How Long After Discharge Can a Trustee Take Assets?

By Beverly Bird

Debtors often believe that when they receive a bankruptcy discharge, their case is over, but this isn't always true. Your bankruptcy case remains open, and the trustee can reach your property indefinitely until he either abandons the particular asset or files a no-asset report with the court.

Debtors often believe that when they receive a bankruptcy discharge, their case is over, but this isn't always true. Your bankruptcy case remains open, and the trustee can reach your property indefinitely until he either abandons the particular asset or files a no-asset report with the court.

Chapter 7 versus Chapter 13

Chapter 13 bankruptcy requires a repayment plan to satisfy your creditors. The trustee doesn't take your assets in this type of bankruptcy, but your assets are primarily vulnerable in a chapter 7 proceeding, because your creditors receive payment from the sale of your property.

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When the Trustee Abandons Assets

Sometimes, it's not worth it for the trustee to go to the time and expense of selling a particular asset, such as when there's little equity or value in it. He is supposed to file a notice of abandonment when this happens. If he doesn't, and if the asset appreciates in value, it may eventually be worth liquidating. If your case remains open, the trustee can still order the sale of the asset, even if you've received a discharge. However, you have the right to file a motion asking the court to order him to abandon the property if he's not going to sell it. After the trustee abandons an asset, he can't reclaim it for sale.

When the Trustee Files a No-Asset Report

A Chapter 7 bankruptcy remains open until the trustee files a no-asset report with the court. Trustees do this when they've sold everything there is to sell and abandoned any remaining property. Until you receive a copy of this report, the trustee can come back and take assets, but only if you owned them at the time you filed.

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Do You Always Get a Notice of Abandonment From a Trustee?

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What Happens When You Reaffirm a Vehicle After Bankruptcy?

Bankruptcy allows you to get a fresh start financially, clearing up debts by paying some and dismissing others. Filing Chapter 7 bankruptcy, also called "liquidation" bankruptcy, doesn’t mean you have to give up everything you own, even if you still owe money on some of your assets. If you reaffirm your obligation to pay for an asset, such as a vehicle, you can keep that asset. However, without reaffirmation, you could lose your vehicle after your bankruptcy proceedings if you still owe money on a car loan.

Chapter 7 and Abandoned Collateral

Filing for bankruptcy is often the first step in achieving a fresh financial start. But when you file for Chapter 7 bankruptcy, several things must take place before staring afresh. First, you must hand over your assets to a trustee so that they can be sold to pay your creditors. This is often one of the hardest parts of the process. Sometimes, however, the bankruptcy trustee decides to abandon an asset, allowing you to keep it.

How Often do Trustees Sell Your Property in Chapter 7?

If you're contemplating filing for Chapter 7, you can take some comfort in knowing that trustees do not sell any of the debtor's property in about 90 percent of the cases they handle. This isn't to say that they let debtors keep their assets out of the goodness of their hearts. It means that in nine out of 10 cases, circumstances align so that there's no reason for the trustee to liquidate property.

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