Why did the Trustee Object to My Bankruptcy Discharge?

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At the time that your bankruptcy case is officially filed with the court, a trustee will be assigned to oversee the details of your case. The trustee is an impartial third party who will be selected by the court system. Your trustee is not working against you; however, he is not working for you, either. The job of the trustee is to ensure that your bankruptcy case proceeds smoothly and lawfully.

Trustees are typically attorneys themselves, but they will not be involved in your legal representation during your bankruptcy case. Chapter 7 trustees are paid a small administration fee as well as a percentage of the assets they are able to liquidate and disburse to your creditors.

In a chapter 13 bankruptcy, trustees are paid through your reorganized debt repayment plan at the end of your case. There are limits on how much money a chapter 13 trustee can receive per bankruptcy case.

In both chapter 7 and chapter 13 cases, it is the responsibility of the trustee to verify the validity of any and all financial information that you provide in your bankruptcy paperwork. The trustee checks all of your calculations and will certify their  accuracy to the bankruptcy court.

Chapter 7 trustees are also entrusted with holding the 341 hearing – the Meeting of the Creditors, which takes place approximately 30 days after your case was filed in court. During this hearing, the trustee may ask you some questions regarding any of the data included in your documents. You will be under oath and must answer truthfully. If there is any falsified data in your bankruptcy documentation or if you are determined to have lied under oath – your bankruptcy petition will most likely be thrown out due to charges of attempted bankruptcy fraud.

If you successfully make it past the Meeting of the Creditors and your trustee finds that all of your paperwork and testimony is accurate, it then becomes the trustee’s job to examine all of your assets to determine what can be sold in order to pay off as much of your debt as possible. Don’t panic: the trustee isn’t going to come in and sell everything you own, because that would defeat the purpose of filing for bankruptcy. The goal is to leave you in better financial condition than before you filed.

(New Jersey chapter 7 bankruptcy exemptions can be found here.)

Although your trustee most definitely isn’t working against you, it is within his job description to make sure you are being forthcoming in your bankruptcy. As long as you have nothing to hide, you can rest easy.

Your bankruptcy trustee also has the power to ultimately object to your discharge (elimination of your debts). A trustee may object if you:

  • Respond dishonestly to any information that is requested during your bankruptcy case or misrepresent any of your financial information in your bankruptcy documents
  • Hide, move (or attempt to hide) any of your assets or property with fraudulent intent
  • Repay some creditors above others (preferential payments)
  • Withhold evidence of pertinent financial information
  • Disobey a court order
  • In any other way attempt to defraud the bankruptcy court or your creditors

In the event that your trustee determines that you should not be granted a bankruptcy discharge, he will make his objection known via a lawsuit known as an adversary proceeding.

The trustee does not have the final say as to whether or not your discharge will be granted. You will be able to defend yourself against the trustee’s claims, and ultimately, the court will determine if your debts should be discharged or not.

If you are currently in the midst of a pro se bankruptcy case and your trustee has made an objection, be sure to connect with a bankruptcy attorney who has dealt with adversary proceedings in the past.

 

Image credit: Daniel O’Neil

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Can My Bankruptcy Trustee Visit My Home to ‘Take Inventory’?

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A common concern for anyone filing for bankruptcy is exactly how much “power” the bankruptcy trustee holds, and whether s/he is working for the debtor or for the creditors. In order to discuss this in depth, we first need to review some trustee basics.

In a Chapter 7 bankruptcy proceeding, a trustee is assigned to each case. The trustee’s main purpose is to oversee all of the assets that the debtor owns. An asset is defined as “property owned by a person or company that has monetary value and is available to meet debts owed.”

A trustee is appointed to a bankruptcy case as an impartial administrator of sorts. S/he has no personal interest in the case and can therefore oversee all of the financial information without prejudice. You cannot hire your own trustee, and your bankruptcy attorney cannot take on the role of trustee due to the conflict of interest. The bankruptcy court will typically select a local attorney with extensive bankruptcy experience to act as trustee.

Any and all documents containing information about your debts, assets, income, and the general state of your financial affairs will be reviewed by your trustee in order to verify all of the claims you made on your bankruptcy petition. Once s/he has a good handle on the details of your case, the trustee’s main job is to determine if you have any nonexempt assets.

