When Florida residents file a Chapter 7 personal bankruptcy petition, the court appoints a trustee to act as an administrator and liquidate any assets owned by the petitioner that are unencumbered by liens and not covered by bankruptcy exemptions. Before any assets are liquidated, a date is set for the creditors to meet. Once this meeting has taken place, creditors are given 90 days to file proofs of claim with the bankruptcy court.
The bankruptcy estate
The nonexempt and unencumbered assets that are liquidated by Chapter 7 trustees are known as the bankruptcy estate. The law does not specify how assets should be liquidated, but Chapter 7 trustees are expected to act in a way that generates as much money as possible for the petitioner’s creditors. Once assets have been sold, the money raised is distributed to creditors based on a class structure laid down by the U.S. Bankruptcy Code.
In addition to liquidating nonexempt assets, Chapter 7 trustees may seek to recover assets that the petitioner improperly tried to hide from their creditors before filing their bankruptcy petition using what are called “avoiding powers.” These powers allow Chapter 7 trustees to set aside preferential payments made to creditors up to 90 days before the bankruptcy petition was filed and reclaim assets that were improperly transferred to another person.
No asset bankruptcy cases
People who are struggling to cope with unmanageable financial situations often put off filing bankruptcy because they are worried that their assets will be sold off and they will be left with nothing. Attorneys with debt relief experience could put this fear to rest by pointing out that Florida has several bankruptcy exemptions that protect personal assets like retirement and education savings, automobiles and personal property like furniture and electronics. They include one of the nation’s most generous homestead exemptions. Attorneys could then explain that this is why many Chapter 7 bankruptcies in Florida are “no asset” cases.