When you file for bankruptcy, whether under Chapter 7 or Chapter 13, your property becomes part of what is called the “bankruptcy estate.”
Assets that are part of the estate include all your property, such as your house, vehicle and bank accounts; property that you may have loaned to somebody or is in someone else’s possession; money or funds that are owed to you but which you have not yet received, such as wages or commissions; revenue from rental income and more.
In short, pretty much everything you own, are owed or have an interest in, such as your share of marital property, less any allowable exemptions.
Whatever is in the bankruptcy estate is now under the control of the bankruptcy trustee, and it is his or her job to oversee the bankruptcy estate and perform duties required by the bankruptcy court.
As stated by the U.S. Trustee program, the trustee’s mission is to “promote the integrity and efficiency of the bankruptcy system for the benefit of all stakeholders–debtors, creditors, and the public.”
The bankruptcy trustee reviews all documents related to your bankruptcy case
A primary function of the trustee is to look at your schedules (the paperwork you turn in to the court) and other submitted financial documents.
They are looking for accuracy, and will check to see that your income matches the financial information you have provided.
They will look for red flags that might indicate assets that are hidden, whether accidentally missed or purposely omitted (in which case, you have committed bankruptcy fraud, a federal felony).
The trustee can also inspect your property, take inventory of items in your house, a storage facility and even your safe deposit box.
The bankruptcy trustee is responsible for selling any assets that aren’t exempt
Under Chapter 7 bankruptcy, the trustee collects all your assets and sells those which aren’t exempt.
Assets that are exempt under federal law, and you are allowed to keep, are based on a value limit, and include:
- Homestead value up to $25,150
- Motor vehicle value up to $4,000
- Household items with a combined value of up to $13,400
- Jewelry value up to $1,700
- Tools of the trade value up to $2,525
- Unmatured life insurance value up to $13,400
- Personal injury claims value up to $25,150
In many cases, New York residents are better off going with the exemptions offered under New York law, rather than the federal exemptions, and your bankruptcy attorney can advise you on your options.
In any case, whatever isn’t exempt is sold under Chapter 7.
The bankruptcy trustee helps you manage paying off your debt
If you have filed for bankruptcy under Chapter 13, your assets aren’t sold.
Instead, you have an agreement with your creditors to repay what you owe over a three-to-five-year period of time.
That means that your disposable income will go into a fund designated for the repayment of your debts.
Your disposable income is whatever is left over after you have paid your allowed monthly expenses.
The bankruptcy trustee, in turn, distributes the money in the fund to your creditors, as per your bankruptcy plan.
Learn more about the role of the bankruptcy trustee, how bankruptcy works and how it could work for you
Bankruptcy is complicated and requires skilled legal guidance to ensure that schedules and documents are accurate and complete.
The trustee will look for any issues, and we help make sure that they don’t find any.