WEIRD SITUATION need Help, TT trying to recover 14k from another party..

[HHM]

That is a good question, can the FIL discharge the Insider Transfer Judgment in a BK?

I honestly don't know, and quite frankly, it is probably an issue that comes up so infrequently, that even an experienced BK attorney would need to research it. I suspect that the it cannot be discharge, but am not sure of the specific grounds. I am not sure the BK trustee constitues a governmental unit. As I review the exceptions to discharge, Section 523 of the BK code, no exception jumps out as covering this scenario, so FIL's liability may, in fact, be dischargeable.

But, if the trustee cannot get the debt from the FIL, then it comes back onto the MIL to statisfy. This is UNlike a preferential transfer where the debtor pays one debt in favor of another, those don't come back onto the debtor, but an insider transfer can come back and effect the MIL's BK.

[music12]

i am very confused about one thing here: if the MIL's case was both discharged and closed, that means that the trustee has been relieved of all duties. in such a situation, the trustee has no authority to be writing anybody letters about the MIL's bk estate. there has to be a case that's open for the trustee to be doing something.

so either the MIL's case was discharged but not closed, or the whole thing is way more complicated than even appears.

[JRScott]

I agree largely with what HHM and lrprn have said.

One thing you have to understand OP is that the Trustee can motion to have the discharge dismissed, and if the case is closed he can motion to reopen it. Thus as they say if the FIL can't satisfy it the Trustee can and will seek remedy from MIL.

The Trustee is not double dipping. As explained above the Trustee is their to represent all the creditors not one. A significant asset (14k) was transferred to an insider (FIL) within 1 year of filing. That is an asset the other creditors will want a part of.

What you really need as HHM and LRPRN state is a lawyer at this point. Your FIL should immediately see a BK attorney and lay out fully what is going on and ask what his options are. Your MIL's case has proceeded a good ways but it might not be unreasonable for her to seek legal council now. Since you say they cannot afford to pay a lawyer you might want to look up Legal Aid and see if any attorneys will work Pro Bono in the area, then make an appointment and see if they qualify for the Pro Bono, but this is going to take a lot of work and though a lawyer may reduce fees I"m not sure it would be entirely free.

[JRScott]

i am very confused about one thing here: if the MIL's case was both discharged and closed, that means that the trustee has been relieved of all duties. in such a situation, the trustee has no authority to be writing anybody letters about the MIL's bk estate. there has to be a case that's open for the trustee to be doing something.

so either the MIL's case was discharged but not closed, or the whole thing is way more complicated than even appears.

Although rare a discharge can be rescinded and a case reopened. Usually reserved for cases where insider payments or fraud comes to light. So the MIL is not out of the woods yet.

[music12]

Although rare a discharge can be rescinded and a case reopened. Usually reserved for cases where insider payments or fraud comes to light. So the MIL is not out of the woods yet.

but that doesn't seem to be what is happening. if the trustee wanted to go after the FIL, wouldn't the MIL's bk case remain open? i thought if a trustee goes after an insider, it's done within the bk case.

i just think it's abusive of the trustee to close the case, then outside the case go sue the FIL privately, all the time holding the threat against the MIL of reopening the case. also, this really cannot be done because the case would have to be turned into an asset case and the creditors are supposed to file proofs of claim. how would they do that if the case is closed??

[JRScott]

Discharge and Closed are two different things.

I suspect the OP has them confused in the original post.

In any event if the Trustee after closing the case discovered the insider payment he could motion to have it reopened. As someone else said I"m not sure the full story has been born out here.

[music12]

you're probably right, the OP must have had them confused, otherwise nothing makes sense.

i think it's unlikely that this insider payment was "discovered" only after closing - it appears to have been on the petition since they settled an AP about the same thing.

[mysticspirit25]

you're probably right, the OP must have had them confused, otherwise nothing makes sense.

i think it's unlikely that this insider payment was "discovered" only after closing - it appears to have been on the petition since they settled an AP about the same thing.

Ok, the BK is discharged, but the case is open, the TT filed a motion to employ his firm to "search for assets" after the discharge, and the judge granted the motion. The motion to employ his firm to search was only after the close of the AP with Chase. Had Chase not filed the AP to begin with, this would not be an issue. MIL was upfront and honest about everything, it wasnt until the AP filed that this became an issue.

[justbroke]

HHM and lrprn have this covered very well! Unfortunately, most pro se debtors file their petitions without reviewing all their financial transactions in the past 1-3 years including real property transfers. This always comes back to haunt them because they did not know what the powers of the Trustee are and what the Trustee is looking for. Usually, in these cases, it's not the debtor who receives the wrath of the U.S. Trustee, it's a relative or business partner who feels it.

As HHM writes, the Bankruptcy Estate is much larger than most people realize, and the reach and power of the U.S. Trustee should never be marginalized.

This is a good thread.

(BTW, filing within the insider preference period, is one of the top 10 ways to mess up your Chapter 7)

[mysticspirit25]

This is a good thread and hopefully others will learn from it. So the trustee can look at bank accounts, etc for the past 3 years if he/she wanted too?

[mysticspirit25]

HHM and lrprn have this covered very well! Unfortunately, most pro se debtors file their petitions without reviewing all their financial transactions in the past 1-3 years including real property transfers. This always comes back to haunt them because they did not know what the powers of the Trustee are and what the Trustee is looking for. Usually, in these cases, it's not the debtor who receives the wrath of the U.S. Trustee, it's a relative or business partner who feels it.

As HHM writes, the Bankruptcy Estate is much larger than most people realize, and the reach and power of the U.S. Trustee should never be marginalized.

This is a good thread.

(BTW, filing within the insider preference period, is one of the top 10 ways to mess up your Chapter 7)

How long exactly is the "insider preference period"???

[justbroke]

How long exactly is the "insider preference period"???

One year.

[Willy13]

From everything I have read on this subject, this case sounds more like a Fraudulent Transfer than a Preference which would have a 2 year lookback or possibly longer using state laws.

[jb300]

In any event if the Trustee after closing the case discovered the insider payment he could motion to have it reopened.

What kind of things happen that would cause the TT to open cases back up. I pretty much thought when the case was closed, you were done. I guess this thread is saying differently and how long do you have to wonder if your case might get reopened?

[HHM]

No, this thread is not saying differently, the OP's MIL case was not closed. But yes, it is "possible" to reopen a BK after it is closed. It is rare, but there is mechanism to do so.