Most people understand that when you file for Chapter 7 bankruptcy, you might have to give up unnecessary or extravagant property. In most cases, you'll make arrangements to turn the property over to the bankruptcy trustee, who will sell it and distribute the proceeds to your creditors. In exchange, you'll receive a Chapter 7 discharge erasing qualifying debt.
It would be unusual for a Chapter 7 bankruptcy trustee to come to your home to collect property personally—especially without arranging it with you beforehand. However, the trustee might schedule a time to inspect or inventory your possessions and home. Receiving reports that you failed to list assets or reducing a property's value due to needed repairs might cause the trustee to decide that a home visit is warranted.
Before the court discharges your debt, you must provide a clear financial picture. Part of your disclosures will include listing everything you own on bankruptcy schedules—valuable items as well as things that have little or no value—when you fill out the official bankruptcy forms.
The state that you live in will determine the property you can keep. Your state might require you to use the state exemptions (laws that protect certain property from creditor claims and keep the property out of the reach of the trustee) or allow you to choose between the state and federal exemptions.
In many Chapter 7 bankruptcies, the filer can claim all property as exempt, and the trustee takes nothing. But, even so, everything you own must be listed in your bankruptcy schedules.
(Learn more about the information you'll disclose when completing the bankruptcy forms.)
The trustee will review your bankruptcy paperwork carefully to ensure you've made full and forthright financial disclosures as part of the trustee's duties to:
The trustee will ask you about any discrepancies in your paperwork. It's not unusual for the trustee to request additional documents or ask you questions at the creditors' meeting (the one court appearance all filers must attend) to clear up any concerns the trustee has after reviewing your schedules.
If the trustee isn't satisfied with the information you provide or there has been conflicting information provided by a creditor or third party, the trustee can inspect your property.
Any number of things can raise suspicion, such as:
The only requirement is that the trustee must make prior arrangements with you to conduct the inspection. Courts have determined that it's 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's more likely that a representative or an appraiser will inspect the property. Often they will take photographs or videos as part of the process.
The trustee cannot just take things from your home if there is a disagreement about whether it's part of the bankruptcy estate. If you have claimed the exemptions, the trustee must object to the exemptions and have the matter determined by the court. If you haven't claimed the property as exempt and believe that there's some valid reason it shouldn't 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 (force) the property's turnover.
There aren't many valid reasons that would support not turning over assets that you didn't claim as exempt. If you're in this situation, you should check with an experienced bankruptcy attorney in your area. There could be serious ramifications if you refuse to turn over the property.
If you and the trustee agree that the assets are property of the estate, the trustee or the trustee's representative might come to your house to collect those assets at an agreed-upon time. It's also possible that the trustee would request that you deliver the items. All trustees handle these things differently. It generally depends on your trustee's procedures and the arrangements you have made with the trustee.