What happens when Trustee finds Assets in Bankruptcy?

That is a good question when trustee finds assets, the first thing the trustee would do is to change it from No Assets to Find Assets. The trustee would give a notice under Bankruptcy Rule 3002(c)(5), that the trustee has found assets in this bankruptcy estate from which a payment of a dividend appears possible. Any creditor holding a claim against the estate may file a proof of claim in the office of the Clerk of the Bankruptcy Court, 300 Las Vegas Boulevard South, Las Vega, Nevada 89101. However, this is just the beginning, and no need to be optimistic. It is just a statement. Now, you need to file claims. More than likely, if there are enough assets, the filers may at least get 10 cent on the dollar. Some may not even get that. The awards are distributed on the order of priority.

This proof of claim must be filed for a dividend within 90 days after the date of the mailing of this notice.

Furthermore, pursuant to Local Bankruptcy Rule 2002(7), after the expiration of the claims bar date in a Chapter 7 case, all notices required by Fed. R. Bank P. 2002(a), may be mailed only to creditors whose claims have been filed with the clerk of the court and to creditors, if any, who are permitted to file claims by reason of an extension granted under Fed. R. Bank. P. 3002(c)(6).

How this proof of claim can be filed?

Before we provide instructions, let us define who is a debtor, creditor, secured claim and unsecured claim, because a distinction and demarcation is very important in our discussion here.

Debtor
This person, corporation, or other entity that has filed a bankruptcy case is called the debtor.

Creditor
A creditor is any person, corporation or other entity to whom the debtor owed a debt on the date that the bankruptcy case was filed.

Proof of claim
A form telling the bankruptcy court how much the debtor owed a creditor at the time of the bankruptcy case was filed (the amount of the creditor’s claim). This form must be filed with the clerk of the bankruptcy court where the bankruptcy was filed.

Secured Claim
A claim is a secured claim to the extent that the creditor has a lien on property of the debtor (collateral) that gives the creditor the right to be paid from that property before creditors ho do not have liens on the property. Examples of lien are a mortgage on real estate and a security interest in a car, truck, boat, television set, or other item of property. A lien may have been obtained through a court proceeding before the bankruptcy case began; in some states a court judgment is a lien.

Unsecured claim
If a claim is not a secured claim it is an unsecured claim. A claim may be party secured and partly unsecured if th property on which a creditor has a lien is not worth enough to pay the creditor in full.

Unsecured Priority Claim
Certain types of unsecured claims are given priority, so they are to be in bankruptcy cases before most other unsecured class (if there is enough money or property available to pay these claims). The most common types of priority claims are listed on the proof of claim form. Unsecured claims that are not specifically given priority status by the bankruptcy laws are classified and unsecured nonpriority claims.

Can you rescind a reaffirmation agreement?

The bankruptcy Code is liberal in this regard. You can rescind your reaffirmation agreement at any time before the bankruptcy court enters a discharge order, or before the expiration of the 60-day period that begins on the date your reaffirmation agreement is filled with the court, whichever occurs later. You must notify the creditor that you are rescinding your reaffirmation agreement.

What are your obligations if you are reaffirming the debt?
A reaffirmed debt remains your personal legal obligations. It is not discharged in your bankruptcy case. That means that if you default on your reaffirmed debt after your bankruptcy case is over, your creditor may be able to take your property or your wages. Otherwise, your obligations will be determined by the reaffirmation agreement which may have changed the terms of the original agreement. For example, if you are reaffirming an open end credit agreement, the creditor may be permitted by that agreement or applicable law to change the terms of that agreement in the future under certain conditions.

Are you required to enter into a reaffirmation agreement by any law?
Of course, not. Only agree, if this is in your best interest. Make sure you can afford the payments you are reaffirming.

