When you file your Chapter 7 bankruptcy petition, you should already be aware of which assets will get liquidated and which ones you will be able to keep. Liquidation usually includes all of your valuable property, although some of your property will be exempt from the bankruptcy. A skilled and knowledgeable bankruptcy attorney can let you know which of your assets you should expect to relinquish to the bankruptcy estate.
The bankruptcy trustee is in charge of liquidating your assets that are surrendered to the bankruptcy estate. Pragmatically speaking, the trustee will only attempt to liquidate property that will result in a profit after the cost of liquidation is factored in. The ultimate decision regarding your assets will be left up to the trustee appointed to your case.
The United States Department of Justice oversees the U.S. Trustee Program, which offers guidance to bankruptcy trustees pertaining to liquidations. According to these guidelines, a trustee must formulate a worthwhile dispensation to a debtor’s unsecured creditors before they proceed with liquidating the debtor’s assets. In other words, any assets that are sold in a Chapter 7 bankruptcy must make sense financially and benefit the unsecured creditors.
All Trustees Are Different
Chapter 7 trustees are randomly appointed to bankruptcy cases, and while they are supposed to follow bankruptcy code, they come with a wide variety of temperaments and do not work for the government. This means that you can be assigned a more aggressive trustee who disregards the guidance from the U.S. Trustee Program and liquidates all of your valuable, nonexempt assets, even if they do not make much profit.
If you are worried about losing any of your assets, you should carefully survey all of your nonexempt property before you file a Chapter 7 bankruptcy petition. This process is called “hypothetical liquidation.” In a hypothetical liquidation, you analyze all of your nonexempt property and determine the value of your bankruptcy estate.
Factors that are taken into consideration when determining and then calculating the total value of your assets:
Fair market value of assets
Encumbrances (or liens)
Costs of liquidation
After analyzing the hypothetical liquidation of your assets, you can determine if the trustee is more likely to net a profit from the sale of your assets or not. If the hypothetical liquidation reveals that a profit is not possible, then you can usually proceed with Chapter 7 bankruptcy without any apprehension that you will lose your property.
However, if the hypothetical liquidation affirms that the trustee is likely to make a profit on your assets (especially if the profit will produce a worthwhile dispensation to your creditors), you should understand that there is a legitimate risk of losing your assets if you file Chapter 7. If you are not prepared to risk your assets, you might want to consider filing Chapter 13 instead.Are You Considering Filing For Bankruptcy? If you feel bankruptcy is the best option for your financial situation you need to speak with an experienced bankruptcy lawyer as soon as possible. Please contact us online or call our office directly at 888.348.2616 to schedule your free consultation.
Are You Considering Filing For Bankruptcy?
If you feel bankruptcy is the best option for your financial situation you need to speak with an experienced bankruptcy lawyer as soon as possible. Please contact us online or call our office directly at 888.348.2616 to schedule your free consultation.