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How to Deal with Aggressive Chapter 7 Trustees

Bankruptcy can be stressful enough without worrying about overly aggressive chapter 7 trustees. However, people going through bankruptcy should understand that chapter 7 trustees have a strong financial incentive to attempt to sell a debtor’s home. There have been several cases where chapter 7 trustees have lined their pockets with their efforts to sell a debtor’s home rather than procuring any meaningful recovery for the debtor’s unsecured creditors.

For example, a chapter 7 trustee might have a tendency to dispute the debtor’s accurate appraisal by using the opinion of his or her own real estate salesperson, a seller who might do nothing more than drive by the debtor’s house. They rely on friends or business associates rather than hiring a professional appraiser to get an accurate assessment in order to get quick money.

Another way an aggressive trustee will try and squeeze money out of a debtor is if the debtor doesn’t want to live with his or her family in a house the trustee is threatening to sell. Rather, the debtor will lay out significant amounts of money—around $5,000 to $10,000–that mostly goes to the chapter 7 trustee rather than hiring an attorney to oppose the trustee’s efforts to sell the debtor’s home. Likewise, this vast sum of money isn’t going into a meaningful payout to the debtor’s general unsecured creditors.

If you find yourself targeted by such an unscrupulous trustee, you have three options. First, submit to the chapter 7 trustee’s bad-faith blackmail and pay a reasonably small comparative amount. While it may not seem small to the debtor, who will likely have to borrow the money from friends or family, it will appear minor to the trustee who wants more.

Second, file a motion to convert your chapter 7 case to a chapter 13 case and pay whatever small amount of equity arguably exists in your house to the chapter 13 Trustee over a 3- to 5-year plan (the length of a debtor’s chapter 13 plan will depend on the amount of the debtor’s household gross income during the six months prior to filing for bankruptcy protection). Although the right to convert a chapter 13 to a chapter 7 case is not absolute under the U.S. Bankruptcy Code, most chapter 7 trustees will not object to a good faith attempt to convert to chapter’s 13. Occasionally an individual chapter 7 trustee will object to a good faith conversion to chapter 13 because this overly aggressive Trustee stands to lose a significant amount of money the seven trustee would earn from an unfair settlement or forced sale of the debtors home. A chapter 13 trustee’s office is an arm of the U.S. Trustee’s Office, and there is no personal financial incentive for a chapter 13 trustee to be overly aggressive, i.e., try to squeeze out every penny of potential nonexempt equity debtor may have in his/her home from the debtor.

The point is not to cave in to to an unfair/overly aggressive chapter 7 Trustee. If the trustee refuses to back down, file a motion with the bankruptcy court. You can seek an order that compels the trustee to abandon the bankruptcy estate’s (trustee’s) interest in your house.

The Marc G. Alster has spent more than 23 years working on bankruptcy and debt relief cases. In his experience, bankruptcy is a court of equity in which justice, fairness, and truth do, in fact, prevail. He will soon be getting ready to file such a motion against a greedy trustee and the attorney representing the trustee. In a good faith chapter 7 case, the trustee or judge has to do a particular type of math to see if money is available for unsecured debt. This equation usually equates to about 10% or a little more for debtors and 5% for realtors.

If you have questions about fighting an aggressive chapter 7 trustee, talk to the skilled founding attorney of The Law Office of Marc G. Alster. He has brought thousands of chapter 7 and chapter 13 cases to favorable conclusions. Mr. Alster takes pride in ensuring he does everything he can to put himself in his clients’ shoes, treating them respectfully and representing them competently every step of the way. He has also published numerous articles surrounding bankruptcy law and the scope of protection afforded individuals under the U.S. Bankruptcy Code, so he understands the complex nature of the subject. To talk to him about your case, contact him at (201) 878-4630 or fill out the online form to schedule a free initial consultation.

Categories: Bankruptcy, Chapter 7

The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship.

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