Tag Archives: trustee

Bankruptcy and Your Facebook Account: How Safe Is It?

Although I have not seen this happening much, so far, in the Eastern District of Michigan, where I practice as a bankruptcy lawyer, some of my colleagues around the country are reporting that Chapter 7 bankruptcy Trustees are beginning to review and to ask questions about debtors’ Facebook accounts. In some extreme cases, Trustees have reportedly requested debtors’ user-names and passwords at the 341 Meeting of Creditors hearing that occurs in the Chapter 7 bankruptcy process.

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Do I Need to List Every Debt in my Chapter 7 or Chapter 13 Bankruptcy? (Revisited)

I’ve written before on the subject of whether all debts must be listed in a Chapter 7 or a Chapter 13 bankruptcy petition as an answer to the very commonly asked question, “Can I leave my favorite credit card out of the bankruptcy?”

The answer to that question is an easy, “No, you cannot leave a debt out of the bankruptcy; the US Bankruptcy Code requires that all assets and all liabilities (debts) must be listed in either a Chapter 7 or Chapter 13 petition—and treated in a Chapter 13 payment plan one way or another.

However, there are additional reasons why you would want every debt listed, even if you otherwise desired to leave it out of the bankruptcy:

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How Much Can my Chapter 7 Banrkuptcy Trustee Can Take from Me?

Most Chapter 7 cases that I handle as a Michigan bankruptcy attorney are “no-asset” bankruptcy cases, meaning that, after I  have exempted the filing individual’s personal assets from the bankruptcy estate created by the filing of the bankruptcy petition, there is nothing left available for the Trustee to liquidate (seize and sell off for cash) and distribute to creditors. In fact, the great majority of Chapter 7 bankruptcy cases filed anywhere are “no-asset” cases of this sort.

However, some cases are “asset” cases that do involve a transfer of assets from the filing individual’s ownership to the creditors whose debts he or she is discharging by way of the Chapter 7 Trustee assigned to the case, whose job is to do just that.

Sometimes, however, a filing individual does have more property or more cash assets in their possession than the exemptions in the Bankruptcy Code allow me to protect. (The exemptions are bits of the Bankruptcy Code statute that allow me to remove up to certain dollar-amounts of certain types of property from that legal “bankruptcy estate” containing otherwise everything the individual owns or is owed at the timing of the filing of the case.) These cases are called “asset” cases.

Usually, the available bankruptcy exemptions are sufficient to protect, if not ALL of somebody’s property, nearly all of it and what the Trustee manages to liquidate and distribute to creditors is less than what the individual owes to their creditors. This is sometimes only a few thousand dollars or less, which may be a small price for the individual to pay to discharge and walk away from tens of thousands or hundreds of thousands of dollars’ worth of debt.

Occasionally, however, the asset liquidated by the Trustee may be quite valuable. On extremely rare occasions, its value may outstrip the total dollar amount owed to the individual’s creditors.

Of course, this is rare because the calculation by the filing individual of the worthwhileness of the bankruptcy’s filing in the first place may be premised upon the fact that they will lose less to the Bankrutpcy Trustee than they owe; if they could simply sell off a valuable asset in order to pay creditors off and avoid bankruptcy in the first place, this is generally preferable. When this occurs, it may be because a filing individual has underestimated the value of an asset, did not realize that they owned it in the first place (e.g., a piece of real estate titled to them by an elderly relative without their knowledge, etc.), or for other reasons.

What happens then?

The Trustee takes a small percentage of the amount distributed to creditors, naturally. After that, however, Section 726 of the Bankruptcy Code governs how creditors are paid and in what order. Creditors are paid by the Trustee according to the timing of the claims that they file with the Bankruptcy Court when the Trustee alerts them that there is an asset to be distributed and according to their classification as “secured” creditors (holding debts with collateral attached to them) or “unsecured” creditors (holding debts with no collateral attached to them). Interest owed is paid as well, under certain circumstances.

However, after all creditors have been paid in accordance with Section 726, the Debtor him- or herself (i.e., the individual who filed the bankruptcy) is then paid.

In other words, you can only pay 100% of what you owe–and no more. If an asset liquidated by the Trustee brings more money to the Trustee for distribution to creditors than those creditors are actually owed, the filing individual will get money back from the Trustee. Eventually. (This distribution process can take months or years to complete.)

If you are a southeast Michigan resident and are considering filing for bankruptcy, please contact me at (866) 674-2317 or john@hillalaw.com to schedule a free, initial consultation.

Can a Chapter 7 Bankruptcy Trustee Sell My House after My Case Discharge?

A Chapter 7 bankruptcy Trustee may indeed attempt to short-sell or sell your foreclosed or surrendered home in your Chapter 7 Bankruptcy. However, there are steps that an experienced bankruptcy attorney can take to limit the Trustee’s reach.

To read more about this topic, click here to read our full article on bankruptcy Trustee short sales and real estate sales on the new Michigan Bankruptcy Blog of The Hilla Law Firm, PLLC.

If you are a southeast Michigan resident and are considering filing for bankruptcy, please contact us at (866) 674-2317 or john@hillalaw.com to schedule a free, initial consultation.

Is My Chapter 7 Bankruptcy Case Really Over (Part II)?

Generally, when a Chapter 7 bankruptcy has been closed by the Bankruptcy Court, it is because the Chapter 7 Trustee has either expressly issued an “Order of Abandonment” abandoning all interest in the debtor’s personal property and real estate or has constructively done so via the entry of a “Report of No Distribution” stating that there are no assets in the estate to distribute, allowing the court clerk  to close the case. Once this has occurred, typically, the bankrutpcy is finally over and, if the homeowner wishes to short sell or otherwise dispose of his or her home, he or she is free to do so.

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When Is My Chapter 7 Bankruptcy Actually Over?

A chapter 7 bankruptcy case does not necessary close immediately after the Bankruptcy Court issues your discharge of debt. A Chapter 7 Trustee’s efforts to liquidate some of your assets and any lawsuit or other adversary proceedings by creditors or other parties can result in your case staying open for months or even years after your discharge is issued.

To read more about this topic, click here to read our full article regarding Chapter 7 bankruptcy case closure timing on the new Michigan Bankruptcy Blog of The Hilla Law Firm, PLLC.

If you are a southeast Michigan resident and are considering filing for bankruptcy, please contact us at (866) 674-2317 or john@hillalaw.com to schedule a free, initial consultation.

Will I Lose my Second Home if I File Chapter 13 Bankruptcy?

Chapter 13 bankruptcies do not require the liquidation of property as Chapter 7 bankruptcies do when property is unable to be exempted. Instead, Chapter 13 bankruptcies are “funded” by the monthly payments filing debtors make to their Chapter 13 Plans. Personal and real property is not subject to liquidation (seizing and selling off of property by the Trustee assigned to a Chapter 7 case by the court) in a Chapter 13 at all.

That does not mean, however, that it is always possible to retain a second home or second piece of real estate in a Chapter 13, particularly if it is a home for which you are making mortgage or other payments.

To read more about rental properties and second homes in Chapter 13 bankruptcy, click here to read our full article on this topic on the new Michigan Bankruptcy Blog of The Hilla Law Firm, PLLC.

If you are a southeast Michigan resident and are considering filing for bankruptcy, please contact us at (866) 674-2317 or john@hillalaw.com to schedule a free, initial consultation.