Will the Bankruptcy Trustee Come to My Home to Collect Property?

It would be unusual for a Chapter 7 bankruptcy trustee to come to your home to collect property without arranging it beforehand. However, if the trustee suspects you didn't disclose all of your property in your bankruptcy paperwork, the trustee might schedule a time to inspect or inventory your possessions and home.

In this article, you'll learn when you might lose property in Chapter 7 bankruptcy, be subject to a property inspection by the trustee, and need to appear before the bankruptcy court to resolve a property dispute.

You can learn more about the property you can keep using property exemptions in Chapter 7 bankruptcy. If you don't want to worry about losing property, consider filing for Chapter 13 bankruptcy. You'll be able to keep everything you own.

Does the Trustee Take Property in Chapter 7 Bankruptcy?

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.

However, receiving a report that you failed to list assets or reduced a property's value due to needed repairs might cause the Chapter 7 trustee to decide that a home visit is warranted. Keep reading to learn about the Chapter 7 process and when the trustee or the trustee's representative might visit you.

Disclosing in Chapter 7 Bankruptcy

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 when you fill out the official bankruptcy forms.

Keeping Property From the Trustee in Chapter 7

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 trustee's reach) 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.

How the Trustee Learns of Nonreported Property

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:

• investigate your financial affairs
• sell all nonexempt property, and
• distribute the sales proceeds to creditors according to priority payment rules.

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 341 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 a creditor or third party has provided conflicting information, the trustee might inspect your property.

When the Trustee Will Conduct a Property 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 property than you listed
• you own an expensive house but little furniture, or
• your schedules list excessive amounts of credit card debt and little property.

Also, the trustee will want to examine storage spaces, safe deposit boxes, and other locations.

What Will Happen at the Inspection

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.

Can the Trustee Take Property Without My Consent?

The trustee can't 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" to force the property's turnover.

What If I Agree to Turn Over 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.

Need More Bankruptcy Help?

Did you know Nolo has made the law accessible for over fifty years? It's true—and we wholeheartedly encourage research and learning. You'll find many more helpful bankruptcy articles on Nolo's bankruptcy homepage, and information needed to complete the official downloadable bankruptcy forms is located on the Department of Justice U.S. Trustee Program.

However, online articles and resources can't address all bankruptcy issues and aren't written with the facts of your particular case in mind. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.