When you file for Chapter 7 bankruptcy, you may have to give up some of your property. The property goes to the bankruptcy trustee to administer.
It is unusual for a Chapter 7 bankruptcy trustee to come to your home to collect property, or to inventory and inspect your possessions, but there are circumstances that could make this more likely. Failing to list assets or carelessly assigning inconsistent values to your property may cause the trustee to decide that a home visit is warranted.
(Visit our Chapter 7 Bankruptcy Center to learn how Chapter 7 works.)
Your Duty to Disclose Property
When you file for Chapter 7 bankruptcy, you must list everything that you own in the papers, called schedules, that you file with the bankruptcy court. This includes valuable items as well as things that have little or no value. The federal government and each state have exemption laws, which protect certain property from creditor claims and keep the property out of the reach of the trustee in bankruptcy. In many Chapter 7 bankruptcies, all property is claimed as exempt and nothing is taken by the trustee. But regardless of the designation as exempt or not exempt, everything you own must be listed in your bankruptcy schedules.
(Learn more about the bankruptcy schedules and what you must included on them.)
The Trustee’s Duty to Investigate
It is the job of the bankruptcy trustee to investigate your financial affairs, and to liquidate and reduce to cash, all property that is not exempt. The investigation of your financial affairs includes the duty of the trustee to review your bankruptcy schedules and make any inquiries that are necessary to explain discrepancies. (Learn about the role of the Chapter 7 bankruptcy trustee.)
It is not unusual for the trustee to request additional documents or ask you questions at the creditors meeting to clear up any concerns the trustee has after reviewing your schedules. If the trustee is not satisfied with the information you provide or if there has been conflicting information provided by a creditor or third party, the bankruptcy law allows the trustee to inspect your property.
How Will the Inspection Take Place?
The only requirement is that the trustee must make prior arrangements with you to conduct the inspection. Courts have determined that it is not permissible for a trustee to show up unannounced to demand a surprise inspection of the contents of your house. The trustee can do the inspection personally but it is more likely that she will send a representative or an appraiser to inspect the property for her. Often they will take photographs or video as part of the process.
What Might Cause the Trustee to Do an Inspection?
Any number of things can raise suspicion, such as:
- overvaluing or undervaluing property in the schedules
- the trustee received calls or letters from your ex-spouse, ex-friend, or a creditor which indicate that you own more than you listed
- you own an expensive house but have listed little or no furniture and electronics, or
- your schedules list excessive amounts of consumer credit with little or no personal property.
Can the Trustee Take Property From My Home Without My Consent?
The trustee cannot just take things from your home if there is a disagreement with you on whether it is part of the bankruptcy estate. If you have claimed the items as exempt, the trustee must object to the exemptions and have the matter determined by the court. If you have not claimed the property as exempt and believe that there is some valid reason why it should not be taken by the trustee, either you or the trustee can bring the matter before the court. In most instances, the trustee would file a motion to compel turnover of the property.
There are very few valid reasons not to turnover assets that have not been claimed as exempt to the trustee. If you have this situation, you should check with an experienced bankruptcy attorney in your area. There could be serious ramifications if you do not have a good legal basis for your refusal to turn over items.
What If I Agree to Turn Over Property?
If you and the trustee agree that the assets are property of the estate, it is possible that the trustee or the trustee’s representative would come to your house to collect those assets. It is also possible that the trustee would request that you deliver the items. All trustee’s handle these things differently. It generally depends on your trustee’s procedures and the arrangements you have made with the trustee.