The trustee’s role is explained by a Park Ridge bankruptcy attorney. The trustee’s job is to see if there are any assets that can be taken and administered to pay creditors a pro rata share. In the overwhelming majority of Chapter 7 bankruptcy cases there are no assets that can be administered. Chapter 7 is known as a fresh start because in most cases, the debtor gets a fresh start. There are no assets to administer and the case closes with the discharge within 120 days.
If there is going to be an asset to be administered, the debtor claiming bankruptcy still has the opportunity to buy out the trustee’s interest. For example, let’s say the debtor has a paid off vehicle that is worth $5000. In Illinois, a debtor can protect up to $2400 of equity in a vehicle and that’s their Illinois exemption amounts. The difference between the $5000 market value and the $2400 exemption amount is $2600. So technically, there’s $2600 of unprotected property that a Chapter 7 bankruptcy trustee could realistically sell and pay creditors a pro rata share.
Now, the debtor in an Illinois bankruptcy case also has a $4000 wildcard exemption that he could sprinkle over any kind of property. But let’s assume for argument’s sake that the $4000 wildcard exemption has already been used on other property and there really is $2600 exposed on that vehicle. In that case, the trustee can request that the debtor turn over the vehicle for sale or more likely than not, the debtor and the attorney for the debtor and the trustee can work out a buyout. A buyout is a situation where the debtor will offer the trustee $1500 or maybe $2000 in exchange for the debtor being able to keep that vehicle. Thus, there would still be some money going to creditors pro rata, however the debtor will maintain ownership of the vehicle because he did the buyout. That happens on rare occasions, maybe 1% to 2% of all the bankruptcy cases under Chapter 7 have an asset that has to be administered.
Now, the debtor can also say I don’t want to do a buyout. I’m willing to exchange that vehicle for my fresh start. That happens very often, too. Sometimes people will have a particular piece of property or a particular bank account or a life insurance policy with cash value that cannot be exempted and they will give that up to the trustee in exchange for their fresh start. You have to remember that some people who are filing bankruptcy are in eliminating tens or 100s of thousands of dollars. It is worth it for an individual to give up a small piece of property or a tiny bit of equity in a piece of property in exchange for receiving a complete fresh start. This is very common and will not make the bankruptcy news.