Bankruptcy

Bankruptcy Sometimes Involves Luck

By Jonathan Alper

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

Full post as published by Florida Bankruptcy Law on May 19, 2009 (boomark / email).