Restricted and Private Stock, Chapter 7

[ewing8888]

I am going to be filing chapter 7 in the next 30 days and was wondering what happens to stock I own in a private start up I invested in a few years ago. I also hav restricted shares of in a company but I can not sell them for six months. I have looked to sell both shares of stock but there have been no buyers. Does anyone know what the trustee will do in this situation?

[Mensa1]

First off you will list these as assets on your petition. You should list FMV of the stock and that could be zero, if that is what they are worth. The TT will determine if they agree with you or not, and if not, could attempt to sell them if they are unprotected by an exemption. If the TT attempted to sell the stock and was unsuccessful in a period of 90 days or more, then the TT may abandon the asset, which then puts it back into your control... and from that point you can do what you wish with it; keep, sell, trade, etc.

It really boils down to how much $$$ we are talking here. Hundreds, Thousands, Tens of 000's.

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BTW, one last point here. It may also depend on what structure the company is under and what percent of that company that you interest represents. If a large percentage then the TT could consider accepting an asset trade or something like that from the underlying company. Of course if the ownership is minority interest then none of this would apply.

[coolmom04]

We're dealing with this - or are about to anyway. My husband has a bunch of restricted stock units and stock options... all of which vest over a period of four years. Some he was just granted in December and won't fully vest until 2013. The value of the stocks he can cash in right now is only about 3K, but the potential value of ALL the stocks at the current value is apx 16K. The attorney exempted the ones with current value and is trying to say that the others really aren't worth anything b/c if my husband loses his job, he loses the stock options and RSUs anyway and with the economy and market the way it is, who knows what will happen to the values.

My attorney said he's never had a trustee in our district go after stock options for his clients except for once when a guy had a whole LOT of stock options with BB&T or something. The attorney asked the TT why in the world he picked this particular client to go after and the TT said, "I like BB&T. I bank there." And that was that!

Anyway, the attorney filed us as a no asset case, but we could potentially be turned into an asset case. My husband is completely willing to turn over all the stock stuff to the TT, but what we DONT want to happen is the TT holding the case open for four years waiting for the stuff to vest!

Welcome to the forum! Sorry for my long post. Lots of luck and please keep us posted

[ewing8888]

Mensa, coolmom, thank you for the advice. I am meeting with my attorney later this week, but he told me earlier he thinks I'll be able to hold on to them as the trustee will not be able to get any liquidity out of them. One is a 25K investment in a media start up which I've tried to sell back to the company with no luck. The other stock has a restriction on it until September so hopefully i'll be able to hold on to it.

[ewing8888]

I have a check coming soon of about 25K from restricted stock that will be unrestricted in the next few weeks. I plan to use the 25K for expenses and other things. I plan though to file Chapter 7 in June with about 85K in unsecured debt. My question is will I be able to if I spend the 25K or transfer to a relatives name. Thanks..

[newbie2]

I have a check coming soon of about 25K from restricted stock that will be unrestricted in the next few weeks. I plan to use the 25K for expenses and other things. I plan though to file Chapter 7 in June with about 85K in unsecured debt. My question is will I be able to if I spend the 25K or transfer to a relatives name. Thanks..

Don't even consider transferring 25K to a relatives name if you are going to file for bankruptcy.

You've already had one consultation with an attorney, sit down with him/her again and ask about the cash exemption for your state and circumstances.

[scorpion35]

I have a check coming soon of about 25K from restricted stock that will be unrestricted in the next few weeks. I plan to use the 25K for expenses and other things. I plan though to file Chapter 7 in June with about 85K in unsecured debt. My question is will I be able to if I spend the 25K or transfer to a relatives name. Thanks..

transferring 25K to a relatives name is a BIG NO NO

[catleg]

Put it in an exempt asset(401k/IRA), pay off student loans, get any medical/dental care you need, etc.