HELP! 1 year from filing and they're turning it into an ASSET case

[firsttime]

November 17 marked 1 year from filing. We received our discharge at the end of April (meeting of the creditors was December 15)....I received a small inheritance ($500) back in April and our attorney wrote to the trustee telling her and saying if we don't hear back from her, he will assume it's mine..never heard back from her. She had asked for our tax returns back in March and heard nothing from her regarding the one asset we did have, which were royalties. Nothing on PACER since April. Just received a letter asking for all monies received from these royalties since filing AND the inheritance money AND $25 from our bank account And $35 for a digital camera. She is giving us 3 1/2 weeks to give her all this money. Can she wait this long to change it to an asset case? If she wants to sell the royalties, will she give us a chance to buy them from her? It says that she intends to Auction the Royalties or PAY OVER.....what is Pay Over? I'm freaked out. I had hoped this was all done and it was just a lag in court paperwork that caused it not to close...help help help

[despritfreya]

Your attny should have told you this. . .

1. The inheritance, no matter how small, does not belong to you (unless there is some exemption that covers it).

Your attny, sending a letter, means nothing. If he had not heard back, instead of assuming the Trustee did not care, he should have requested that she abandon the asset or he should have filed a Motion to Abandon. Regardless he should have told you not to spend any money you receive from the inheritance.

2. There is no time limit for a Trustee to administer the estate.

3. All non-exempt property must be turned over upon demand of the Trustee or other suitable arrangements must be made at that time.

4. There is nothing for your to be upset over. This is a process and, if you want to get out from under debt, you must take everything in stride and deal with it.

It sounds like the inheritance was not a one time payout of $500. Sounds like the asset is an interest in a royalty that has a continuous payment stream. The Trustee is going to auction either the royalty itself or the rights to receive the income stream (pay over).

Every dime you have received from the royalty thus far belongs to the Trustee and needs to be turned over. The Trustee is asking for the funds (including some smaller amounts) to be paid in 3 weeks. If you do not have the $$ the Trustee may allow you to make payments over a longer period of time. How much have your received thus far?

Des.

[firsttime]

Thank you for your response. I understand about the inheritance, just wish we knew about it back in April. Why did she wait so long to tell us? If she is going to sell the royality or the pay over, do I have the option of purchasing it? How do I find out how much she is wanting to sell it for? Honestly, it brings in about $1200 a year, max... There are many years it is much less. We were just very surprised why she waited so long. Pacer never changed to Asset Case...with our meeting back in December 2011, waiting a year to tell us this seemed rather long. What is your opinion?

[firsttime]

oh and the inheritance and the royalty monies are two separate things. Isn't it strange that she wants $35 from digital camera/hobby stuff?

[despritfreya]

It is not unusual for it to take more than a year for a Trustee to administer assets or even determine that there are assets to administer. Remember, the Trustee has many, many other cases to deal with.

You can make an offer to buy back the asset(s). The Trustee will either use the offer as a opening bid at a bk sale (auction) or she will accept or reject it outright. You should discuss these options with your attny.

Also, it sounds like you owned the royalty before filing, in addition to the inheritance. If so (and there was no exemption to protect the royalty), then you were an asset case from day one. The Clerk of the Court sets each Chapter 7 up as a “no-asset” case until the Trustee issues a notice that there may be a distribution. At that point the Clerk of the Court switches the PACER description to “asset”. As to the $35, she is being knit picky and, but for the other items, normally she would not care about the camera. Personally, I would just give her the camera - let her spend the time to liquidate it.

Des.

[firsttime]

understanding this more, thank you. So it can be a "no asset" case thru discharge and then after a year switch. They always knew about the royalities, but because they didn't amount to much, it was discussed that it would just not be worth trying to sell it, as there isn't a big market for it. Nor did anyone have any idea where the heck you would even sell it. Don't want to piss her off, but the camera in question is now broken! We listed our asset to having a certain value (under $1000)..is that what she would want? How is an value of an asset determined?...

[despritfreya]

Value is determined by what you are willing to pay to keep it. If the Trustee auctions it, value is determined by those that bid on the item. Tough to say what you should offer her to keep it. If there is no market it might be cheaper to let her try to sell it. Show up at the auction and give a bid of $10. See what happens and hope you are not out-bid.

Des.

[poorpoorpoor]

Hi. I'm sorry to hear that you are going through this.

I always thought that once a case is discharged, whatever money you get is yours to keep. How can they go after money that comes to you after you file/after the debt is discharged?

[despritfreya]

I always thought that once a case is discharged, whatever money you get is yours to keep. How can they go after money that comes to you after you file/after the debt is discharged?

