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28 REIMAGINING ASSET DISPOSITION IN CHAPTER 7 BANKRUPTCIES By Ed Delgado It is perhaps the most stressful moment that a borrower can experience: the realiza- tion that they are no longer able to pay their outstanding debts and must file for bankruptcy protection. Since 2013, more than 4 million non-business bankruptcies have been filed in the United States. e circumstances of ap- proximately, two-thirds of those cases required that the estate be administered by the trustee under the rules governed by Chapter 7 of the United States Bankruptcy Code, which calls for (among other things) liquidation of the per- son's non-exempt assets. Under the rules, once the Debtor (in other contexts referred to as the borrower) files for bankruptcy all collection activities (including foreclosure of mortgaged properties) must cease. THE PROBLEM Unsurprisingly, approximately 25 per- cent of Chapter 7 bankruptcy estates include mortgaged real estate assets that are severely delinquent (more than 120 days) on their home mortgage payments at the time of filing. Despite their delinquency, many times the disposition of these properties does not take place within the administration of the bank- ruptcy estate because the property qualifies for the homestead exemption under the rules and the debtor/borrower has a desire to attempt to stay in the home. A borrower that makes a qualified claim of the homestead exemption removes the mortgage form the bankruptcy estate, leaving the property exposed to the continued risk of foreclosure. Unfortunately, despite the borrower's best intentions, their income level is often insufficient to sustain the required mortgage payments on the home and the result is simply a delay of the inevitable. Further, if a foreclosure has been initiated prior to the filing of the bankruptcy, many mortgagees are able to successfully petition the bankruptcy court to remove the property from the estate. One of the primary motivations in removing the mortgage is the reality that the disposition of the property within the confines of the bankruptcy requires the trustee to bring value to the estate and by requiring secured