What rights , if any, does someone have the moment they file?

[bornfree2]

Once someone files, what rights over their property do they have? I understand that the trustee assumes ownership over everything, and that the debtor can claim property via exemptions. But how does day to day living occur after filing? Can you still use your debit card? Can you sell items on ebay to raise cash (that is items that are exempted)

It appears as if everything is just frozen for as long as the case can take? So how do they expect people to handle life emergencies in the meantime? Just found out my car needs smog check, it failed, and now im looking at unexpected fixes that will require selling something (anything). If the car becomes trustee property, how will I be expected to bring it to standard?

[justbroke]

Once someone files, what rights over their property do they have? I understand that the trustee assumes ownership over everything, and that the debtor can claim property via exemptions.

None. The property belongs to the bankruptcy estate which is created the second that you file. You may claim property as exempt, but until the Trustee abandons the property or the discharge is entered (and in some cases the case is actually closed), the property remains property of the bankruptcy estate. You can only sell property of the bankruptcy estate if you seek permission from the court.

But how does day to day living occur after filing? Can you still use your debit card? Can you sell items on ebay to raise cash (that is items that are exempted)

For Chapter 7, the bankruptcy estate is everything you had as of the date you filed. There are some special exceptions considerations for inheritances, property acquired due to a dissolution of marriage, and some other things related to property bequeathed. Other than those special exceptions, you could win the lottery the day after you filed. That money would not be property of the bankruptcy estate. (But, winning the lottery right after filing would likely raise a "totality of circumstances" situation.)

It appears as if everything is just frozen for as long as the case can take? So how do they expect people to handle life emergencies in the meantime?

As stated, it's as of the filing of the case for a Chapter 7. (Chapter 13s have some special consideration so I'm only talking to a Chapter 7). For a Chapter 7 you continue to live, so long as you don't use or transfer property of the bankruptcy estate. For example, if you filed Chapter 7, the paycheck you receive after filing is not property of the bankruptcy estate. In every case that I know, any other money that you actually exempted could be used to continue to live. The real issue with property in a Chapter 7 is more tangible property like cars, homes, land, and other physical property.

Just found out my car needs smog check, it failed, and now im looking at unexpected fixes that will require selling something (anything). If the car becomes trustee property, how will I be expected to bring it to standard?

You are not expected to bring it to standard. Most people exempt their vehicle since it's usually something they need in order to earn money and live. If you need to fix the car and you intend to keep the car (statement of financial intentions), then continue to make repairs and use the vehicle.

[bornfree2]

None. The property belongs to the bankruptcy estate which is created the second that you file. You may claim property as exempt, but until the Trustee abandons the property or the discharge is entered (and in some cases the case is actually closed), the property remains property of the bankruptcy estate. You can only sell property of the bankruptcy estate if you seek permission from the court.

So my reading of the law (and i dont have it in front of me) is any exempted property IS exempt until the trustee files a claim for it (or objection or whatever the specific motion is). And that then triggers a notice and then a hearing. aka due process. I will research it further and get back.

I can not see how a person without any income can survive 60+ days in limbo land. I may (probably am!) be wrong but I will research the law

[bornfree2]

here is the law where i got my understanding from

https://www.law.cornell.edu/rules/frbp/rule_4003

Rule 4003. Exemptions

Primary tabs


(a) Claim of Exemptions. A debtor shall list the property claimed as exempt under §522 of the Code on the schedule of assets required to be filed by Rule 1007. If the debtor fails to claim exemptions or file the schedule within the time specified in Rule 1007, a dependent of the debtor may file the list within 30 days thereafter.

(b) Objecting to a Claim of Exemptions.

(1) Except as provided in paragraphs (2) and (3), a party in interest may file an objection to the list of property claimed as exempt within 30 days after the meeting of creditors held under §341(a) is concluded or within 30 days after any amendment to the list or supplemental schedules is filed, whichever is later. The court may, for cause, extend the time for filing objections if, before the time to object expires, a party in interest files a request for an extension.

(2) The trustee may file an objection to a claim of exemption at any time prior to one year after the closing of the case if the debtor fraudulently asserted the claim of exemption. The trustee shall deliver or mail the objection to the debtor and the debtor's attorney, and to any person filing the list of exempt property and that person's attorney.

