Wednesday, November 20, 2013

Your Chapter 7 Bankruptcy Trustee is NOT Your Friend

Let me begin this article by stating that in Oregon we are very fortunate to have a great panel of Chapter 7 Trustees.  I have worked on the other side of the table of them for years.  They have nearly always treated me and my clients with respect and professionalism.

So, despite the title of this article, it is not about the Chapter 7 Trustee being a "bad guy".  It is about them not being on your side.  Their job is to represent your creditors and they have a very strict duty to do that to the best of their ability.  They can not give debtors legal advice and are not there to help them through the process.

The most common example of this is when a "pro se" debtor (one of the few chapter 7 debtors who file without being represented by an attorney) appears at a hearing and has claimed the wrong exemptions. This is very common among the debtors who have not had an attorney represent them through the process.

This week our office has had two panicked pro se debtors call our office. Both debtors recently came from their  chapter 7 341 hearing held in downtown Portland.  They were panicked because they were told by their Trustee that they were going to have to pay money, lose cars and turn over their next year's tax refunds.

Keep in mind that had they properly claimed their entitled exemptions under chapter 7 law the Trustee would not have made such demands and they would not face losing any assets.  When the Debtors asked the Trustee if there was a way to fix their case, or otherwise not lose assets they were met with the boilerplate answers all pro se debtors get from their trustee after asking such questions - "that falls within giving you legal advice and I can not give you legal advice, sorry." End of discussion.  This leaves debtors feeling scared, confused and worried about how they will get to work if the Trustee comes an picks up their car.

Fortunately for these debtors we are able to appear on the case and repair/amend the exemptions so they don't lose anything.  However, I wonder how many debtors have not hired competent counsel and simply turned over whatever the Trustee is demanding, even if they could legally exempt all assets had their case been properly handled?  Hiring an experienced attorney may seem expensive at the time, but it could be much more expensive in the long run to not do so. And, remember if you go it alone, don't expect the Trustee to offer you any guidance or assistance. They may be very friendly and professional, but they have a duty to the other side, not to you as a debtor in chapter 7.

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