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FAQ'S

Friday, September 9th, 2005

by Theodore Sliwinski, Esq.

Covered in this Article:

• What is a bankruptcy trustee, and who will be appointed?
• Will the trustee take a debtor’s property if they file for bankruptcy?

1. What is a bankruptcy trustee, and who will be appointed?

After a bankruptcy case is filed the court will then appoint a trustee. The trustee has many functions, but primarily, he is appointed to examine your case, as well as the debtor, and to determine whether there are available for your creditors. Most people can take the necessary exemptions to protect their property from their creditors and the trustee. The trustee then after a thorough examination makes the  determination as to whether he will take physical possession of, or abandon (return legal control) to the debtor.

In the vast majority of cases, the trustee will abandon all if the property that the debtor owner. Very rarely will the trustee actually take the  possession of property in a consumer bankruptcy case. However, if a debtor owns a valuable piece of non-exempt property, then the trustee will take the item and then sell it at a public sale for the benefit of creditor. If the debtor has a little too much equity in their home or car, then the trustee will then usually file a notice of abandonment. This means that they will abandon any equity in this asset, and the debtor will be permitted to keep the car or home.

In my experience, the trustees in Newark will scrutinize the debtor much more than in the Trenton vicineage. However, every trustee is different. Many trustees request that the debtor provide them with proof of their paychecks, their last three pay stubs, and itemization of unusually large credit card bills. The trustee usually wants to be advised what was charged on a large credit card bill. If the items are not luxury items, then the debtor will have no problem.

2. Will the trustee take a debtor’s property if they file for bankruptcy?

In most of the cases the trustee never takes the debtor’s property. When the trustee does seize your property, then this is extremely rare occurrence. The reason is that the bankruptcy code provides the debtors with many broad exemptions.

What this means is that the vast majority of never lose anything. However, a debtor must be careful of losing jewelry. Jewelry can be liquidated rather easily. The trustee can earn his commission and distribute some of the proceeds to the creditors.

A trustee often incurs significant costs and fees liquidating vehicles and homes. Therefore, if a debtor has a significant amount of jewelry that has some value, there is a reasonable chance that an aggressive trustee may take the jewelry. This is a rare case but it does happen.