all since you can’t always get its true value, but don’t let it escape your radar screen. Look into the books, its assets, and expenses. While, on the surface, it may not appear to be a truly viable business, often it only takes the interest of one bidder for a bidding war to erupt. And that’s the kind of war the estate can only benefit from.



While these assets can be considered less than desirable, remember that many times rewards only come to those willing to take the time to find the less-than-obvious solution. Although none of these assets is likely to be very lucrative, take the time to investigate the possible reward. If you’re willing to think outside the box, you may just find that your previously worthless assets that you have no choice but to abandon have turned into a small windfall that will make your asset cases grow.

John Palumbo is the principal of Bankruptcy Asset Management, based in Jacksonville, FL, and one of the nation’s leading authorities on the evaluation and liquidation of unusual assets in bankruptcy. His uncanny ability to recognize value in items oftentimes deemed unworthy has transformed his asset analysis into an extraordinary art form. To speak with John personally, contact him at 904-641-2043 or PalumboJ@aol.com.

Source: http://www.chapter7assets.com/dontgetrid.pdf