Notice of Intent to Sell Equity in Assets

[msm859]

Ok has anyone had this motion filed against them? I have a personal service business that the Trustee threatened to close down pending my chapter 7. My options were to file a motion to abandon which would be heard in 2 weeks and costs me $900.00 attorney fees. During which time the Trustee was saying I could not operate. Or offer him $2500 for the "potential non-exemptable equity in the business - goodwill". He would get $650 out of this and the balance should then go to non-dischargeable taxes. I could then continue operating my business. He had said he would not object to our motion to abandon. I know this is basically a shakedown but I chose the latter. Net costs is less and it avoids disruptions.
Any issues I need to know? The motion says all other exemptions will stand as noted on the petition.

[justbroke]

I don't understand your issue and I don't see any shakedown. Legal representation does costs money and most Chapter 7 attorneys charge fees outside the standard "no-look" bankruptcy petition. I haven't had that particular motion filed, but have seen many motions to sell free and clear and motions to sell assets when there is a business involved. It's a different animal.

[msm859]

I don't understand your issue and I don't see any shakedown. Legal representation does costs money and most Chapter 7 attorneys charge fees outside the standard "no-look" bankruptcy petition. I haven't had that particular motion filed, but have seen many motions to sell free and clear and motions to sell assets when there is a business involved. It's a different animal.

I don't have a problem with the potential attorney fees. The "shakedown" is from the Trustee who is threatening to close my business if I don't pay him something or I can file the motion to abandon - that he won't oppose as he knows there is no value - but I have to close down for 2 weeks. Of course when I agreed to pay at my 341 in 3 weeks he did not have a problem with my staying open.

[tcreegan]

Hi msm,

There seems to be a contradiction....the trustee files a motion to sell the equity in your business, offers you a chance to buy the equity for $2500 and then says he won't oppose a motion to abandon.

So which is he going to do, sell it or abandon it?

On the operate/stop operating deal, I have heard many times that a business (talking sole-proprietor here) must stop operations during a Ch 7

Read the BK code that allows a trustee to operate a business for a short period of time during liquidation

BUT, I have never read/heard/seen an actual reference to BK code that says a sole-proprietorship has to cease operation in a Ch 7...

Anyone know what obscure section of the code that deals with this?

Danged if I can find it...

Tom in Colo

[justbroke]

I don't have a problem with the potential attorney fees. The "shakedown" is from the Trustee who is threatening to close my business if I don't pay him something or I can file the motion to abandon - that he won't oppose as he knows there is no value - but I have to close down for 2 weeks. Of course when I agreed to pay at my 341 in 3 weeks he did not have a problem with my staying open.

I don't understand for some reason. The Trustee is playing this by the book. The Trustee steps into your shows during the pendency of your case. That means, the Trustee "runs" the business. Most Trustee don't want to run a business... especially a personal service business, since the Trustee really can't perform the services. The Trustee gave you a CLEAR OUT and that is to file a Motion to Abandon. The Trustee is just making sure that the creditors don't come back and claim foul, if he, the Trustee were to just let you keep operating and taking profits. The motion protects the Trustee more than it protects you.

The Trustee will always take money on behalf of the creditors -- and him/herself. That's just the way it is. A lot of a bankruptcy is about artful maneuvering and knowing when to fight, and when to pay. If you are discharging hundreds of thousands of dollars of debt, I don't understand the arguing over a few thousand dollars to avoid a liquidation. It might just be me, but I would gladly have paid $2,500 to discharge the $1.4M that I discharged, without any litigation (fighting).

I think the Trustee is being reasonable given the circumstances.

[msm859]

I don't understand for some reason. The Trustee is playing this by the book. The Trustee steps into your shows during the pendency of your case. That means, the Trustee "runs" the business. Most Trustee don't want to run a business... especially a personal service business, since the Trustee really can't perform the services. The Trustee gave you a CLEAR OUT and that is to file a Motion to Abandon. The Trustee is just making sure that the creditors don't come back and claim foul, if he, the Trustee were to just let you keep operating and taking profits. The motion protects the Trustee more than it protects you.

The Trustee will always take money on behalf of the creditors -- and him/herself. That's just the way it is. A lot of a bankruptcy is about artful maneuvering and knowing when to fight, and when to pay. If you are discharging hundreds of thousands of dollars of debt, I don't understand the arguing over a few thousand dollars to avoid a liquidation. It might just be me, but I would gladly have paid $2,500 to discharge the $1.4M that I discharged, without any litigation (fighting).

I think the Trustee is being reasonable given the circumstances.

Well actually the Trustee is Not playing by the book. The Trustees Handbook under Chapter 6 Duties of a Trustee states:

A chapter 7 case should be administered to maximize and expedite dividends to creditors and facilitate a fresh start for the debtors entitled to a discharge. A trustee should not administer an estate or an asset in an estate where the proceeds of liquidation will primarily benefit the trustee or the professionals, or unduly delay the resolution of the case. Chapter 7 trustees must be guided by this fundamental principle when acting as trustee. Accordingly, the trustee must consider whether sufficient funds will be generated to make a meaningful distribution to creditors before administering a case as an asset case.
Further on the handbook states in discussing Abandonment:
Abandonments of property are governed by § 554. A trustee should abandon any estate property that is burdensome or of inconsequential value to the estate. Property should be abandoned when the total amount to be realized would not result in a meaningful distribution to creditors....