Chapter 7 debtors are permitted to keep certain protected assets/property. These are known as exempt assets, and they cannot be sold or liquidated to repay your creditors. Nonexempt assets, on the other hand, are assets whose value exceeds the amount you are allowed to keep. It’s the trustee’s job to ascertain whether or not you have any nonexempt assets. If you do have some nonexempt assets, the trustee must establish the monetary value of said assets so that they can be sold (liquidated). The money that is made from liquidating your nonexempt assets will be used by the trustee to pay all of your creditors equally. For example, if it happens that you have $20,000 worth of nonexempt assets (jewelry, collectibles, etc) and five creditors, the trustee will sell the items and distribute $4,000 to each of your creditors.

While this may only make a small dent in the total amount of money owed to your creditors, the liquidation of nonexempt assets is in place so that your creditors can at least receive some repayment of the money you borrowed.

In order to determine the value of any nonexempt assets, the trustee does have permission to visit you at your home, and this knowledge can be stressful. However, in reality, trustees rarely ever visit a debtor’s home in order to “take inventory” of your nonexempt assets. If your trustee does come to your home, it will typically be at an agreed upon time to collect any nonexempt assets listed in your bankruptcy petition so that they can be sold. It is extremely rare for a trustee to ask to come inside your home to “have a look around.”

If your trustee does happen to show up at your door one day without warning, you can let him or her know that you weren’t expecting the visit, and you’d like to speak to your attorney before granting the trustee access to your property. If the trustee insists on inventorying your assets, reschedule the visit and make sure that your attorney will be present at the rescheduled appointment.

Image credit: Jonathan Mueller

Is My Bankruptcy Trustee Working For Me or Against Me?

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If you are considering filing for bankruptcy, or already have filed, you have probably wondered about the duties of your bankruptcy trustee.

Does he work for me? Is he against me?

In any bankruptcy matter, the trustee is not “on” anybody’s side. He/she does not represent you or your creditors. The trustee is not “out to get you”, or to either prove or disprove your case.

Every bankruptcy case is assigned a trustee to look over and represent the bankruptcy estate that is created when the bankruptcy case is opened. A bankruptcy trustee is assigned by the Department of Justice, and is responsible for collecting all assets of the NJ bankruptcy estate in order to pay off creditors with valid claims that you owe them money.

Your trustee is expected to remain impartial throughout his/her role as your trustee. Some of the responsibilities that come with being a bankruptcy trustee include:

  • Inspecting all of the paperwork involved in your bankruptcy matter, from the original bankruptcy petition to your tax returns, pay stubs, mortgage paperwork, and information about all of your debts and bank statements. This is the trustee’s first priority during any bankruptcy case, and it is performed so that he/she can verify that all of the information included in the original petition as well as all of your financial documents and papers is accurate.

 

  • Holding the Meeting of Creditors, also called the 341 hearing. During this hearing, the trustee will ask you any and all questions that he/she may have regarding information in your financial documents. Any of your creditors are allowed to attend this meeting as well, but more usually they don’t. Creditors may attend the 341 hearing if they feel that you are being less than truthful about your assets, but otherwise, this meeting is usually held between you (along with your NJ bankruptcy attorney) and the bankruptcy trustee. During the 341 hearing, you will be under oath, so it is imperative that you answer all of the questions asked by your trustee in complete honesty.

 

  • Paying your creditors with any of your assets that do not fall under the “exempt” category. This duty is probably the most well-known task that the bankruptcy trustee is responsible for. While you are permitted to retain possession of some of your personal property in a chapter 7 bankruptcy (exemptions), any assets that you own that are above and beyond your exemption amount will be liquidated (sold) by the trustee in order to pay back as many of your creditors as possible.

 

  • Preventing preferential transfers or interests. In a bankruptcy case, your financial behavior during and immediately preceding the filing date will be closely examined. If it is obvious that you transferred any property or paid any money to specific creditors in favor of others, the trustee is permitted to re-collect this property and/or money so that it may be evenly distributed among all of your creditors.

A bankruptcy trustee is not working for you or against you, per se. A good way to look at it is that the trustee will ensure that your bankruptcy petition and paperwork are all flawless, which can only aid in making sure that your debts will be discharged and that your bankruptcy petition will not be dismissed.

Image Credit: Fried Dough (flickr)