Prior to filing a bankruptcy case, there is no exact way of knowing whether or not a trustee is going to want to pursue an asset. As a Skokie bankruptcy attorney, I have a pretty good idea as to whether or not the trustee is going to be interested in a particular asset. However, I can never say for certainty whether or not a trustee is going to make a big deal about an asset and try to administer it. If it’s a close call, I’m going to have my client sign the potential asset acknowledgement form just in case the trustee decides to pursue the asset.
The client then has to make an educated decision on whether or not it’s worth it to file a Chapter 7 bankruptcy, knowing that a particular item is at risk. Sometimes, clients would be willing to lose an asset in exchange for getting a fresh start. In other cases, the debtor does not want to lose the property at all and decides to file Chapter 13 bankruptcy. I like to caution my clients by saying this: there is a possibility that the trustee may want to administer an asset or may want a certain dollar amount in exchange for not pursuing the asset. If that’s the case, the debtor has the ability to buy out the trustee’s interest in the asset.
Let’s say in the case of real estate there’s $25,000.00 worth of un-exempt equity in the property. $25,000.00 is likely going to be an amount that the trustee is going to deem necessary to administer. However, the trustee is willing to accept a lump-sum payment from the debtor rather than put it on the market and sell it in the open market. I as the Chapter 7 bankruptcy attorney can negotiate a buyout with that trustee. The problem sometimes comes into play where the debtor does not have the ability to buy out the trustee’s interest because there just aren’t funds available. In other cases, a debtor may have the ability to tap into a retirement account or a 401(k) account, or they might be able to acquire money from family or friends to buy out the trustee’s interest. If that’s the case, I can negotiate with the trustee and we can work out a payment arrangement whereby the debtor gets to keep the property but the trustee gets a certain dollar amount, which is then administered for the benefit of creditors. This administration can take several months and is an involved bankruptcy process.