Bankruptcy

Please Don't Sell Non-Exempt Property AFTER the Filing of your Chapter 7!

By Joseph McDaniel, Esq.

A yard sale sometimes happens, or a sale of a car, or the sale of the beloved Beanie Baby Collection, or even (in extreme cases) the video game collection.

And as long as the debtors keep track of the money they receive, and they sold the stuff for close to fair market value, and then spend it for food or medicine or a mortgage payment, there's generally no great hullabaloo about the process.

Note: debtors, pre-bankruptcy, can cause problems for themselves if they sell the car for a dollar to their brother, which is both a fraudulent transfer and dumb as a rock. Did you think this was the trustee's first rodeo? Or if they "sell" the car to Mom to pay off the old debt they owe her. That's not quite so dumb, but it gets mom sued for a preference payment to an insider in a troublesome Chapter 7 Bankruptcy case in Arizona. And while the trustees may have a little different approach to things in, say, Casa Grande or Tucson or Flagstaff than they might in Scottsdale, Glendale, Chandler, Mesa or Tempe, you can bank on a fraudulent transfer or a preference payment to an insider causing a speed bump in your case, wherever you may be in Arizona.

I suspect that you will also have problems with fraudulent transfers and preference payments to insiders in Hoboken, Tucumcari, and Mud Lick, but I don't have direct experience with bankruptcy cases in those cities. On the other hand, bankruptcy law is mostly federal law, with a layer of state exemption laws and state property law thrown in for fun, so the results should be similar in those states and cities as well.

BUT ONCE A CHAPTER 7 BANKRUPTCY GETS FILED, THE SALES SHOULD STOP! Make the sales stop, please!

Because a trustee in a bankruptcy case has a statutory period in which he or she can object to the claim of exempt property, and if you're going to try to sell exempt property, you really need to wait until AFTER the trustee has had a shot at objecting to the claim of exempt property.

After that, in the absence of the objections, the property is yours to play with, but you really need to wait, as I've indicated above.

Non-exempt property is a different kettle of fish.

It just plain BELONGS to the trustee after the case is filed.

And the trustee will get downright cranky if you sell his stuff without his permission and don't give him the dough that flowed from the sale. Or her. But the idea is the same.

Now, after the trustee has stamped "NO ASSET CASE" on your file, and it's ready to close, you should (no guarantee in a bankruptcy, folks! They're all a little different!) be able to sell anything you want, IF YOU LISTED IT ON YOUR SCHEDULES!

And you did list it on your schedules, didn't you?

DIDN'T YOU?

Tell me you listed ALL your assets and liabilities. ALL. ALL. ALL.

Please?

NOTHING HERE CONSTITUTES LEGAL ADVICE RE A CHAPTER 7, CHAPTER 13, CHAPTER 11, OR CHAPTER 12. FIND AN ARIZONA BANKRUPTCY LAWYER WHO IS BOARD CERTIFIED IN BANKRUPTCY LAW, AV RATED, AVVO 10 RATED, ON SUPERLAWYERS, OR JUST VERY EXPERIENCED AND A FORMER CHAIR OF SOME BANKRUPTCY SECTION OR COMMITTEE. NOTHING HERE MAY BE USED AS LEGAL ADVICE IN CONNECTION WITH ANY BANKRUPTCY, WHETHER THAT BANKRUPTCY IS IN PHOENIX, GLENDALE, TEMPE, MESA, SCOTTSDALE, OR ANYWHERE ELSE.

Full post as published by Arizona Bankruptcy Attorney Blog on May 05, 2010 (boomark / email).