My business does Not actually have any goodwill value. If I walked out tomorrow I could not sell it. The Trustee knows this. If he followed his Handbook he should be moving to abandon so that he does not have to worry about any liability of it being part of the estate. My buying back this fictitious goodwill will not provide a meaningful distribution to creditors. The sole purpose of all of this is so that the Trustee makes an extra $650.00.
You are right that it is a small price to pay for discharging $200k+. However, on principal it is Not what the Trustee should be doing.

However, as to my original post I was more interested if anyone has had any experience with this type of motion. I had actually thought when we made the deal with the Trustee that he would be filing a motion to abandon and not the one he did?

[justbroke]

A chapter 7 case should be administered to maximize and expedite dividends to creditors and facilitate a fresh start for the debtors entitled to a discharge.

There it is right there... maximmize and expedite dividends to creditors. It's almost a conflict that they are supposed to do this "quickly" and maximize dividends. If you think about what the Trustee wants you to do... pay $2,500... that would "quickly expedite dividends to creditors". If you move to abandon, that's your prerogative and the Trustee seems as though he won't fight it -- but don't count on that!!! The Trustee must appear balanced and fair, but make no mistake that they represent the creditors.

I don't believe the Trustee is just trying to make 600 bucks, but is simply trying to "expedite" the case. Incident to that is that the Trustee earns a commission, but so be it. I will continue to emphasize and remind debtors that the entire liquidation aspect of a Chapter 7 is a fine dance with the Trustee. You don't want to irritate them, and you yourself probably want to have the case expedited and not spend years awaiting administration of the case. That just costs too much in the long run.

And, the Trustee deserves to make money. Do you know that in 95% of the cases, the Trustee doesn't make money at all? They receive $60 per case to find the assets and determine if there is something to administer. If they mess up and it costs them $600 to find out that the case has no money to be had... they just lost $540. With the 5% of cases which do have assets to administer, most Trustees are looking for expedited resolution and offer a "payoff" in order to settle the matter. This is exactly what your Trustee has done and it is not only fair, but is commonplace. Should you chose to fight... by asking the Judge to compel abandonment of the property, then that costs money. The Trustee was very nice to show you his cards and tell you that he wouldn't fight such a motion.

Again, I have seen these motions, but it is usually because "that" was the deal you struck with the Trustee. Otherwise, it would have been a motion to compel.

At least, that's my personal view on this matter. I know I am sometimes more pro-Trustee and pro-process, but I hope that it gives a view of the process that most people don't understand (or don't want to understand). Maybe you could go back to your attorney and ask him just write the motion and proposed order with negative noticing (if allowed by your District) and since the Trustee won't fight it, then there will be no need to appear, and this will cost less than $900. However, if it turns into a fight, that's another story for another thread.

[msm859]

justbroke: I appreciate your viewpoint. As a business decision I agree that if I can pay the Trustee $2500 (or actually $650 since apparently the other $1850 is going to the IRS who I will still owe) and not have to worry about him questioning anything else I am certainly okay with that. (I did like the line in the motion "All other exemptions will stand as noted on the debtors' petition.") I wish though to get him some extra money that I did not have to be turned into an asset case or have to delay the closing of my case because of this. And hopefully by agreeing to this I can assume there are no other issues regarding my filing Chapter 7.
And I further agree it is smarter to pay the Trustee something (and get a sure thing) and not have to file a motion to abandon that could put you on his "bad" side even if you "win". Hopefully at the 341 when he gets his check everything else should be smooth.
I guess like everyone else I just want this all over -- yesterday!

[justbroke]

I hope it goes smoothly for you as well. The fact is that many debtor attorneys don't like to "bother" the Trustee or get on their bad side. This does frustrate most debtors, but in the end, the cost to "settle" and appease is usually cheaper than the cost to litigate. If the Trustee didn't ask you to pay $2,500 (even though 75% of it would go to the IRS), you may not actually pay the IRS. In this way, the IRS gets paid more money sooner, which is actually better for you. This helps you avoid additional penalties and interest on the $1,850.

I wish you the best.

[tcreegan]

Hi msm, Hi justbroke,

I think am getting the picture here...since the trustee said they won't oppose the motion to abandon but they have made an attempt to liquidate some equity, they are CYA. You can file the motion to abandon but the creditors can't come back on the trustee. Close...?

to file a motion to abandon that could put you on his "bad" side ...didn't the trustee say this was OK?

apparently the other $1850 is going to the IRS who I will still owe ??? ..if they get paid the $1850 why would you still owe it?

Good luck to you msm, the frustration and wanting to get it over with...ugh..

Tom in Colo

[JackBondLove]

It might just be me, but I would gladly have paid $2,500 to discharge the $1.4M that I discharged, without any litigation (fighting).

I agree. I had to pay $5K (originally $7.5K until I negotiated it down!) back to the trustee for the privilege of having him discharge $141K. It's always a good thing to let the trustee make a little money (his cut of the assets, which is relatively large for the first little bit) for his time to let things sail through!

[msm859]

I agree. I had to pay $5K (originally $7.5K until I negotiated it down!) back to the trustee for the privilege of having him discharge $141K. It's always a good thing to let the trustee make a little money (his cut of the assets, which is relatively large for the first little bit) for his time to let things sail through!

I think $5k is the sweet spot because the Trustee gets 25% of the first 5k and then the percentage drops. That was the first number my Trustee mentioned. Our argument to the Trustee was that it would cost me $900 to do a motion to abandon which means I could offer the Trustee $3600 and come out even 25% = $900 with the balance going towards my IRS debt. So we offered $2500 which the Trustee accepted.