Will the Trustee Come to My Home & Inventory My Possessions If I File Chapter 7 Bankruptcy?

By Kevin Owen

After you file your petition for Chapter 7 bankruptcy, a court-appointed trustee begins evaluating your assets to determine whether they are subject to being sold to repay your creditors. Although the trustee has authority to come to your home to physically inspect your property, this is not common because in most Chapter 7 bankruptcies, there are very little or no assets to liquidate. However, if the trustee determines you have property that can be sold, you are likely to be visited by an appraiser or real estate agent.

After you file your petition for Chapter 7 bankruptcy, a court-appointed trustee begins evaluating your assets to determine whether they are subject to being sold to repay your creditors. Although the trustee has authority to come to your home to physically inspect your property, this is not common because in most Chapter 7 bankruptcies, there are very little or no assets to liquidate. However, if the trustee determines you have property that can be sold, you are likely to be visited by an appraiser or real estate agent.

Exempt Property

Under Chapter 7 bankruptcy law, you are not required to forfeit all your property to your creditors. Some of your assets are exempt from liquidation so you can get back on your feet and move forward following your bankruptcy. Although the law varies by state, generally your car, a certain amount of personal property, as well as some of your home equity are protected from forfeiture to the trustee because either state or federal law exempts them. To determine what property you have and whether it is exempt under bankruptcy law, the trustee reviews your petition and asks you questions during a meeting with you and your creditors.

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Non-Exempt Property

Any property that is not covered by an exemption is subject to seizure by the bankruptcy trustee for later sale with the proceeds paid to your creditors. The trustee obtains non-exempt financial assets, such as stocks and bonds, directly from your bank or brokerage accounts through a court order. If you have movable physical property that is subject to sale, such as jewelry or non-exempt vehicles, you might have to bring the property to the trustee for valuation and sale. However if your physical property is difficult or impractical to move, the trustee might send an appraiser to evaluate its value.

Non-Exempt Home Equity

If you have home equity that is not covered by an exemption, the trustee might send a real estate agent to your home to inspect, appraise, and list the property for sale. This practice is more common if you own a second home or a vacation home since secondary residences are not usually covered by state or federal exemptions. However, if the trustee does sell your primary residence, you are entitled to a cash payment for the value of any exempt equity in the property.

Fraud

If the trustee suspects that you were untruthful in your bankruptcy petition or in statements that you made during the meeting of creditors, the trustee might send an appraiser to your home to inventory your assets. If it is determined that you attempted to hide assets during your bankruptcy, the trustee has the authority to take action against you. The trustee could prevent the discharge of your debts even though he seized some of your property and sold it to pay your creditors. In egregious cases of dishonesty, the trustee may refer you to the Department of Justice for criminal prosecution under a charge of perjury.

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What Happens If You Sell Your Personal Property Before the Bankruptcy in a Chapter 7 Discharge?

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Bankruptcy & Homestead

A homestead exemption allows you to retain a certain amount of equity in your home -- and can prevent the sale of your home to repay debts in a bankruptcy. In a Chapter 7, the trustee can make you sell your home if the equity you have in it exceeds the homestead exemption. In a Chapter 13 bankruptcy, the homestead exemption plays a part, too, because if you can exempt all or most equity in your home, you will have to repay less to your creditors. Both federal and state laws provide homestead exemptions. Some states allow you to choose between federal and state exemptions, whereas other states require you to use the state exemption.

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.

Can a House Be Sold If You Are Going Through Bankruptcy?

Your house is usually your most valuable asset, especially if it is worth far more than you owe. Depending on the type of bankruptcy, you might have the option to keep your house or voluntarily sell it. On the other hand, the court-appointed bankruptcy trustee may force the sale. However, bankruptcy may even allow you to keep your house if you are facing foreclosure.

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