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Terry L.
Terry L., Attorney
Category: Bankruptcy Law
Satisfied Customers: 2820
Experience:  Better Business Bureau. 18yrs bankruptcy experience. Chicago Bar Assoc. American Bankruptcy Institute member.
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I was discharged from a chapter 7 bankruptcy Oct. 6, 2009 in

Customer Question

I was discharged from a chapter 7 bankruptcy Oct. 6, 2009 in Indiana.

I just received a letter from an employment law attorney that I was party to a class action lawsuit and that my portion of a successful settlement is $5633.

The trustee from the Bankruptcy case claims that those proceeds need to be turned over to the court for disbursement to my discharged creditors, because the money was earned prior to discharge.

I maintain that the money only became an asset at the time of Settlement of the case, reason being that the settlement was only reason that any funds would have been distributed to me. Simply I did not have this asset at the time of discharge.

Question ; Do I have to forefeit my pro-rata share of the settlement to the trustee?
Submitted: 5 years ago.
Category: Bankruptcy Law
Expert:  Terry L. replied 5 years ago.

Terry L. :

Hi and thank you for your question. In the future, you can request me to answer any further questions.

Terry L. :

Sorry, but the answer is yes, if the proceeds were from a pre-petition asset. it does not matter when you became aware of the suit, but the period for which the suit was involved. So, if it was for period worked prior to the bankruptcy case, the trustee is within their right to request the funds to distribute to your creditors. It is akin to a personal injury case. If you were injured the day before you filed bankruptcy, the lawsuit is the asset, which you were entitled to pursue as of the date you filed the case. If the injury was the day after you filed, it is not part of the bankruptcy estate. The right to sue is the asset, it's just that the proceeds are not known at that time, which is irrelevant to the issue of whether it is an asset of the bankruptcy estate.

Terry L. :

Let me know if you have any other questions. Sorry I don't have a better result for you, wish that I could say I did. Thanks for your question though, good luck.

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