Bankruptcy

Chapter 7 Trustee's Discretion To Pursue or Ignore Non-exempt Assets

By Jonathan Alper

Chapter 7 trustees have discretion to pursue, or not pursue, a debtor?s non-exempt assets for the benefit of the bankruptcy estate. Just because a debtor files bankruptcy with assets over the personal property exemption limits does not mean he will necessarily lose the assets during the Chapter 7 bankruptcy. For example, this past week I attended a trustee examination at a 341 meeting with a debtor whose bankruptcy schedules showed that he had $2,700 of non-exempt car equity and an expected non-exempt tax refund of approximately $1,800. The Chapter 7 trustee indicated that he had no interest in pursuing the assets or asking the debtor to buy back the assets. The trustee gave the debtor a "free pass" as to his non-exempt assets.

In my experience this particular trustee is neither unusually lenient nor strict, and I saw no indication that the trustee wanted to do this debtor any favors for any reason. The trustee probably decided that the amount of non-exempt assets was too small to justify the effort to recover the assets. Motions, paperwork, and court orders are require in most cases where a Chapter 7 trustee wants to recover and sell a debtor?s assets for the benefit of a creditors. Trustees are compensated based on the amount of assets recovered for the bankruptcy estate. Sometimes trustees decided that the amount of a debtor?s non-exempt assets is not large enough to justify the effort to recover and sell the assets. Different trustees have different policies toward asset recovery in small Chapter 7 bankruptcy estates. You should not assume that you will be able to keep non-exempt assets even if the amount of non-exempt assets is relatively small. Some debtors are lucky, but I have also seen trustees pursue very small non-exempt values in assets, such as cars, in order to force payments by the debtors.

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

Full post as published by Florida Bankruptcy Law on February 01, 2009 (boomark / email).