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Bankruptcy Trustee Gives Up Trying to Sell Former Slave’s Land — Forty Acres and a Mule

Posted on Wednesday (March 23, 2011) at 8:30 pm to Bankruptcy and Society
Bankruptcy Exemptions
Chapter 7 Bankruptcy

forty-acres-and-a-muleWritten by Craig D. Robins, Esq.
Every so often we file a bankruptcy case that has a rather unusual asset – and unusual assets sometimes lead to unusual dispositions by the trustee.
Almost two years ago, in 2008, we filed a Chapter 7 bankruptcy petition in the Central Islip Bankruptcy Court here on Long Island that was routine in every respect – except one.  The debtor had an unusual asset which the trustee thought he could sell for the benefit of creditors.
Our client, an African-American, had inherited some property 30 years ago that had been in his family for quite some time.
Forty Acres and a Mule
Apparently, the debtor’s great grandfather was a slave in Virginia and upon his emancipation around 1865, he was given some unimproved property in that state – what was then referred to as “forty acres and a mule.”
According to Wikipedia, 40 acres and a mule was a practice in the 1860’s of providing farmable land to Black former slaves who became free as Union armies occupied areas of the Confederacy.
The combination of the land, together with Army mules, was meant to provide a sound start for a family farm.
40 acres (16 hectares) was a standard lot size for rural land, being a sixteenth of a square mile.
Former Slave’s Property Handed Down to Debtor
Over the ensuing years, the great grandfather and his descendants carved up the property several times and transferred it down family lines.
When the debtor inherited some of this property about 30 years ago from his parents, it  consisted of two unimproved lots, one about two acres in size, and the other about four acres.  Other family members owned adjoining parcels.  The trustee assumed that six acres of property had to be worth something.
However, the property was located in a very rural area in Southern Virginia consisting primarily of farms and vacant, unused land. Neither of the debtor’s parcels abutted a roadway; there were no structures on or near the land; and there was no utility service to the land.  Basically, the property had very little value.
Nevertheless, the property was not exempt under any statutory authority.  Since the debtor did not reside on the land, he was unable to assert the homestead exemption to protect it, and since the bankruptcy case was filed before New York’s exemption statutes changed a few months ago, the debtor could not utilize any wildcard exemption.
The debtor had hoped to keep the property for sentimental reasons, but realized that cooperating with the trustee and obtaining a discharge of his existing debts was more important.
Nevertheless, the debtor knew that there was very little demand for such lots as there were many of them, and hoped the trustee would just abandon it.
Bankruptcy Trustee Tries to Sell Former Slave’s Land
The Chapter 7 bankruptcy trustee, known in local circles for being rather aggressive about pursuing assets, would do no such thing.  The trustee brought an application to retain a local Virginia real estate broker to list and sell the property.
I initially tried to persuade the trustee, who I am friendly with, to abandon the property as having no value to the bankruptcy estate.  However, the trustee was somewhat adamant so I assured him that the debtor would fully cooperate with him.
The broker tried to sell the parcels for two years with no success.  The trustee did not give up.  Earlier this month, he fired the broker and brought an application to retain another one.  That application was granted just yesterday.
The Trustee Gives Up
Today, quite unexpectedly, the trustee filed a “no-asset report” – just 24 hours after getting court approval to retain a new real estate broker.
By filing this no-asset report, otherwise known as a “Chapter 7 Trustee’s Report of No Distribution,” the trustee advised the bankruptcy court that there were no assets to be distributed and that the case should be closed as having been fully administered.
What happened in 24 hours?  I haven’t spoken to the trustee yet, but my guess is that the trustee finally realized what the debtor had known all along – that the property had very little extrinsic value and that it would be very difficult to sell.   Sometimes Debtors Can Keep Non-Exempt Assets in Chapter 7 Bankruptcy Cases .
Out of curiosity I called the broker who acknowledged that this property would certainly be a hard-sell.
Non-Exempt Real Estate Stays in the Family
Consequently, the debtor received his discharge (the court actually granted this over two years ago) and he was able to keep all of his assets – including the land remaining from his great grandfather’s emancipation from slavery – forty acres and a mule.
About the Artwork:  The image is a painting by renowned Atlanta Landscape and Wildlife artist Leonard M. DeFoor.  He has some great work!  Check out his website.
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Craig D. Robins, Esq. is a Long Island bankruptcy lawyer, who is focused primarily on helping individuals and families, find solutions to their debt problems. Read more »


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Craig D. Robins, Esq.
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