One of the most common bankruptcy questions we receive is, “Will I lose any of my property if I file bankruptcy?” While we cannot see the future, we can and do use our knowledge of bankruptcy law and our extensive experience filing bankruptcy cases to answer that question for each client. To be perfectly honest, it depends on the case. Each bankruptcy case is different and each debtor’s financial situation is unique to that individual. In a Chapter 7 case, if the trustee takes any property from the debtor, it is called an “asset case.” However, only a very small percentage of Chapter 7 bankruptcies filed in Illinois are asset cases.
Why Does the Trustee Take Property in a Chapter 7 Asset Case?
A Chapter 7 trustee has several roles but one of the most important roles for a Chapter 7 trustee is to locate and liquidate non-exempt assets for the bankruptcy estate. In an asset case, the trustee liquidates non-exempt property and he uses the funds received from the sale of that property to pay the claims of unsecured creditors on a pro-rata basis. Therefore, the trustee will look at the exemptions claimed by a debtor, the secured liens against the property, and the value of the debtor’s assets to determine if there is sufficient value above any liens and claimed exemptions to liquidate on behalf of the unsecured creditors.
In an asset case, the trustee must review the claims filed by the unsecured creditors and object to any improperly filed claims. Once the period for filing claims expires and the trustee files any objections that he has, the trustee will submit a report outlining the distribution he is proposing to each creditor. This report must be filed with the court and notice served on all parties in interest. If there is no objection to the trustee’s report, the court will order the trustee to disburse the funds according to his proposal for distribution. After all funds have been disbursed, the trustee will file a final report and the bankruptcy case can be closed. There is nothing for the debtor to do during this time even though the debtor will receive copies of everything the trustee files with the court.
In an asset case, the debtor may be able to negotiate with the trustee to purchase or “buy back” the equity in a non-exempt asset. If so, the debtor must be able to demonstrate where he or she obtained the funds for the buy back so that the trustee can verify that the debtor was not “hiding” assets in an attempt to deceive the trustee, the court, and the creditors.
Can I Avoid Having an Asset Case?
Whether your case is an asset case is determined by your current financial situation and your property. When you meet with our attorneys, we will review your assets and we will advise you of any potential problems we see that could result in an asset case. As we stated above, almost all Chapter 7 cases filed in Illinois are no asset cases. Our bankruptcy lawyers understand that our clients are anxious about losing property; therefore, we take the time to answer all of their questions and explain the use of bankruptcy exemptions to protect property from the trustee and their creditors. In most cases, a debtor discharges thousands of dollars in unsecured debt while keeping all of his or her property.
Contact Our Office for a Consultation with an Experienced Illinois Bankruptcy Attorney
The attorneys of Pioletti Pioletti & Nichols represent individuals who need experienced bankruptcy attorneys. We represent clients throughout McLean, Woodford, Tazewell and Peoria counties by providing compassionate, competent legal services. Contact our office by calling 309-938-4838 to schedule your free bankruptcy consultation.
When you need the assistance of an experienced bankruptcy lawyer in Central Illinois, call the knowledgeable and skilled attorneys of Pioletti Pioletti & Nichols. We are dedicated to providing our clients with exceptional service and support throughout the bankruptcy process.