Chapter 7: Can You or Trustee Sell Your Property After Bankruptcy Discharge?

You made it to the finish line.

You filed your bankruptcy case and attended the required meetings.

You took your credit counseling and debt management courses.

You survived any filed objections.

And you finally received your Order discharging your debts.

Can you sell your house now?  Or your car?

Can you legally transfer money from your savings to someone?

Can you put your car, house, or other asset in someone else’s name?

What about borrowing money against your home?

Answer:  Not Yet.

Can the Trustee in your case still sell your assets?

Answer: Maybe

The Bankruptcy Discharge Is Not The End Of Your Case.

When you file a Chapter 7 case, a Trustee is appointed and becomes the legal owner of EVERYTHING you own or have a right to.

That includes your house, your car, your jewelry and anything else you had on the date your case was filed.

During the case, you may not do anything with your property without approval of the trustee and bankruptcy court.

In most cases, the Trustee will do nothing with your property/assets as you most likely filed Chapter 7 because there were sufficient exemptions to protect your assets’ values.

But that doesn’t mean you can do whatever you want with those assets while your case is open.

The reason for this is that the trustee’s right to sell (liquidate) assets is independent of the granting of your discharge.

The Trustee retains his/her rights until either

  • (A) The Trustee formally “abandons” the property, or
  • (B) Your case is closed.

Your case does not close at the same time as you get your discharge.

If there are no assets being sold, your case should close within a couple of weeks after the discharge is entered.

If assets are being sold, it could be well over a year before the case is closed.

Usually.

Trustees Can Keep Cases Open And Wait For Property Values To Rise

A scary, but legal, tactic used by some Trustees is to hold open Chapter 7 cases long after the discharge is granted in the hopes that real estate values will increase beyond the protected amount, and then seek to sell the property.

In an upward trending real estate market, this can be very dangerous for a homeowner who thinks they are protected

(and a dangerous practice trap for their attorneys).

The Trustee has the ability to “abandon” (which means: give up their rights to) their interest in any asset.  This requires filing a formal notice of intent to abandon, among other things.

In the course of a typical Chapter 7 case, a Trustee will not formally abandon assets.

The assets are abandoned automatically once your case is closed.

Thus, if your case is dragging on for some reason, you may need to file a Motion to Compel Abandonment of the property.

This forces the Trustee to make a decision as to whether there is presently sufficient value to your bankruptcy estate to warrant selling the property.

If the Trustee cannot demonstrate to the court’s satisfaction that sufficient value is there, it will be “given back” to you.

It Pays To Be Vigilant

Bankruptcy may seem simple, but there are lots of little traps, a couple of which are discussed above.

Make sure you get accurate values for your assets before filing your case, and then monitor the case after discharge to make sure it gets closed.

That way you ensure that your assets are once again your own to do with as you please.

 

Image Courtesy of Mark Moz

By | 2017-01-19T10:39:01+00:00 January 19th, 2017|Categories: Bankruptcy Law|0 Comments

About the Author:

Attorney Mark Markus has been practicing exclusively bankruptcy law in Los Angeles, California since 1991. He is a Certified Specialist in Bankruptcy Law by the State Bar of California Board of Legal Specialization, AV-Rated by martindale.com, and A+ rated by the Better Business Bureau. Google Plus

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