Turning Over Personal Property to the Bankruptcy Trustee

Here are some common methods for turning over personal property to the Chapter 7 bankruptcy trustee.

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If you have nonexempt personal property, the Chapter 7 bankruptcy trustee is entitled to take it, sell it, and use the proceeds to repay your unsecured creditors. How does this process work? Read on to learn how the trustee gets your personal property.

(To learn more about the Chapter 7 bankruptcy trustee's duty to liquidate nonexempt assets, see The Role of the Chapter 7 Bankruptcy Trustee.)

Turning Over Nonexempt Property

Turning over your nonexempt personal property to the bankruptcy trustee can take place in a variety of ways. It depends on what the item is, what the procedures are in your district, and how the particular trustee operates their office. Absent a court order, however, a bankruptcy trustee should not show up at your house unannounced and demand that you surrender nonexempt property on the spot.

No Set Procedures for Turning Over Property

While the bankruptcy laws require that the trustee take possession of, and secure property of the bankruptcy estate (which is, essentially, all nonexempt property), the law does not specify how the trustee should do this. The Office of the United States Trustee, which is the supervisory authority for Chapter 7 and Chapter 13 trustees, does provide the trustees with some general guidelines but, in large part, how it is accomplished is a business decision made by the individual trustee. Often, it is a collaborative effort between you and the trustee, as the bankruptcy laws do require that you cooperate with the trustee to the extent necessary to enable the trustee to perform the trustee’s duties.

If you have carefully prepared your bankruptcy forms and schedules, the trustee will know what property you are claiming as exempt and what property you intend to surrender. In most cases, the trustee will contact you about the nonexempt property.

Here are some ways that the trustee might use to get your property.

Bringing small items to the creditors meeting

While it is possible that some trustees may ask for certain property that is easily carried (such as stocks or small items of jewelry) to be turned over at the creditors meeting, many trustees will not want this because creditors meetings are set on crowded schedules and it is just too hectic to collect and keep track of items at the same time.

Delivering items to the trustee's office

Often you will be asked to deliver small items to the trustee’s office, which you can generally do in person or by mail.

Items picked up by towing company

Some trustees will request that you deliver larger, mobile items like automobiles or motorcycles, while others will prefer to have those items picked up from you by a towing company.

Third party takes possession

For some property, the trustee may be allowed to hire a third party, such as an auctioneer, to take possession or sell the nonexempt property. In some districts, auctioneers are employed to hold regular auctions of nonexempt property from many bankruptcy estates. In other districts, auctioneers are allowed only on a case by case basis.

When in Doubt, Ask Your Trustee

If you are not sure what the trustee in your case wants you to do with the nonexempt property, you should contact the trustee’s office and ask. You can do this by telephone, email or letter.

Get a Receipt

In the end, however the surrender is accomplished, remember to get a receipt. Simply list the items that you are leaving with the trustee, write "received" and have someone at the trustee’s office sign and date it when you leave the items with them. While most trustees are very organized, it can protect you later if something does go wrong.

For a lot more free legal information on the process, see Nolo's sections on The Bankruptcy Process and Filing for Bankruptcy.

by: , Attorney

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