Chapter 7 Bankruptcy Trustee Charles Daff”s job as a Chapter 7 Trustee is to verify the petition as filed by the debtor and the debtor’s attorney. In most cases the information is true and correct and the trustee files his “no asset” report. The debtor then receives his discharge approximately ninety days after the first meeting of creditors. However in some cases, the paperwork is not true or not correct and the Trustee must investigate on behalf of the United States Trustee.
Recently Mr. Daff told me that he had a case with a lawyer in which the petition may or may not have been correct as to a truck that may or may not have been the debtors’. The record was not clear and the trustee asked for more information. The information then showed that the truck was the debtors and the vehicle was not exempt. Trustee Daff asked for the truck to be turned over and the debtor and counsel resisted.
Trustee Daff had to file a motion for turnover which brought the matter before the Bankruptcy Judge. At the Court hearing, Mr. Daff was ready to present his argument, when the Judge said that he the Judge would proceed and then told the debtor and the debtor’s counsel in “no uncertain terms” to turn over the truck. The evidence was so clear that the pleadings were sufficient to demonstrate that the truck belonged to the bankruptcy estate.
Trustee Daff said “Had the debtor’s attorney asked about the truck when he first questioned his client, the truck would have been disclosed and could have been dealt with at that point.” Now the estate has run up trustees and attorneys fees and the client will be without the vehicle.
The moral of the story, in order to avoid a motion for turnover by the trustee, ask your client about his property and any interests he may have in property. And remind your client that any withholding of property or withholding of information will surface and they will have to pay dearly for those omissions.