Under Suspicion: Is someone going to snoop around my house if I file for bankruptcy?

Under Suspicion: Is someone going to snoop around my house if I file for bankruptcy?

Almost definitely not! Here’s why:

Lots of my clients are understandably concerned about their privacy, and are sometimes afraid that someone is going to be checking up on them after they file for bankruptcy to make sure they’re not hiding anything.

When you file bankruptcy in Utah, everything you own goes into a “bankruptcy estate“. Thus, if you own a lot of “stuff” and you file bankruptcy, the bankruptcy trustee that is assigned to your case can take your stuff and sell it to partially pay back your debts. However, almost everything you own will be protected by an exemption which prevents the trustee from taking a piece of property and selling it.

There are lots of exemptions for things like your house, your car, your furniture, your clothing, etc.

Also, in practicality, the things that aren’t covered by an exemption are usually not worth enough for the trustee to bother to sell.

My clients are sometimes worried that the trustee won’t take their word for it when it comes to what assets they may own. They are concerned that the trustee may want to come and check up on things. For instance, they think he may want to inspect their car, to see if it really does have 100,000 miles on it, or if it might be in better condition than you’re claiming. Or they are worried that someone is going to come to their house and go through everything to determine whether there are valuable assets that you haven’t claimed on your bankruptcy petition.

None of this is going to happen! First of all, the trustee does not have time to hassle with this. Second of all, the trustee does not want to spend the money necessary to have your things inspected. Third, the trustee knows that the benefit of checking up on every single bankruptcy filing to see if there are hidden assets is simply not worth it, because there almost never are hidden assets. Finally, the trustee is not just “taking your word for it” when you file your petition and tell him what assets you have. He is taking your sworn and recorded word, under oath for it, which he will obtain at your 341 meeting.

(As a corollary, clients are also sometimes concerned that the trustee is going to ask them why they filed bankruptcy at the 341 Meeting, and that they are going to have to give a good reason. This will also NEVER happen! It is not the trustee’s job to determine whether or not your filing is legitimate, it is only his job to protect your creditors and distribute the estate properly.)

As long as you are honest at your 341 meeting, and there aren’t any suspicious circumstances surrounding your bankruptcy, there will never be a stranger investigating your property!

 

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