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Ellen
Ellen, Attorney
Category: Bankruptcy Law
Satisfied Customers: 36714
Experience:  Bankruptcy Lawyer. Experienced.
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My Wife and I have recently received a Chapter 7 discharge.

Resolved Question:

My Wife and I have recently received a Chapter 7 discharge. In the Chapter 7 case, we had some land worth about $39K in which we had about $36K in equity (only owed about $3K all of which was in arrears). Originally, we were going to let the Trustee have the land but instead we made an offer in compromise of $8000 to the Trustee which was accepted and we have paid in full. Does the Trustee first pay off the $3000 that we owed to the lienholder then pay unsecureds or does all of the $8000 go to unsecured debt and we still have to pay the $3000? I guess another way to phrase the question is, When a trustee receives funds on an offer in compromise that deals with the equity in secured property, does the Trustee first have to pay off the secured debt before he can pay any of the received funds to unsecured creditiors? Also, if you have any statutes that back up your answer to the question I would appreciate that as well...thank you
Submitted: 6 years ago.
Category: Bankruptcy Law
Expert:  Ellen replied 6 years ago.
Hello,

I am the JustAnswer expert that will be helping you today. I am a lawyer with 25 years experience. Although I am not your attorney, I hope that I can give you helpful legal information.

When a trustee receives funds on an offer in compromise that deals with the equity in secured property, does the Trustee first have to pay off the secured debt before he can pay any of the received funds to unsecured creditiors?
No. The trustee in bankruptcy sells his interest in the property subject to the lien. This means that the $8000 that you paid to purchase the trustee's interest, will be used by the trustee for payment of the unsecured creditors and priority debt. You will be responsible to pay the lien
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