The discharge ends a debtor's issues with the creditors. It has nothing to do with the Trustee's administration of the case. Like mixing apples and oranges.

The Trustee's job is to find, liquidate and administer assets that were in existence prior to the filing of the bk or became an asset by operation of law within 180 days after filing. The length of time it takes is not usually relevant and a debtor has a duty to cooperate with the Trustee. Failure to cooperate can result in the revocation of the discharge.

Des.

[HHM]

You need to start reorienting your priorities. Regardless of what your attorney told you or didn't...the goal now is to preserve your BK discharge. If you are unwilling or unable to make good on the assets that belong to the BK estate, the trustee CAN AND WILL revoke your discharge.

Generally, representing you and assisting you with these sort of post-filing issues is beyond the scope of the attorneys representation, so you should review your fee agreement.

Or, it might be time to call in a "real" attorney. The sad fact in the bankruptcy industry is that very few providers provide any real service beyond filling out forms and basic advice. When things get rough, these dabblers disappear and there isn't much you can do about it because limiting representation is standard industry practice and with so many debtors wanting to do BK on the cheap, you get what you pay for.

[tobee43]

The discharge ends a debtor's issues with the creditors. It has nothing to do with the Trustee's administration of the case. Like mixing apples and oranges.

The Trustee's job is to find, liquidate and administer assets that were in existence prior to the filing of the bk or became an asset by operation of law within 180 days after filing. The length of time it takes is not usually relevant and a debtor has a duty to cooperate with the Trustee. Failure to cooperate can result in the revocation of the discharge.

Des.

well stated des. this is the way, and again, it's only a personal preference, but the "close" order to me is far more sufficient than that of a discharge order, not to imply that having one's debts discharge is not important.

HHM, while i understand what you are pointing out here, i really don't see that this situation should not have been addressed with the atty. the objective, once one hires an atty to represent them in a bk case, one would hope is not only the filing out and submission of "forms" to the court, but to insure there are no situations that can harm their client, and follow the case once filed to it's end or conclusion. in this case; the client rec'ing both the discharge and the close orders. many people are not schooled in the law or the languages of the legal end of the situation and have no clue that both these orders must be issued to finalize the case. i believe that is why people engage an atty through out the process, because they do not know what to expect. i do understand that if other issues arise out of those initial filings, (i.e. and AP), one would hope the atty they hired was or is watching or guarding their case to it's completion and informing them of any complications or problems that arise. only then, i can see the atty tell their client, well we have run into this problem and it may cost you more to resolve the issue because i have to file this or that.

it's telling to me that this atty, when a reasonable amount of time lapsed did not file the motion to abandon, that motion would have at the least made the client aware there may be issues and prepare them. as suggesting that this situation is a post-filing issue, i really can't understand that, as once again, both orders to complete the case should have been concluded. that was the goal.

[HHM]

Tobee...I understand what you are saying, but I deal in reality, not fantasy land. It is "accepted" practice in most districts and most states that attorneys can "unbundle" legal services. What that means is the attorney is NOT on the hook to provide certain services. Generally, most bankruptcy attorney will end representation once the case is filed...but will attend the 341 meeting. But, for any matter that arises after the case filing, e.g. any contested matter, AP's, redemption, dealing with the trustee with assets, reaffirmation, are ALL considered extra and outside the scope of the Representation. The fee agreement will say as much in various ways.

Also, why I say there is nothing the OP can do about it is that the rarely the debtor is actually harmed. Malpractice is actually quite rare (poor service is common), because the debtor is usually not harmed by the attorney's action or inaction. About the only time malpractice rears its head is if an attorney messes up a tax discharge case, but other than that, the debtor's individual circumstances determine what happens to them in BK. So, if someone dies during the Look forward period for inheritance, there is nothing an attorney can do about that. If the debtor has some assets, advised the client of such (which is what happened here), nothing the attorney can do can change it. Even with Desp's example, you "could" file a motion to abandon...but let me ask it like this; Debtor, I could file a Motion to Abandon, it will cost you $600, and if it goes to hearing, another $600, and it will 99% certain get rejected, do you want to do that?

Not knowing, or not explaining the "entire" situation doesn't change the result. All it does is make it so it doesn't come as such a shock. But the inheritance and the royalties would have been taken, regardless. I am willing to bet that if the attorney said...hey, to really figure out the royalties, it will cost an extra $1500 dollars to get a discounted future value of the disbursement and review the documents, the debtor here would have balked.

I don't necessarily agree, but the market dictates this sort of thing. If you want BK's to cost less than $2,000, this is what happens. That is just reality.

