In our section about keeping property in a chapter 7 bankruptcy, there is an explanation with regard to how and when a Chapter 7 Trustee can sell a debtor’s asset. As explained, it is unusual for a trustee to sell an individual debtor’s asset. Please note that the trustee will be paid a commission from a disbursement, which is based on the distribution paid to the creditors.
The trustee analyzes the value of each asset to determine whether to sell the asset. In the event that the trustee sells an asset, the creditor that has a secured interest in the asset must first be paid in full. For example, if a house is sold, the mortgage must be paid and satisfied first. Additionally, any cost in connection with the sale of the property, such as the realtor’s fees, must be paid. Thereafter, the debtor will receive the full amount of his or her exemption. A single debtor’s exemption on a residence is $25,150.00. Under this scenario, the trustee will disburse $25,150.00 to the debtor after the above listed disbursements.
Thereafter, the trustee looks to the Bankruptcy Code to determine which creditor and in what order a particular creditor will receive a disbursement from the sale. The first category of claims to be paid are domestic support obligations which is spousal and/or child support that is due to a child, present, or former spouse. The individuals that are due the support will be paid the entire amount due, before any other type of creditors are paid any funds whatsoever.
Thereafter, the trustee pays from the sale’s proceeds, the administrative expenses that are necessary for preserving the estate and the debtor’s assets. These administrative expenses may include wages, salaries, and commissions that occur after the filing of the bankruptcy case. The administrative expenses to preserve the bankruptcy estate and debtor’s assets include taxes that are due from the bankruptcy estate, reasonable compensation for professional services incurred after filing, such as attorney and accountant’s fees, etc.
Any remaining funds from the sale are disbursed to pre-filing income due for wages, salaries or commissions for each individual up to the amount of $10,000.00, which was earned within 100 days prior to the bankruptcy filing. Thereafter, the sale’s proceeds will pay certain pre-filing taxes that are due to the government. Any balance of the sale’s proceeds of any asset sales will be paid to the general unsecured creditors, pro rata. If there are any remaining funds after payment to these creditors, the balance of the proceeds will be paid to the debtor.
Contact a Chapter 7 Bankruptcy Lawyer in New Jersey
The bankruptcy code is very complex, especially when it comes to the details relating to property and the distribution of funds and assets to creditors. If you are considering filing for bankruptcy, you should call an experienced bankruptcy lawyer in NJ to discuss your situation. Robert Manchel has been helping individuals and families navigate the intricacies of bankruptcy for 26 years. He knows the law and will ensure that your case is handled professionally and expeditiously. Call us today at (866) 503-5655. Free consultations.