Bankruptcy Sometimes Involves Luck

Like most things in life bankruptcy involves some luck. Particularly, there is luck in the draw of your bankruptcy trustee. There is variation among Chapter 7 bankruptcy trustees in their policies concerning pursuit of non-exempt assets which can be taken from the debtor to pay unsecured creditors. Bankruptcy trustees are paid mostly by "commission"; they are paid a percentage of money recovered for creditors. They are not paid based on the time they spent trying to recover assets. The same is true for attorneys employed by bankruptcy trustees to handle legal proceedings- no recovery, no legal fee. Some trustees are more aggressive than others and will pursue relatively small assets while other trustees often ignore low-value non-exempt assets in order to spend more effort after potentially large recoveries.

Recently I attended a trustee meeting on behalf of several clients each of whom had significant non-exempt assets. In each case, I told the clients that they would have to surrender or buy back from the trustee their non-exempt assets. One Chapter 7 client listed on his schedules over $8,000 of liquid non-exempt property. A second debtor had about $4,500 non-exempt property including three non-exempt cars. A third debtor at the same session listed over $65,000 of non-exempt real estate equity and about $7,000 of non-exempt personal property. The trustee did not mention any of these clients’ non-exempt property- he did not asks the clients for copies of deeds, car titles, or other information about the property. He did not ask the debtors if they wanted to surrender or buy back their non-exempt property. The trustee can still pursue these assets, but it almost all cases a trustee pursuing non-exempt assets will raise the issue at the creditor meeting and will discuss the debtor’s alternatives at the meeting.

It seems that this Chapter 7 trustee is overlooking smaller amounts of non-exempt assets because she believes it is not practical to pursue the assets in today’s economy of depressed asset prices. These debtors were lucky. Two of them expressed relief that they finally got a break financially. All debtors should assume that they will have to surrender or buy back any and all non-exempt property in order to decide if bankruptcy is in their best interest. But maybe, you’ll get lucky.

posted by Jonathan Alper, bankruptcy and asset protection attorney, Orlando, Florida

Comments

[TOM COLE]

I RECV. A LETTER ALMOST 1 YEAR AFTER THE MEETING OF CREDITORS,JAN 09 IT STATES THAT I HAVE TO PAY, 3600.00 IN LIEU OF TURNOVER OF PROP.NO AMOUNT WAS EVER DISCUSSED,BY MY LAWYER OR THE TRUSTEE.ORIGINALLY MY LAWYER HAD STATED, THAT IT LOOKED LIKE I WOULD HAVE TO PAY SOME MONEYS, TO KEEP MY PROP.BUT I WAS NEVER TOLD AN AMOUNT.THE LETTER I RECV.SAID I WAS TO START MAKING PAYMENTS IN OCT.OF 09 ON THE 16TH. I RECV. THE LETTER ON DEC.22AND 09.BY THE LETTER, I AM 3 MONTHS BEHIND ALLREADY.IT ALSO STATES THAT IM TO MAKE 12 EQAUL PAYMENTS OF 3000.00.WICH WORKS OUT TO FAR MORE THAN 3600.00.MY QUESTION IS THIS,I KNOW THE LETTER HAS A TYPO,BUT WILL IT EFFECT ME.AND IS THERE A TIME LIMIT, ON LETTING ME KNOW ,HOW MUCH IS OWED.MY LAWYER DID SAY THAT IF ANY MONEY WAS TO BE PAID, I WOULD FIND OUT AROUND APRIL 09.I NEVER KNEW AN AMOUNT? I COULD HAVE ALMOST PAID OF BY NOW.AND WHY DID WE RECV.LETTER FROM LAWYER AND COURT TELLING US THAT WE WERE ALL DONE,AND MY LAWYER SENT LETTER THANKING US FOR USING HIM,RECV LETTER IN MARCH 09.WHY WOULD HE THANK ME FOR USING HIM IF CASE HAD NOT CHARGED OFF YET.AND IN THE LETTER FROM TRUSTEE SHOULD THERE BE JUDGEMENT # ALONG WITH CASE # IF MONEY WAS AWARDED TO TRUSTEE.AND IS IT NORMAL, FOR SAID AMOUNTS TO BE PAID TO PO BOX ADDRESS WITH NO PAPPER WORK,IS MY CANCELLED CHECK ALL I NEED FOR PROOF OF PAYMENT

[Florida Defense Lawyer]

It is important to hire the right bankruptcy attorney whenever starting this type of project. Anybody that comes recommended is always a good start.

[Scott Forgey]

Great point. I am amazed at the divergence of requirements and behaviors within a single jurisdiction, let alone throughout the US Districts.

One of our hardest tasks is to deal with the inherant unpredictability of the current system and the personal spin the trustees often have regarding assets.