Bankruptcy Secret!

07 Sep Bankruptcy Secret!

Bankruptcy Secret!

Bankruptcy Secret!

Wanna know a bankruptcy secret? The truth is that Chapter 7 trustees are paid $60 per case that they administer. Is this the secret? No that is part of the code under 11 U.S.C. §330(b). Additionally the Chapter 7 trustee receives commission from the stuff they take and sell. Is this the secret? No as this is also part of the code under 11 U.S.C. §326. So what is the secret?The secret is that ALL TRUSTEES are human and like to get paid for doing their job just like you and I. The Chapter 13 trustee receives an administrative fee to handle a case based on the monthly payment. In my area of the bankruptcy world the trustee fee is 8% of the monthly payment. This is a steady line of funding for his or her office each. In comparison the Chapter 7 trustee receives $60 to handle each case. $60 to review the case, make sure your attorney turned in all the required paperwork, to handle your 341 meeting, review the case again, and file the associated reports with the court. The average billable hourly fee for our local trustees is $200-$300 an hour. Consequently that $60 per case is used up the first time they review a petition.

Why is this knowledge helpful to you? Because this should indicate that the Chapter 7 trustee’s are looking for assets to sell so that they may not only pay your creditors but also earn a living themselves. Don’t be enraged with the system as it is the government who established this law. The law is designed, I believe, to encourage the Chapter 7 trustee to be aggressive and go after assets. That is if they wish to make any type of living at being a Chapter 7 trustee.

I can already hear some saying “then don’t be the trustee.” If there weren’t any trustees you could not file bankruptcy. The solution is to use the secret.

The secret is that trustees are human with feelings and basic needs. Do you wish to make your trustee or your enemy? If it were me I would want to make the trustee my friend or at least someone I would want to keep in a good mood. Does this mean that you have to become a brownnoser? Absolutely not but common courtesy of please/thank you and keeping the golden rule in mind goes a long way. Do onto others as you would want done onto you.

One of the best practice tips I learned early on was to think like a trustee. My mentor said; “Rachel when you are analyzing a case and reviewing assets, what would you want to know to decide whether or not take a vehicle or a home?” Details, details and more details are what I provide when drafting a petition. If Zillow says a house is worth $150,000 and the client says it is a piece of crap worth $80,000, I am going to provide details as to why it is a piece of crap. Details are critical for a trustee when deciding to whether to take your stuff away from you. If you don’t care then great no worries. Still provide details but at least you do not need to worry about whether or not you will lose the item.

You must submit a Schedule A and a Schedule B when filing for bankruptcy. Schedule A is where a home is listed if you own one and Schedule B contains all the rest of your stuff. My clients will provide written details of the home and everything else. If we are trying to devalue a home I will have them obtain estimates of repairs and take pictures inside and out. Pictures often times have to power the express the level of “crapiness” that no words could adequately explain. The same holds true when reviewing the value of a vehicle or any other asset.

For vehicles I want to know what the NADA “clean retail” value is and then I want to know what it would take to get to clean retail. Whatever the cost it takes to get to “clean retail” I will then reduce the NADA value of the vehicle. But my inquiry does not stop there. Just because NADA says it will sell for a certain amount does not mean that it is actually selling for that amount in your particular area. Check the Internet for your local dealers to see what the vehicle is selling for.

What about a Thomas Kinkade painting? You may think it is worth a fortune but in reality I cannot give these paintings away lately.

Do your homework? Don’t hide the Thomas Kinkade painting and make the trustee do the work of pulling information out of you. You are supposed to be an honest debtor and therefore you must list the assets. But honesty means you can provide as many details as possible so that the trustee may make an informed decision.

Let’s think about this for a moment. As a human being if you have two cases, one where the debtor has provided enough information for you to decide to release the case as a no asset case and one where you cannot tell whether there is stuff to sell, which case would you spend your time investigating? Time is money and trustees are human. Provide the details.

You have a responsibility to provide information to the court. If your attorney just lists household goods without listing the Thomas Kinkade painting and you have provided that information, I personally would be looking for a new attorney. If you need help looking for an attorney check out the attorneys on this blog and/or the NACBA attorneys.

Bankruptcy is becoming more aggressive. Therefore as the economy still remains sluggish non-bankruptcy attorneys are seeking more business. For some odd reason many attorneys think that they can just fill out a form, show up at a meeting and obtain a discharge. This is sloppy and the one who may lose the most in the fall out is you!

Be alert, be honest and above all be prepared. Gather and provide as many details as possible on the stuff you own. Especially items such as your home, vehicle, jewelry, art work, and land just to name a few. Take pictures, get estimates for the values of the item or repairs, check NADA for vehicles and Zillow/Trulia for land. Details can make or break a case.

Remember that knowledge is power. Now that you have the knowledge of the secret you will have the power to gather all the details the trustee needs to ensure a smooth handling of your bankruptcy case.

 

Image credit: Rachel Lynn Foley

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Former Bankruptcy Attorney to the Kansas City UAW: Ford and GM workers, now assisting the general public in Missouri and Kansas with regaining financial control using the Bankruptcy Code. 816-472-HELP (4357).

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