(3) An objection to a claim of exemption based on §522(q) shall be filed before the closing of the case. If an exemption is first claimed after a case is reopened, an objection shall be filed before the reopened case is closed.

(4) A copy of any objection shall be delivered or mailed to the trustee, the debtor and the debtor's attorney, and the person filing the list and that person's attorney.

(c) Burden of Proof. In any hearing under this rule, the objecting party has the burden of proving that the exemptions are not properly claimed. After hearing on notice, the court shall determine the issues presented by the objections.

I will go down the rabbit hole on how this has been interpreted but the naive me says its exempt by fact that its claimed, until its objected to..and that objection has to be a legal procedure and brought before a judge

Which makes sense otherwise the Trustee and Creditors would have supreme power and there would be no checks and balances

[bornfree2]

Furthermore California had passed a law last year that allowed a bank account to be exempt from judgements (?) if it had amounts necessary for basic living ... something like $1600 based on poverty limits and household size etc. (horribly misquoting it but thats the gist). So perhaps the wiser move would be to have more in the bank than in cash for that legal protection

Lastly, this link also shares my thinking

https://www.alllaw.com/articles/nolo...-property.html

In essense, there is exempt and non exempt property. Trustees only work with non-exempt property unless they make a move to try to convert an exempt to non-exempt status via the objection process

[justbroke]

So my reading of the law (and i dont have it in front of me) is any exempted property IS exempt until the trustee files a claim for it (or objection or whatever the specific motion is). And that then triggers a notice and then a hearing. aka due process. I will research it further and get back.

The property is tentatively exempt. The Trustee can object to that exemption. That generally is done within about 10 days of the 341-meeting, but the trustee has up to 30 days after the first "concluded" 341-Meeting. (Concluded 341 meeting is differentiated from first "scheduled" 341 meeting.) That's why even though it's exempt, you can't just sell it. Again, the Trustee has about 30-days after the (concluded) 341-meeting which means at least 60 days has elapsed since the filing date. There are also other specific things when there is fraud (allowing objection up to 1 year after the case is actually closed).

Think of exemption as precluding the bankruptcy estate -- the trustee -- from selling the property unless the estate gives you the exempted value of the property.

I can not see how a person without any income can survive 60+ days in limbo land. I may (probably am!) be wrong but I will research the law

If they had no money before the 60-days... then they would have none after the 60 days. You can't sell property of the bankruptcy estate without approval. Unless and until the Chapter 7 Panel Trustee abandons the property or files their report (or what property they want to administer), it remains property of the bankruptcy estate until the earlier of dismissal, discharge, or the explicit abandonment.

In essense, there is exempt and non exempt property. Trustees only work with non-exempt property unless they make a move to try to convert an exempt to non-exempt status via the objection process

Not quite. Trustees work with all property of the estate. They can administer partially exempt property, which happens more often than you would imagine. The property is still property of the bankruptcy estate even if exempt. It's just exempted from liquidation to pay the creditors. Ownership of the property remain with the bankruptcy estate until the earlier of dismissal, discharge, abandonment, and/or close.

[bornfree2]

Okay i see your points. So that 60 day period is very very sensitive. Wow.

But something like cash cant be 'sold' or 'appraised' . Is that treated differently? With a huge wild card exemption in california, why not throw just everything in cash, claim it exempt, and spend on absolutely necessary things and hope it survives the 60 day- 1 year pressure can period

Think of exemption as precluding the bankruptcy estate -- the trustee -- from selling the property unless the estate gives you the exempted value of the property.

I dont see what right/ authority the Trustee has to 'give you the exempted value' if its already given by law. Again Im sure im all wrong, and i will dig deeper into this esp to try to find practical strategies to pay my rent and this car expense in march!

[justbroke]

Okay i see your points. So that 60 day period is very very sensitive. Wow.

It's probably a minimum of 60 days since it is tied to the "concluded" 341-Meeting. Not all 341-meetings are concluded at the first scheduled session. That's why it's tied to the concluded meeting as the schedules are likely changed from the time of the first-scheduled 341 meeting until that meeting is considered concluded.

