Rights as a Debtor in Chapter 7 asset case.

[vhs]

If a clearly stated exemption is not honored by a trustee in a chapter 7 asset case, what recourse does a debtor have? I am fairly sure that my retaliation payment from my pending lawsuit, from an employer, is exempted in my state. So, shouldn't the trustee simply abandon the case? If they don't, I am seriously going to consider filing a lawsuit for damages. I know the trustee has incentive to liquidate all assets in an open case of a chapter 7 that was even discharged, however, the law should protect me here. any thoughts?

[justbroke]

If the Trustee files an Objection to Claim of Exemption (or something similar), you file a motion in opposition to that disallowance. If you can't agree, then the Trustee (should) would request a hearing. You then fight in an evidentiary hearing on why the exemption should be allowed.

For example, you may believe that the entire amount of your lawsuit is exempt whereas the Chapter 7 (Panel) Trustee believes that only what is "reasonable. and necessary" is exempt . The Trustee may reason that only a portion of the proceeds are non-exempt property of the bankruptcy estate. If it's a novel question then it will certainly go to a hearing at a minimum. The question would turn on the statutory language of just what does "reasonable and necessary" mean and I'd bet that the argument will center on the meaning of the word "necessary" as used or contemplated by the statute.

justbroke's thoughts: there's a reason that a legislature would use the words "reasonable and necessary" where they could have just said that the proceeds are exempt (period). That means that the legislature likely wanted the person claiming the exemption to show what portion of the proceeds are both reasonable and necessary and not just receive the entire 100% exemption on the face of the statute. In other words, you have to produce or introduce evidence that meets the criteria of reasonable and necessary or only that portion of the proceeds that meet both criteria will be statutorily exempt.

justbroke's other thoughts: if I were the Chapter 7 (Panel) Trustee and there was a reasonable amount of $$$ on the table, then I would want to know what the term "reasonable and necessary" means as intended in the statute. Didn't Des give you a couple of cases?

[vhs]

Appreciate the response. The settlement is not overwhelming, but does cover the lost time I had, while I was not working and could not find a job. It covers less than a year of gross income from my employer, and I was out of work for well over one year. I have a lot to fall back on this. Also, the agreement I made with the employer (based out of Florida, the company) requires a confidentiality agreement to even get it. I was transparent with this because that is what I do and I think it is the law anyway, in this situation, right?

[justbroke]

It all comes down to the appetite of the particular Chapter 7 Trustee and whether they want to deal with waiting or trying to obtain the proceeds. A Chapter 7 case could be open for years (2-3 years maybe), waiting on the proceeds from a lawsuit. My thought was just that if there is a reasonable amount of money--and I don't care to speculate on the amount--then the Trustee would likely be more interested in the case.

[vhs]

Its about 1 year worth of wages, so not a crazy amount. But, I think my state exemptions will cover it, because it is a retaliation and I clearly show a loss of future earnings. If it was in the millions, then I am sure I would be in a different situation unless I had job opportunities that were similar.