Bankruptcy and the Case Trustee


Bankruptcy was intended to give people a way to get out of debt and start a new life that is debt free.  In most cases it is best to work with a bankruptcy lawyer because they can help you to follow all the rules, and make sure you do not make mistakes that could keep the bankruptcy from not being filed.  You should look into filing for bankruptcy if your creditors keep calling you, you have an extreme amount of medical bills, you are close to filing for a foreclosure or you have a lot of business debt that is unpaid.

Chapter 7

Chapter 7 does not involve a repayment plan unlike Chapter 13.  It involves a case trustee taking all the debtor’s nonexempt assets and using the cash received from them to pay the creditors.  Some of the debtor’s property will be under liens or mortgages, so the debtor has an opportunity to hold on to this property as long as they can pay the creditors owed.  But debtors must realize that even though they are allowed to keep “exempt” property they could still lose their property.


Role of Case Trustee under Chapter 7

Most cases that are filed under Chapter 7 are “no asset” cases, but if it gets ruled an asset case a trustee will be assigned to the debtor, and they must file within 90 days.  A “no asset” case is acquired when a debtor’s assets are ruled to be all “exempt” or have valid liens, and if this occurs no payment will be made to unsecured creditors.  The trustee will then liquidate the debtor’s nonexempt assets to receive the maximum amount to pay the unsecured creditors.  To do this the trustee will sell the debtor’s property as long as it is free of liens, or if it costs more than the security interest or lien the property is attached.

Also, the trustee can get the money by using their “avoiding powers”.  The “avoiding powers”; do not take into account the transfers made to creditors 90 days before the petition, they can undo security interests and prepetition transfers made in the past 90 days before the petition and they can go after non-bankruptcy claims that are allowed under state law.  If the debtor is a business, the trustee can take over the business if it helps the creditors, or it helps to maximize the liquidation process.

Victoria Kunze writes on a variety of topics including Chapter 7 bankruptcy California.

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