But something like cash cant be 'sold' or 'appraised' . Is that treated differently?

You have to think about a Chapter 7 bankruptcy as a liquidation. Liquidation is converting property from the physical into cash (or a cash equivalent). Cash is already in a "liquid" state (e.g. a liquid asset) and its value is pretty easy to determine (face value). Generally debtors are allowed to use cash in order to continue contemporary exchange for a service (cash for food). Generally, debtors shouldn't buy property just after filing any bankruptcy.

With a huge wild card exemption in california, why not throw just everything in cash, claim it exempt, and spend on absolutely necessary things and hope it survives the 60 day- 1 year pressure can period

If you have no income, and only have liquid assets in cash deposits, exempting it would be the thing to do. The court doesn't look at you sideways for spending money to live. But, if you can't exempt the cash... you can't spend the cash. But don't go out and buy a new car the day after you file, or do other things that show that you don't deserve a discharge.

I dont see what right/ authority the Trustee has to 'give you the exempted value' if its already given by law. Again Im sure im all wrong, and i will dig deeper into this esp to try to find practical strategies to pay my rent and this car expense in march!

The right comes from the law. It literally places the trustee into the shoes of the debtor. The trustee can do anything that the debtor could have done which includes... selling his/her own property. Trustees also have strong-arm powers which allow them to undue bad deals, fraudulent transfers, and improper perfection of liens.

If property is partially exempt. For example, you own a car free-and-clear and it's worth $10,000. However you only have a $4,000 exemption so the vehicle is only partially exempt. The trustee can -- and will -- sell the vehicle and then give you $4,000. So long as the Trustee gives you the value of the exemption, they can liquidate.

A smart trustee won't try to liquidate something where they can't get the value. A couple of them thought they could make money on something and ended up losing money because they still had to give the debtor the exemption value.

[bornfree2]

Okay, ill just have to keep super diligent about every single expense post filing. I dont plan on buying a new car (its unbelievable how much they cost), just want to stay housed, get income, and get my fresh start. Never will i apply for a credit card ... im sure everyone says that lol but after living in absolute austerity for 5 years, im pretty good at living on beans and rice.

[justbroke]

Okay, ill just have to keep super diligent about every single expense post filing.

Not required. You are allowed to live. You are allowed to pay your rent, eat, buy food, fix you car, buy gas, keep your lights on. You just can't sell (or liquidate) something that is obviously property of the bankruptcy estate, and usually that's physical property, but can be non-exempt cash. Outside perhaps a 401(k) or other retirement account, most people that enter bankruptcy usually don't have that much cash and they depend on post-filing income. For a Chapter 7, post-filing income is not an issue so that's why we don't think of these things.

So long as the money you're using would otherwise be exempt, it's not an issue. If you filed on your own and claimed the wrong exemption and didn't protect the cash, the trustee will come looking for the money. This is why I tell everyone that has assets -- which includes cash on hand in in banks -- should file with an attorney. Too many Pro Se filers have made errors in their claim of exemptions and are shocked when they learn that the car, cash, or even home was not protected.

I dont plan on buying a new car (its unbelievable how much they cost), just want to stay housed, get income, and get my fresh start. Never will i apply for a credit card ... im sure everyone says that lol but after living in absolute austerity for 5 years, im pretty good at living on beans and rice.

A post-discharge life can be interesting. We all hope we learned something from when we were insolvent and hope to never revisit those habits which caused our downfall.

[bornfree2]

If property is partially exempt. For example, you own a car free-and-clear and it's worth $10,000. However you only have a $4,000 exemption so the vehicle is only partially exempt. The trustee can -- and will -- sell the vehicle and then give you $4,000. So long as the Trustee gives you the value of the exemption, they can liquidate.

A smart trustee won't try to liquidate something where they can't get the value. A couple of them thought they could make money on something and ended up losing money because they still had to give the debtor the exemption value.

Its an interesting dynamic at play. Its like the Trustee and Debtor are adversaries (since Trustee is looking to liquidate to pay creditors) and also 'friends'. Trustee has incentive to get top value (within practical reasons) so they can score their commissions. And if they get top value, they must compensate you via the value of your exemption. So Debtor best interest to exempt as much as possible and at a highest value so they get that amount in compensation.

