06 Aug Chapter 7 Debtor Waits Four Years for Trustee to Release his Money
You may be wondering what happens if you file Chapter 7 bankruptcy and you own assets that cannot be exempted or sheltered under the applicable exemption laws in your district. There may be instances where you need to file bankruptcy to stop a pending lawsuit but you do not have the income to support a Chapter 13.
Chapter 7 functions as a liquidation type of bankruptcy. While it is true that most Chapter 7 debtors have no assets to liquidate (because those assets fit within the exemption provisions of the bankruptcy laws) there are some cases where the Chapter 7 trustee must function as a liquidation asset.
A client of mine here in Atlanta faced this situation several years ago. He was employed at a relatively low paying job but had well over $50,000 in credit card and other unsecured debts. After we filed, my client discovered that he was a beneficiary of his great auntâ€™s estate – his portion was just over $20,800.
Under the Georgia exemption law, my client had a potential â€œwildcardâ€ exemption of $5,400. We had used up $3,200 in the original filing, meaning that there was $2,200 of the exemption left. I filed an amendment to Schedules B and C of his petition to declare the $2,200 as exempt. This meant that my client would participate in the liquidation of the bankruptcy estate.
The Chapter 7 trustee then began his work to liquidate the asset. He contacted the estate lawyer and had my clientâ€™s portion (the $20,800) sent to him. He then changed the designation of the Chapter 7 case to an â€œassetâ€ case from a â€œno assetâ€ case and sent out notices to all creditors along with proof of claim forms.
The creditors filed their claims and the trustee filed his administrative claims. In this case a CPA hired by the trustee received $297.50 and the Chapter 7 trustee received $2,671.99 for his efforts. My client got a check for $2,200 and the creditors in the case received a total of $17,830.
And did I mention the time frame for this distribution? This Chapter 7 case was filed in April, 2009. I received my clientâ€™s $2,200 check on August 5, 2013, some four years after this case was filed.
So, if you file a Chapter 7 case that includes non-exempt assets that your trustee has to liquidate, the wheels of justice will turn very slowly so you should not expect to see your exemption distributed anytime soon.
by Jonathan Ginsberg, Atlanta bankruptcy attorney
Jonathan Ginsberg, Esq.
Latest posts by Jonathan Ginsberg, Esq. (see all)
- How Cognitive Biases Can Drive You Into Bankruptcy - April 9, 2018
- Are We Seeing a Return to Debtors’ Prisons? - March 6, 2018
- Why Surrendering Your Car or House in a Chapter 13 May Create Unexpected Problems - February 6, 2018
- How Bankruptcy Exemptions Work - November 6, 2017
- Yes You Can Refile Your Chapter 13 Case, But Should You? - September 6, 2017