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61 provide and rarely is the focus on the benefits to the debtors and creditors. is perceived scrutiny that comes with the sale of an asset often discourages a Trustee from completing their fiduciary duty. COURT DISTRICTS Bankruptcy law is federal law; however, it is governed by approximately 94 court districts across the country and differs on its application from district to district. Bankruptcy law clearly defines how real estate assets are sold in section 11 U.S.C. § 363. e law goes into great detail for over- encumbered assets, giving the trustee several options depending on the circumstances and the consent of all stakeholders. Today, there are several districts that "do not allow" the sale of "short sales" (over-encumbered assets) either by the UST's office or the judge. e reasons that short sales are not allowed in certain districts range from differing applications of the law on the transactions. e most common misconceptions are that these transactions are fraudulent and don't help the debtor, short sales never help the creditor, or that these transactions will only benefit paying professionals and the trustees. ese misconceptions by the courts and the trustees are at the heart of the issue. In a proper 11 U.S.C. § 363 transaction, none of these generalizations are founded. is makes you question if the law allows debtors and creditors their rights under section 11 U.S.C. § 363, why are they denied court approval for the sale if they abide by the rules governed by the law? GOOD QUESTION? Where this doesn't make much sense is when a debtor elects to surrender their property to be sold and the Secured Creditor (mortgage servicer) has agreed to accept a short payoff, and they agree to pay the trustee a carve-out fee to administer the sale, creating meaningful value to the estate and unsecured creditors. is follows Bankruptcy Code, yet the UST or judge denies the sale. Doesn't that violate their rights? e law is also clear that when selling fully encumbered property, the trustee must administer the sale to avoid a diminution of funds otherwise available for unsecured creditors, 11 U.S.C. § 704, 28 U.S.C. § 586. e trustee has a fiduciary duty to ensure the law is followed and should sell an asset to settle the debt to protect and preserve funds available to the unsecured creditors. However, this rarely ever happens as the system is broken. Bridging the gap between mortgage servicers, their counsel, and trustees results in a far better outcome for all parties involved. So, how do we fix the process to ensure debtors and creditors can exercise their rights and utilize bankruptcy for the benefits it is intended to provide? It seems this is never a topic for discussion and why most creditors consider bankruptcy as a "black hole." It might be time to reassess and improve the process. Some potential solutions might be: 1. Modifying the bankruptcy trustee's compensation to ensure the requirements in bankruptcy are fulfilled. 2. Having a different focus from governing authorities to ensure the law is followed and not focused only on fees and compensation. 3. Ensuring that when all parties consent and are within the law, they have the legal right to proceed with a sale. Bankruptcy is one of our legal rights and one of the greatest benefits of our financial, legal system. Over time, regulation, process, and interpretation have turned the bankruptcy process into a black hole for creditors and the end of the road for debtors, resulting in a lose- lose for all stakeholders. IS IT TIME TO FIX THE PROCESS AND RESTORE THE RIGHTS OF DEBTORS AND CREDITORS? We have come a long way since we started on this mission, but there is still a long, long way to go. Today, there is a large portion of the country where trustees will not entertain a "short sale" in bankruptcy even though the trustee has a fiduciary responsibility to administer the sale. Ultimately, the debtors and creditors should have the legal right to request the sale. Brad Geisen is a 35-year veteran of the default real estate industry and a serial entrepreneur, always focusing on creating smart solutions with better outcomes. He is known for creating online real estate solutions such as Foreclosure.com, HomePath.com, HomeSteps. com, TaxLiens.com, HUDHouses.com, and many more. He developed and ran a pilot program for HUD, which became the highly effective HUD M&M Program. Geisen created the first online offer management platform, which has become the industry standard used by mortgage servicers and the GSEs. Unfortunately, the current process to administer a case rarely allows debtors and credits the option to exercise their rights, creating greater losses and hardship.