So trustee seeks to get commission, debtor seeks to assert rights to exemptions, and creditors get what they get after the trustee gets theirs. Im sure debtor is on the bottom of that pyramid but thats how it seems to stack up (well yeah the Debtor is branded with scarlet BK letter for 10 years!)

And the Trustee also has ultimate power to just f u off by recommending a dismissal. Lol. I cant wait till this over.

[justbroke]

Its an interesting dynamic at play. Its like the Trustee and Debtor are advisories (since Trustee is looking to liquidate to pay creditors) and also 'friends'.

The Trustee is appointed the represent the creditors. While a Chapter 13 Trustee's relationship with the debtor is more symbiotic, the Chapter 7 Trustee is trying to find things to liquidate (sell, claw back) in order to get money for the creditors while earning a commission for themself.

Simply, I wouldn't call the Chapter 7 Trustee a friend of the debtor at all -- it's an exclusively advisorial relationship. A Chapter 13 is different and the Chapter 13 Trustee will say that they are not successful unless the debtor is successful.

Trustee has incentive to get top value (within practical reasons) so they can score their commissions. And if they get top value, they must compensate you via the value of your exemption. So Debtor best interest to exempt as much as possible and at a highest value so they get that amount in compensation.

Their commissions are on a sliding scale; they make 10% under $5K and then the commission goes down over certain amounts. Yes, the debtor wants to exempt as much property from being liquidated, while the Chapter 7 Trustee is trying to find as much stuff for the creditors. The Chapter 7 Trustee has a fiduciary responsibility to the creditors as they represent them all.

So trustee seeks to get commission, debtor seeks to assert rights to exemptions, and creditors get what they get after the trustee gets theirs. Im sure debtor is on the bottom of that pyramid but thats how it seems to stack up

Not quite. Chapter 7 Trustee seeks to make sure the debtor's non-exempt (and partially-exempt) property is used to pay the creditors a dividend. That's why it's called a liquidation. The Chapter 7 Trustee is the one selling (liquidating) the property in a fire-sale in order to get the unsecured creditors something.

And the Trustee also has ultimate power to just f u off by recommending a dismissal. Lol. I cant wait till this over.

Ummmm.... Trustees are over-ridden by the court more times than one may thing. They don't have as much power as many think they do. They use the power of the court to do most things (they must actually seek an order of the court just like anyone else). The (Chapter 7 Panel) Trustee's aren't usually the ones that go for a dismissal... it's the Office of the United States Trustee (UST). The UST is responsible for overseeing the integrity of the bankruptcy program and is the office that hires (appoints) trustees. While the UST has some statutory powers, they leverage the Office of the Attorney General and use US Attorneys to prosecute bankruptcy fraud.

[flashoflight]

If you have a judgment creditor, your rights with property outside of bankruptcy are far less than post-petition bankruptcy. The judgment creditor can put a lien on real estate, prevent you from selling or buying real estate without satisfying the judgment, seize all the funds in your bank account or cash register via the sheriff with no notice to you, seize a part of your paycheck, and cause considerable delays (6 months or more) to returning your levied funds if determined to be exempt. If you are at a debtor's exam, opposing counsel can request to see the contents of your wallet and seize the cash with the assistance of court deputies. If you don't show up for a debtor's exam or don't otherwise cooperate, you can lose your freedom by being thrown in jail for contempt of court.

With a properly prepared bankruptcy petition by your lawyer, you will be able to protect quite a bit of property in California via exemptions even though it is part of the bankruptcy estate. For all intents and purposes, all of your exempt property is yours the whole time with no way for the judgment creditor to take it from you anymore although the trustee doesn't have to agree with your exemption claim. However, non-exempt property is vulnerable to forced liquidation in a CH7 or buyback in CH7/CH13. In California, you can keep your house, retirement, some cash, and cars while leaving the unsecured creditors high and dry. My California bankruptcy was old enough that I had to make sure there was nothing left in my checking account on the day of filing. Now I can keep a small amount in the checking account if I filed a new case. In the worst states for BK, you keep just the retirement and everything else is subject to liquidation for the creditors.