[firsttime]

Thank you for all of your input. I feel that our attorney will help us understand how to proceed. There aren't any suprises, other than it taking so long to come to the conclusion we thought might happen. We just wished that it wasn't a year after filing...as we were told by many that if the trustee didn't make mention of auctioning the royalities way back when, they probably wouldn't going to touch them. There isn't really a market for them, and it will take some work on her part to put together a 'package' for it to sell, so that's where we're hoping that she will just sell them to us. It's more of a "family" thing than a money thing at this point. We will call the attorney today and see what they have to say. We just want this done and over with. And yes, we wouldn't have paid even more money to fight the $500 inheritance, it would have cost more to fight. People on this board and the attorney really thought the trustee would let that one go, as it wasn't a big amount...we're ready to get on with the next chapter of our lives. I feel that the lesson here for those who are just going thru this is that the discharge doesn't mean anything about the trustee accepting the filing...it's just formality.

[tobee43]

Tobee...I understand what you are saying, but I deal in reality, not fantasy land. It is "accepted" practice in most districts and most states that attorneys can "unbundle" legal services. What that means is the attorney is NOT on the hook to provide certain services. Generally, most bankruptcy attorney will end representation once the case is filed...but will attend the 341 meeting. But, for any matter that arises after the case filing, e.g. any contested matter, AP's, redemption, dealing with the trustee with assets, reaffirmation, are ALL considered extra and outside the scope of the Representation. The fee agreement will say as much in various ways.

Also, why I say there is nothing the OP can do about it is that the rarely the debtor is actually harmed. Malpractice is actually quite rare (poor service is common), because the debtor is usually not harmed by the attorney's action or inaction. About the only time malpractice rears its head is if an attorney messes up a tax discharge case, but other than that, the debtor's individual circumstances determine what happens to them in BK. So, if someone dies during the Look forward period for inheritance, there is nothing an attorney can do about that. If the debtor has some assets, advised the client of such (which is what happened here), nothing the attorney can do can change it. Even with Desp's example, you "could" file a motion to abandon...but let me ask it like this; Debtor, I could file a Motion to Abandon, it will cost you $600, and if it goes to hearing, another $600, and it will 99% certain get rejected, do you want to do that?

Not knowing, or not explaining the "entire" situation doesn't change the result. All it does is make it so it doesn't come as such a shock. But the inheritance and the royalties would have been taken, regardless. I am willing to bet that if the attorney said...hey, to really figure out the royalties, it will cost an extra $1500 dollars to get a discounted future value of the disbursement and review the documents, the debtor here would have balked.

I don't necessarily agree, but the market dictates this sort of thing. If you want BK's to cost less than $2,000, this is what happens. That is just reality.

HHM, i wasn't aware that atty's were now bundling bk packages like direct tv. LOL! i hear you, however, i do not agree, i do feel the atty's responsibility goes a step further than you are stating, once hired. the fee agreement is just that and if one doesn't like it, they can negotiate those fees as well. i know you see reality everyday, however, i don't believe it's a fantasy to expect an atty to do more than just and fill out the paperwork and file the docket. which really is done by the firms $6 an hour high school kid anyway, usually incorrect and as we have heard over and over again on this forum.

i wasn't at all referring to the inheritance, as there simply is no argument here, it clearly falls into the 180 day limitation and certainly would not be worth fighting or paying $600 for a $500 issue. no one wants to throw good money after bad. however, in the case of the royalties and not clearly knowing what the basis for their payments are, they could last 3 life times and be worth, depending on what they are and why, quite a bit of monies.

my point is the atty should have explained the process perhaps a bit clearer. your correct, explaining it does not change the outcome, however, it helps the client understand and know what to expect. i am aware you are not a hand holder

firsttime:

I feel that the lesson here for those who are just going thru this is that the discharge doesn't mean anything about the trustee accepting the filing...it's just formality.

that's correct, and the accepting and agreement of the petition and approved by the trustee, then signed by the judge, is when an order of "close" is issued. it's really more than a formality, it's actually a reality that your case is done.

just to make you "feel" better about your year, i do know someone that has had an open chapter 7 case for over 7 years now, and there is at this time no end in sight. so these situations do happen.

best of luck to you, i'm certain you will get this all straighten out and be able to move on with your lives!

[HHM]

Tobee

If that is the case, then I would ask that you clarify in your post that you are stating "your" opinion about what an attorney should or should not do and don't present it as accepted fact. The position I present is the one that has been largely accepted by the bankruptcy courts and by most state boards of professional ethics.