How is Property in Your Chapter 7 Bankruptcy Estate Treated By The Trustee?
When you file for Chapter 7 bankruptcy, a “bankruptcy estate” is created that is comprised of everything you own that is not covered by a Florida bankruptcy exemption (protection). The bankruptcy estate comes under the bankruptcy court’s authority upon filing. Florida bankruptcy law has exemptions for certain items such as: pensions, tuition and individual education accounts, and if you are married but filing bankruptcy alone, property you own with a spouse as tenants by the entirety is usually exempt. All the property that is subject to the bankruptcy court’s jurisdiction is called the “bankruptcy estate.” In addition to the property you own when you file bankruptcy, your bankruptcy estate also includes property you used to own but transferred to someone else before filing bankruptcy. Property you acquire after filing generally isn’t part of your estate, although exceptions apply to certain types of property you acquire within six months after filing.
Why Does A Chapter 7 Bankruptcy Trustee Care About What I Own?
The Chapter 7 bankruptcy trustee is very interested in your bankruptcy estate because the trustee receives a sizeable commission on any property that can be taken from your estate and sold to come up with some money for your unsecured creditors. Only property from which the trustee can realize a profit will be sold; you usually won’t lose property that is worth very little or is protected by an exemption. The word “usually” is used because Chapter 7 trustees in South Florida are known to be quite aggressive in making claim to property that has little equity available but they know you will want to keep it. Some are well known to overestimate the value of the property in order to have you pay them to keep it. Usually, it’s cheaper to pay them than to incur the legal fees required to fight them. They know this and, as I’m fond of reminding people, law is a business. Many times, it’s cheaper and less stressful to file a Chapter 13 bankruptcy even though you qualify for a Chapter 7 bankruptcy because of over-zealous Chapter 7 bankruptcy trustees in South Florida. An experienced Fort Lauderdale bankruptcy attorney knows the bankruptcy trustees and can guide you towards the bankruptcy chapter that will give you the financial fresh start that you seek without the stress of aggressive Chapter 7 trustees.
Any Property That You Own Is Part of the Bankruptcy Estate
Any property you own is part of your bankruptcy estate —for example, clothing, books, computers, cameras, TV, iPods, cellphones, furniture, tools, car, real estate, boat, artworks, and stock certificates— all of these are included in your bankruptcy estate. Property that belongs to someone else is not part of your bankruptcy estate—even if you control the property—because you don’t have the right to sell it or give it away. You will have to disclose all property you hold on behalf of someone else in your paperwork.
Transferring Property Before You File Bankruptcy Is a Bad Idea
People contemplating bankruptcy are often tempted to transfer property to friends and relatives or pay favorite creditors before they file. Don’t do it. Property given away or paid out in anticipation of filing for bankruptcy is still part of your bankruptcy estate—and in most Chapter 7 bankruptcy cases, the trustee has the legal authority to take it back and will do so. If you do not want to lose property before filing bankruptcy, consider filing a Chapter 13 bankruptcy where you get to keep your property.
Certain types of actions you take before filing for bankruptcy have such serious consequences that, as a practical matter, they render you ineligible to file for bankruptcy for a period. For example, if you sell or give away property during the two-year period immediately before you file, you will have to disclose those transactions on your bankruptcy papers. The consequences can be very severe. You risk losing the property or having your whole case thrown out if the trustee decides that the transfer was fraudulent and the court agrees.
Questions About How Your Property Will Be Treated In a Chapter 7 or Chapter 13 Bankruptcy?
The Orfelia Mayor Bankruptcy Law Firm offers free bankruptcy law consultations to clients throughout Broward and Palm Beach County, but not limited to, those in the following locations: Broward County including Coconut Creek, Cooper City, Coral Springs, Dania Beach, Davie, Deerfield Beach, Fort Lauderdale, Hallandale Beach, Hollywood, Lauderdale Lakes, Lauderhill, Lighthouse Point, Margate, Miramar, North Lauderdale, Oakland Park, Parkland, Pembroke Pines, Plantation, Pompano Beach, Sunrise, Tamarac, West Park, Weston. In Palm Beach, we serve clients in Boca Raton, Lake Worth, West Palm Beach, Lantana, Boynton Beach, and all cities in Palm Beach County.
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