[bornfree2]

If you have a judgment creditor, your rights with property outside of bankruptcy are far less than post-petition bankruptcy. The judgment creditor can put a lien on real estate, prevent you from selling or buying real estate without satisfying the judgment, seize all the funds in your bank account or cash register via the sheriff with no notice to you, seize a part of your paycheck, and cause considerable delays (6 months or more) to returning your levied funds if determined to be exempt. If you are at a debtor's exam, opposing counsel can request to see the contents of your wallet and seize the cash with the assistance of court deputies. If you don't show up for a debtor's exam or don't otherwise cooperate, you can lose your freedom by being thrown in jail for contempt of court.

Yeah being a judgement debtor appears to be the worst possible outcome. You become their b*tch for a decade and they can stain your future property/income with their cancerous tentacles of lien. I dont understand still how bankruptcy cleans that up... i think it requires a lot lawyer work to dismantle the face sucking spider (Aliens movie). Ugh, what an ugly side of American 'justice'...preying on the ignorance, fear, and defensiveness of the average worker.

I was reading the local bankruptcy rules (as well as local court civil ones) and there is SO much in there gives incentives to lawyers for winning 'awards' for default judgements. Awards, fees, etc...its all set up so that litigation occurs not for justice or truth seeking, but for outrageous, extortion lawsuits.

Im really really praying bankruptcy court is still fair to the average joe looking for a new start in life.

[justbroke]

Yeah being a judgement debtor appears to be the worst possible outcome.

A judgement, as well as a judgement lien, is renewable one additional time (in most jurisdictions). That means that most judgements can be renewed after the initial 10 years, for 10 more years.

I dont understand still how bankruptcy cleans that up... i think it requires a lot lawyer work to dismantle the face sucking spider (Aliens movie).

• Rule 1: All liens survive bankruptcy.
• Rule 2: When in doubt, see Rule #1

That's the standard. Security through a lien has been jurisprudence for 100s of years. Most States enacted them in the 1800s, but English common law prevailed before then. A lien is a way to guarantee payment. I won't lend you $300,000 to purchase a home without a mortgage, which is a type of lien.

Bankruptcy does provide a way to remove liens where they a.) impair a statutory exemption, b.) questions on the perfection of the lien, c.) and other cause.

In the end, a lien guarantees payment. But it doesn't really guarantee payment. The creditor hopes the lien will be satisfied (the debt paid), but there are many cases where liens aren't worth the paper that they are written on (e.g. foreclosure, bankruptcy, casualty, insolvent debtor, collection-proof debtor).

Ugh, what an ugly side of American 'justice'...preying on the ignorance, fear, and defensiveness of the average worker.

I don't understand this at all. If you borrow $100 from me and you don't pay, I'm going to invoke the law to make you pay me. If there were no laws to protect the creditor then no one would ever loan money to anyone but family. Alas, family is among the worst group of debtors as they tend to never pay back their family member so... no lending.

I was reading the local bankruptcy rules (as well as local court civil ones) and there is SO much in there gives incentives to lawyers for winning 'awards' for default judgements. Awards, fees, etc...its all set up so that litigation occurs not for justice or truth seeking, but for outrageous, extortion lawsuits.

What incentive? Lawyers charge for the time worked. They must account for their time and in most lawsuits, must provide an application for fees and show, through their time-keeping records -- which are electronic these days -- the time spent on the case. These are the professional standards. As an attorney, you can't just make up a number when it comes to a judgement. (There are fees and costs for prosecuting a case as well. PACER costs $$$, so does tools like Westlaw and other research tools which are expensive to use. The tools are expensive, but do reduce the time spent looking in the books, thereby reducing costs overall.)

For a settlement, however, it's up to the person to accept a settlement or go to trial. The settlement is "usually" based on the cost to litigate to verdict with some sort of discount. For example, pay me $5,000 to settle or we go to trial and you'll spend $10,000 defending yourself and may still lose.

Im really really praying bankruptcy court is still fair to the average joe looking for a new start in life.

Bankruptcy was designed for a person deserving of an immediate discharge of their responsibility to pay their debts. It's a tool for those deserving a fresh start... not for those wanting a head start.