What the Bankruptcy Trustee Looks for in Your Schedules
The bankruptcy trustee reviews your bankruptcy papers carefully to look for hidden assets, avoidable transfers, improper exemptions, and more.
The bankruptcy trustee reviews your bankruptcy petition and schedules to find information about you and your finances. Of course, one of the things the trustee looks for is assets that can be sold to pay creditors. But the trustee looks for a lot more than that in your schedules. The trustee also looks for transferred or hidden assets, that you've properly claimed exemptions, information about your overall financial situation, and issues related to your Chapter 13 plan.
(To learn more about trustee duties and obligations in Chapter 7 and Chapter 13 bankruptcy, see the articles and Q&As in our Bankruptcy Trustee topic area.)
Here are some of the most common things bankruptcy trustees look for:
Assets that Can be Liquidated to Pay Creditors
The trustee will be looking for these types of assets to use to pay creditors:
- income producing assets such as investment real estate, oil and gas leases, business interests
- pending claims or lawsuits that you filed
- nonexempt real estate
- personal property not claimed exempt
- liens that may reduce value of assets to the estate
- tax refunds
- divorce settlements, and
- assets that have been only partially claimed exempt.
The following items in your schedules might lead the trustee to hidden assets:
- insufficient detail -- especially for assets such as jewelry, collectibles, real estate, and motor vehicles
- undervalued assets
- assets not in line with income levels
- debts or expenses for assets not listed in the schedules
- undocumented losses such as thefts with no police report, or casualty losses with no insurance claim
- medical bills (these could indicate personal injury or insurance claims)
- missing financial records
- closed accounts
- safe deposit boxes
- property you hold for someone else
- money owed to you such as trust income, probate interests, insurance claims, or refunds due, and
- income from sources not listed.
To learn why you should never try to hide property in bankruptcy, see Hiding Assets in Bankruptcy.
Potential Avoidable Transfers
If you've repaid creditors or transferred money out of your name recently, the trustee may be able to get the money back in certain circumstances. (To learn when and how the trustee can get money back, see The Bankruptcy Trustee and Preference Claims.)
These items might signal transfers that the trustee can reverse and bring back into the estate:
- excessive gifts (in value or number)
- transfers for less than full value
- transfers that prefer one creditor over others, and
- payments to relatives or others close to you.
The trustee will look at the following to help determine whether your claims of exemption are proper:
- joint debts when only one spouse is filing for bankruptcy
- correct basis for exemptions (federal or state, and which state)
- undervalued assets or assets with unknown value
- prior addresses and moves (particularly from other states), and
- marital status.
To learn more about claiming exemptions in your bankruptcy, choosing the correct exemptions, and finding the exemption amounts in your state, see our Bankruptcy Exemptions area.)
What Caused You to File for Bankruptcy?
Looking at the following items to see what caused your financial problems overall will help the trustee understand your motivation for filing:
- job change or loss (change in income),
- medical bills (illness or injury)
- assets too small when compared to debt (which might indicate Ponzi schemes), and
- closed businesses or business debts (failed business).
Chapter 13 Plan Issues
In addition to the other items, the Chapter 13 trustee will be interested in the following things to determine whether your plan is confirmable:
- your marital status
- whether the value of your nonexempt assets is greater than your proposed payout in the plan
- whether your debt exceeds statutory limits
- whether you have excess income not included in your plan, and
- prefiling transfers of assets.
(Learn more about the Chapter 13 Repayment Plan.)