When filing bankruptcy under Chapter 7, a petitioner is making an offer to the court. In exchange for the sale of their disposable assets, the petitioner is asking to court to relieve them of any remaining debts. A court-appointed trustee will sell the assets and equitably distribute the proceeds to the creditors.
You might wonder how this process works. Also, you may want to know what assurances you'll have when your debts are done with. Here are three things you should know about this aspect of bankruptcy.
What Is Sold Under Chapter 7 Bankruptcy?
Disposable assets are items you own outright and that you can afford to do without. A sensible car that you need to get you to and from your job, for example, is a necessary asset. You'll likely be able to keep that as long as the trustee doesn't value it too highly. Conversely, a boat that you use during the summertime on the weekends for enjoyment is a disposable asset.
Notably, not all disposable assets are always sold. The trustee might determine there is no market for an asset or that selling it is too unusual to quickly sell. However, that is the trustee's decision to make, and only the judge can overrule it.
How Are Assets Sold?
The trustee has the right to sell each asset either through an auction or a brokered sale. For example, a valuable painting might go through a broker if the trustee feels this would return the most value in the shortest amount of time. Note that the trustee has a duty to the creditors and not to you to get the most money possible under the circumstances. The trustee will post a notice in their office of the items for sale, and there are people who follow Chapter 7 bankruptcy sales to try to get deals.
Once the items have either sold or failed to sell, the trustee will place the money into an account and file a report with the court. They will pay each creditor in your petition a proportionate amount determined by the court. Any items that fail to sell may be returned at the trustee's discretion to the debtor.
What Guarantees Your Debts Will Be Discharged?
Upon completion of the sales process, the trustee will inform the judge that the process is done. The judge will enter an order discharging whatever remaining debts weren't covered by sold assets and send you and your bankruptcy lawyer paperwork confirming the discharge.
If you have additional questions, reach out to a local bankruptcy lawyer.
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