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Good morning The trustee handling my bankruptcy gave my

Good morning The trustee handling my...
Good morning

The trustee handling my bankruptcy gave my creditors 90 days to
claim cash generated from a auto accident settlement. He has been holding 55K and gave the creditors until July 26th. Only B of A has claimed 4500.
I'm flat out of cash and need this money. Yesterday he has agreed to release our minimum exception amount of 20K. It appears he wants to extend the closing date and remind creditors that their is 31500.00 left for them to grab. Can he break his own closing date. It appears it is in his best interest to extend this so he can get a commission. How should this be handled ?
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Answered in 20 minutes by:
8/21/2013
A.J.
A.J., Attorney
Category: Bankruptcy Law
Satisfied Customers: 4,300
Experience: Experienced consumer bankruptcy attorney.
Verified

SavyLawyer :

Hello, and thank you for using Just Answer. My name isXXXXX am a bankruptcy law professional, and I look forward to answering your question this afternoon. I have a few quick follow up questions for you so that I can better answer your question:

SavyLawyer :

(1) What state did you file in?

SavyLawyer :

(2) Is this a chapter 7 bankruptcy? (it sounds like it, but I want to make sure)

Customer:

Washington

Customer:

Chapter 7

SavyLawyer :

Ok great, thank you. Give me just a moment to look at Washington's exemptions and to see if there are any specific local rules that might apply (bankruptcy is federal law, but local court rules and state exemptions also apply).

Customer:

Michael – Following up on our conversation this morning I represent the Sanborns in the above matter. The settlement of their first case has been approved, and after attorneys fees there is approximately $55,000 to distribute. Only one creditor’s claim was filed in the case by Bank of America. This claim should be about $4,500 once the proceeds from the sale of the secured collateral is accounted for. The bar date for filing additional claims expired in July. My clients are really in desparate need of funds, and should ultimately be entitled to most of the proceed from the settlement. I understand that we can do an interim distribution at this time by a agreed Order, and that you will send me one that you recently used successfully. I appreciate your help with this matter and I look forward to receiving the order and I will return it immediately.


 


XXXXX XXXXX


Attorney for Debtor

Customer:

this was the email my attorney sent the trustee yesterday

SavyLawyer :

Ok so you are represented by an attorney, that is a good thing. It looks like the attorney did the right thing here.

Customer:

ok

SavyLawyer :

First, to answer your initial question, the trustee does have significant leeway in seeking to get creditors paid where there are assets that can be distributed.

Customer:

I'm interested in the trustee's action on withhold funds

SavyLawyer :

The funds would currently be part of what is called the "bankruptcy estate". So technically the trustee is not withholding them, they are just still a part of the bankruptcy estate.

Customer:

if he has sent a date of july 26th can he break that since the results or not up to his expectations

Customer:

does challenging him to release the balance just plan piss him off and have him dig his heals in ?

SavyLawyer :

A bankruptcy trustee can extend a deadline for creditors if they believe that is necessary for equitable distribution to creditors. So long as the funds were not exempt, the trustee has wide latitude for setting the rules for distributing the funds, at least as far as the timeline goes.

Customer:

does he contact them to remind them their is money available ?

SavyLawyer :

Potentially, yes, it would be at the very least a calculated risk to file a motion to halt distribution on the grounds that the deadline originally set has come and gone, and the assets have not been distributed.

Customer:

so who time is he allowed ? Can the judge either have it stopped and distributed or set a firm date for closure

Customer:

how much time sorry

SavyLawyer :

Generally the trustee files a report with the court that is available to all creditors to see listing assets available for distribution. The trustee could do this again as a "reminder", listing assets still available (ie that have not been distributed).

Customer:

can we do anything to get this closed.

Customer:

last question about 522 exemptions

SavyLawyer :

I understood. A trustee can hold a bankruptcy case open for years, theoretically, so long as they can justify the time as necessary to seize or distribute assets. Having said that, based on what you describe, if the assets are just cash and has already been seized by the trustee, and there is no good reason why a creditor hasn't either filed a proof of claim or followed up on that claim, then an argument can be made that it is time to close the bankruptcy case. This is done by filing a motion with the court, and letting the judge decide. Ultimately, that is something that should be discussed with your attorney. It will come down to whether or not the judge then thinks that the trustee has had a reasonable amount of time to get assets distributed. Where the asset involved is cash, the debtor has a pretty good argument to make that it should not take that long for creditors to claim a share if they are going to.

SavyLawyer :

So yes, a motion seeking closure of the bankruptcy estate and the bankruptcy case would stop the process if the debtor wins the motion. This is something that you should discuss with your attorney prior to taking any action. They may know something more about either local rules or, sometimes more importantly, how a particular judge will respond to such a motion.

SavyLawyer :

Yes, your question about exemptions is....?

Customer:

does the trustee get paid a commission on this

Customer:

my attorney has said something about 350 hr and 1000 bucks to take any action

SavyLawyer :

Generally, yes, the trustees are paid two ways. First, they are paid a very small fee per case. Then they are paid commission for assets seized and distributed on the following sliding scale:

SavyLawyer :

  • 25% of the first $5,000 disbursed

  • 10% of the next $45,000

  • 5% of the next $950,000, and

  • 3% of anything over $1,000,000.

SavyLawyer :

Note that the commission is based not on seizure but on actually disbursing the assets to creditors.

Customer:

sound reasonable I'm getting 20K so I can afford to pay him. would you spend money to try to collect the other 30K

SavyLawyer :

You actually don't have to pay the trustee, the commission should come out of the total assets that have been collected.

Customer:

I understand he gets a commission on what is distributed

SavyLawyer :

Truth be told, that is a tough call, and will really come down to what your attorney knows about the particular court you are in. Some courts are willing to give the trustee more time than others. If this is the first extension of time, and there is an argument to be made that the trustee is not acting unreasonably, then a court does want to see creditors get paid if they can, as that is what the bankruptcy code requires.

Customer:

but if he cant find anyone to pay he doesn't get to make that correct

SavyLawyer :

At first, it may not be worth the money, because the court is likely to err, at least at the beginning, towards giving the trustee a "reasonable" amount of time. Again, however, that is really something that is better answered by your local counsel.

SavyLawyer :

And you are correct, the trustee only gets commission on the assets distributed (ie paid to a creditor), because if they are not distributed for some reason, they go back to the debtor.

Customer:

I understand....do we wait another 60 days

Customer:

can he contact the creditors and remind them the money is their to claim ?

SavyLawyer :

As I said before, whether or not to wait is a decision you will have to make with your attorney. It does seem unlikely that a court is going to force the trustees hand if it has not been too long, making a motion to close the case potentially a waste of time.

SavyLawyer :

And, yes, the trustee can communicate with the creditors so long as the communication is also given to the debtor and the court. The debtor has the right to be kept informed of the administration of the bankruptcy estate so that they can object to its administration if necessary. Your attorney should be getting copies of communication with creditors, check with them to make sure that they are.

Customer:

ok I'll discuss and wait thanks for your time and your answers have a good day

SavyLawyer :

I hope this chat has been helpful, and let me know if you need any further related information or clarification of anything. Otherwise, please remember to RATE my answer so that I can receive credit for my work.

Customer:

ok

A.J.
A.J., Attorney
Category: Bankruptcy Law
Satisfied Customers: 4,300
Experience: Experienced consumer bankruptcy attorney.
Verified
A.J. and 87 other Bankruptcy Law Specialists are ready to help you
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Category: Bankruptcy Law
Satisfied Customers: 4,300
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