Personal Bankruptcy - Auctions & Liquidation of Assets
Personal bankruptcy trustees have a duty to collect all non-exempt assets and liquidate assets to cash equivalents. They do this by seizing non-exempt property of the personal bankruptcy estate and offering it for sale at public auction. In practice, few consumers actually lose property through seizure if planning for personal bankruptcy in advance. Personal bankruptcy planning is a matter of choosing the correct chapter and verifying property exemptions before filing. Within limitations, personal bankruptcy rules allow for many transfers within the weeks and months before a petition is filed.
Turn-over of property after seizure in personal bankruptcy
The turnover of property of the debtor is governed by 11 U.S.C. 542, which provides:
- Debtors must turnover property of the personal bankruptcy estate that is not specifically exempted, or provide the cash value of the property to the trustee.
- Third party debtors who owe money to the debtor in personal bankruptcy must pay the trustee promptly.
- Third party debtors who do not have actual notice of the commencement of a personal bankruptcy case are not punishable for failure to pay the trustee.
- Life insurance companies are exempted from prosecution and are allowed to take property from a the personal bankruptcy estates of their policy holders.
- Attorneys, accountants, bookkeepers and other person that hold records of the debtor and personal bankruptcy estate must turnover records to the trustee when given notice of a court order.
After turnover, seizure or forfeiture, the trustee is subject to strict requirements regarding the sale of assets. Notice of a pending sale must be given to all creditors who file a proof of claim. Trustee are directed to advertise public actions. However, other than large commercially advertised actions, few people receive actual notice of trustee auctions.
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