Most likely outcome?

[sunshine93]

After much discussion, we will most likely be filing chapter 7 sometime in the next 6 weeks. My only question involves some private stock that my husband owns. He purchased a number of shares 5 years ago for $33000. He contacted the company (his former employer) to ask what the fair market value of it was. The company either can't or won't tell him and further advised that the company was not interested nor legally able to purchase the stock back from him. They did advise that they would approve a sale if he found a buyer. Well, so far no luck finding a buyer which stinks as if we could sell it we wouldn't have to file. My questions are:

1. How will the trustee most likely value the stock? Will they assume it has no value as we can't find a buyer? Will they try and find a buyer?

2. Are we better served declaring a certain value - say $15,000 - in the hopes that the trustee will let us buy back the non-exempt portion?

3. Could and would they likely value the stock at what we paid for it? If so, we would want just me to file so we would not lose it.

Any advice would be great! We did a free consult with an attorney who didn't seem concerned as he claims it would be nearly impossible to place a value on it due to it being a private company. However, we are still worried. By the way, we can protect $11000 - $12000 under federal exemptions.

[chrisdfw]

You need a good attorney, you need to be honest, list it at some appoximate value, claim every exemption possible on it.

Perhaps the trustee can help you find a buyer and you would recieve your exempted portion. Trustees sell things all the time. Sometimes the trustee taking something and selling it is not the end of the world. Sometime it works out to your benefit.

You are looking at it all wrong. You want to file and have the trustee sell the stock for you if they can.

Lets say you have 30,000 in debt. If you can sell the stock for 30,000 you can pay off the debt and be clear, but have nothing left.
Say you file bankruptcy and exempt 10,000. The trustee sells the stock for 15,000, gives you 10,000 for your exempt portion and gives your credits 5,000 less his or her cut (they should get paid for doing their job). You get rid of the 30,000 or more in debt, get to keep 10,000 dollars. The way I see it, with the bankruptcy you get to keep 10,000 and get rid of the debt, whereas if you sell it yourself you will get rid of the debt but have nothing left.

The trustee may not be interested at all, but they might. The trustee is not always the enemy. You may be better off letting the trustee sell the stock and pay you your exempt portion and discharging all your debt. Let the trustee decide and do the work, they still have to pay you your exempted portion, and you get rid of the debt. It would be short sighted to have you file alone just to protect an asset which you can't seem to sell.

If the trustee can't sell it and pay you your non-exempt portion then you get to keep it anyway when they abandon it. If they can, you get money your otherwise have not been able to get. Either way your debt gets discharged and you either get something for the stock, or you get to keep it and be rid of dischargeable debts. If they sell it, the trustee will do the work, get paid, probably be happy, and you get money. To me its a can't lose to file and exempt as much as possible.

Trustees often get paid nearly nothing to handle chapter 7s, if you have an asset they can sell, that you can't sell, they are likely to be happy to handle it for a chance to make more than $60. You win, they win, your creditors get something rather than nothing.

most likely the trustee won't be able to sell it and abandon it, but you want them to sell it for you.

[sunshine93]

Thanks, Chrisdfw.

I guess the real problem is that we don't want to sell them if we don't have to. Or if we do, we would prefer to do so and pay our debts off and have no black mark on our credit. While they technically aren't worth much right now they could be if the company goes public in a few years. Being debt free with an extra $10k would be great, no question, but even better would be if we could protect them and/or buy them back somehow. It just seems like such a gamble and I'm not sure we are willing to roll the dice. Especially when I could file alone and erase $17,000 of our cc debt and protect husband's credit as he's the one earning all of the money in our family. Thanks for your advice though....it's really appreciated!!

[daylate]

Selling stock in a private company is not going to be easy unless it appears that it is the next Google or Facebook or the like. If got 33000 shares for a $1 per, then your chances are better but still not good. If he paid $10 a share the chances of selling are less. Best bet might be a current executive in the company who doesn't have as many shares or who wants more. if you can't find a buyer, chances are the trustee won't be able to either so like an earlier poster said there is a good chance he will abandon it and you'll get to keep them. Good luck.

[chrisdfw]

I agree with daylate, If you can't sell it, the trustee probably can't either... but on the off chance he or she can, I still think you win since you get paid the non-exempt portion. If the trustee can figure out a value, perhaps you can keep a portion of the shares equal in value to your exemption.

Realistically it will get abandoned, if it doesn't you come out ok anyway.

[sunshine93]

You are both right, for sure. Oddly enough, we did just find a buyer today. The amount he is willing to pay, however, is well within the amount we can exempt (and comes nowhere NEAR what we woudl need to pay off our debt) so I am hoping that the trustee accepts that offer as the value and everything will be fine. I guess we'll find out for sure in a couple of months! Thanks again