The Process And The Players Involved In Filing And Discharge Of A Bankruptcy
Interviewer: Who are the players involved in the case; you mentioned trustee, Is the bankruptcy judge getting involved? Who’re involved in your case and what are their roles?
James Logan: In a Chapter 7, we’ll file the case and about 30 days after that, we’ll go to what’s called the meeting of creditors. Despite the name and 17 years of doing this, the only creditors that ever show up are the IRS if and friends and relatives who have lent you money. The IRS will show up if you haven’t filed tax returns. The friend and relatives show up because they think if they show up and yell at you, it’ll make a difference. It doesn’t because if they want to get paid, there are other methods. So, those are the only creditors that I’ve mostly seen. Occasionally, credit unions will send somebody down to try to get you to re-affirm a debt. So, you can stay in good standing with the credit union but 99 per cent of the time, there’ll be three people at the table: The debtor, the chapter 7 trustee and me.
The Chapter 7 Trustee Is Appointed By the Court to Find Unprotected Assets to Sell and Raise Money for Creditors and Himself
The chapter 7 trustee is appointed by the court, generally he or she is an attorney but not in all cases. And his job is to find assets that are not protected that he can sell to raise money to make fees for him and to pay off some of your debts. So, there are 15 different chapter 7 trustees in our district here and they all have a little bit different take in how they do it. One trustee, he was the nicest guy in the world. I remember talking to him one time and he said, “Jim, I don’t see any point in being mean to these people because the nicer I am, the more they talk and the more they talk, the more they tell me”. People get in front of him and they start telling them all kinds of stuff and he says, “Over the years, I’ve recovered a lot of assets because people be like ‘Oh, yes. My aunt did give me that diamond necklace’ or whatever”.
Trustees Can Sometimes Be Nasty People Who Threaten and Intimidate Debtors
Other trustees will try to intimidate and scare the debtors. At the meeting of creditors, the trustees, they’re asking you some standard questions. What they’re interested in are finding things that they can sell to raise money. The most common assets are tax refunds, cars that are paid for, and lawsuits. If you’re in car accident, and there’s a part of your settlement is not for personal injury , it’s for lost wages or damages or property damages. Sometimes, the trustees can try to go after that money.
The Trustees Get Paid a Certain Amount Per Case Plus a Percentage of the Money that they Recover
Inheritances are big one, bank accounts, so obviously that’s an easy one. And preferences, like the one I talked about earlier where you pay to creditors, sometimes they’ll go after that. But that’s their main interest is finding assets that they can basically get paid from because the trustees will get paid a certain amount per case plus a percentage of whatever money they recover. So, most trustees are interested in recovering assets so they can make some money.
Trustees Typically Work for Personal Gain and the Benefit of the Creditors
Interviewer: So, they’re actually getting incentivized and try to take everything they can from you?
James Logan: Trustees work for the benefit of the creditors and for the benefit for themselves. All the asset cases that I’ve had over the years, the main winner is often the chapter 7 trustee. Because so few cases have any assets, when they do find an asset case, they want to get as much money for themselves as they can.
After meeting of creditors, any other creditors who want to object to your discharge basically tell the court, “Hey, this guy did something wrong and the debt that he has with us shouldn’t be wiped out”. They’ve got 60 days from the date of the meeting of creditors to do that. If nobody objects and there are no assets, then you get your discharge, That means your debts that can be wiped out are wiped out and you get your fresh start.