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JP
JP, Attorney
Category: Bankruptcy Law
Satisfied Customers: 109
Experience:  Represented creditors and individuals in bankruptcy and consumer matters.
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I currently have stock options in a company that has not gone

Resolved Question:

I currently have stock options in a company that has not gone public yet. Could those stock options be siezed during a chapter 7 backruptcy (they are currently worth nothing, but I paid $5000 for 1000 shares)? What if the company went public after bankruptcy discharge? Could this stock be siezed and what is the time table for when they no longer can be siezed? I live in Austin, TX.
Submitted: 8 years ago.
Category: Bankruptcy Law
Expert:  JP replied 8 years ago.

Whether your stock options can be seized has little to do with whether the company has gone public. The possibility that the trustee will seize your stock options has everything to do with your ability to claim those stock options as exempt from seizure by the trustee. Your best option would be to consider using the federal exemptions when filing your chapter 7 case. The federal exemptions has a "wild card" exemption that you can apply to any property. Your stock options will be considered personal property that will become a part of the bankruptcy estate once the case is filed and it is your responsibility to properly exempt any property that you want to keep and protect from seizure by the trustee.

 

The timetable varies. The trustee is considered the administrator of your bankruptcy estate until the bankruptcy case is closed. Many people believe the bankruptcy case closes upon entry of the discharge order, which generally takes approximately 6 months. However, the trustee could potentially seize any non-exempt property until a final decree is entered closing the case, and this could take place at any time after the discharge order is entered. The final decree could be entered within 3 days of the discharge order or the final decree could be entered within 3 years after the discharge order is entered. The trustee will be able to seize any non-exempt property until such time as the final decree has been entered closing your case.

 

You should consult with a bankruptcy attorney in your area to ensure that you are using the best exemptions (state or federal) to properly exempt any property (including the stock options) that you want to protect from seizure by the chapter 7 trustee.

 

I hope you found this information helpful.

 

Best Regards.

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