Trustee Review Process In Chapter 7 Bankruptcy
Chapter 7 bankruptcy cases are overseen by a trustee who is responsible for examining and liquidating assets to pay creditors. It's important for the bankruptcy debtor to understand exactly how this process works so that they can do thing that will make the process go smoother.
Let's take a closer look at the bankruptcy trustee review process:
The bankruptcy trustee will review the bankruptcy petition. They will make sure that it is done correctly and look at the assets and liabilities listed. It's up to the debtor to make sure they have listed all of their assets and debts on their bankruptcy petition and that the forms are correct. If there are any obvious errors, the case may be dismissed.
Meeting Of Creditors
At the meeting of creditors the bankruptcy trustee will once again examine the bankruptcy petition and confirm with information with the debtor. If the debtor has made a mistake, forgotten to include information or needs to make a change, they can mention it at this meeting. However, it may be better to mention changes and errors to the bankruptcy attorney before attending the meeting of creditors so that changes can be made quickly. It's important to note that the meeting of creditors is usually a quick process, only taking a few minutes.
Examination Of Exemptions
The bankruptcy trustee will examine the assets of the case and determine the amount of non-exempt property. If there is no non-exempt property in the bankruptcy case, the trustee will file a "Notice of No Assets" and discharge the case. However, creditors and the trustee can challenge bankruptcy exemptions. For example, if a debtor claims a vehicle as exempt and the trustee doesn't agree, the trustee can challenge the exemption.
If there are assets which are non-exempt, the bankruptcy trustee can liquidate the property and pay creditors. But before creditors are paid, the trustee deducts his/her administrative fees from the sales proceeds. Sometimes after doing calculations, the bankruptcy trustee concludes that the property is not valuable enough to warrant liquidating it. In this case the trustee will abandon the property and return it to the bankruptcy debtor.
It's important to note that pro se debtors sometimes overlook valuable bankruptcy exemptions. The bankruptcy trustee will not educate the debtor about overlooked bankruptcy exemption.
Unlisted Hidden Assets
Sometimes the bankruptcy trustee will discover unlisted assets. When this happens the debtor is compelled to turn the property over to the bankruptcy trustee. Sometimes failure to list assets happens because of an innocent oversight or because a bankruptcy debtor received assets post-petition. For certain assets such as a lawsuit settlement, the debtor must list it if they were involved in a lawsuit prior to filing bankruptcy or if they knew there could be a possible settlement.