What if your creditor has a security interest or lien?
Your bankruptcy discharge does not eliminate any lien on your property. A “lien” is often referred to as a security interest, deef of trust, mortgage or security deed. Even if you do not reaffirm and your personal liability on the debt is discharged, because of the lien your creditor may still have the right to take the security property if you do not pay the debt or default on it. If the lien is on an item of personal property that is exempt under Nevada’s law or that the trustee has abandoned, you may be able to redeem the item

What a Bankruptcy Discharge Means under Chapter 7?

The bankruptcy court grants a discharge to the person named as debtor. However, it should not be treated as dismissal which has entirely different meaning.
The collection of discharged debts are prohibited.
The discharge prohibits any attempt to collect from the debtor a debt that has been discharged. For example, a creditor is not permitted to contact a debtor:
– by mail,
– by phone,
– or otherwise,
– to file or continue a lawsuit,
– to attach wages or other property,
– or to take any other action collect a discharged debt from the debtor.
There are also special rules that protect certain community property owned by the debtor’s spouse, even if that spouse did not file a bankruptcy case.

What is the punishment?
A creditor who violates this order can be required to pay damages and attorney’s fees to the debtor including of course a contempt of court from the bankruptcy court. This, however, should not be mixed up with a creditor’s valid lien which was not avoided or eliminated in the bankruptcy case. Despite all this, a debtor may voluntarily pay his debts that has been discharged.

Debts that are discharged.
The chapter 7 discharge order eliminates a debtor’s legal obligation to pay a debt that is discharged. Most, but not all, types of debts are discharged if the debt existed on the date the bankruptcy case was filed.

Debts that are not discharged.
Let us discuss debts which cannot discharged. Here is a laundry list of these debts:
1. Debts for most taxes.
2. Debts incurred to pay nondischargeable taxes;
4. Debts that are domestic support obligations;
5. Debts for most student loans;
6. Debts for most fines, penalties, forfeitures, or criminal restitution obligations;
7. Debts for personal injuries or death caused by the debtor’s operation of a motor vehicle, vessel, or aircraft while intoxicated.;
8. Some debts which were not properly listed by the debtor;
9. Debts that the bankruptcy court specifically has decided or will decide in this bankruptcy case are not discharged;
10. Debts for which debtor has given up the discharge protection by signing a reaffirmation agreement in compliance with the Bankruptcy Code requirements for reaffirmation of debts; and
11. Debts owed to certain pension, profit sharing, stock bonus, other retirement plans, or to the Thrift Savings Plan for federal employees for certain types of loans from these plans.

The law is complex, and it is always good to talk to a Nevada licensed attorney.

How defendant can request discharge of attachment in Nevada?

NRS 31.200 Grounds for discharge of attachment.

1. The Defendant may also, at any time before trial, apply by motion, upon reasonable notice to the Plaintiff, to the court in which the action is brought or to the judge thereof, for a discharge of the attachment, or the money or property attached through the use of a writ of garnishment, on the following grounds:

(a) That the writ was improperly or improvidently issued.

(b) That the property levied upon is exempt from execution or necessary and required by the Defendant for the support and maintenance of the Defendant and the members of the Defendant’s family.

(c) That the levy is excessive.

2. If the court or the judge thereof on the hearing of such motion shall find that any of the grounds stated in subsection 1 exist, the attachment and levy thereof shall be discharged. If the motion is based upon paragraph (c) of subsection 1 only, and the fact is found to exist, the discharge of attachment shall be only as to the excess.

Bankruptcy Discharge, Its Implications, Duration and What It Encompasses

Law Office of Malik W. Ahmad, Fast Bankruptcy Nevada. A bankruptcy discharge is a milestone in the bankruptcy proceedings as this discharge releases the debtor from personal liability for certain specified types of debts. Again, those debts which are exempted debts and certain dischargeable debts. Again, please refresh your memory by what debts are dischargeable. The Law Office of Malik W. Ahmad, had given a laundry list in many of the articles as to what debts are dischargeable. Alimony debts, student loans, certain liens, child supports and government fines are not dischargeable. They survive the bankruptcy. In other words, the debtor is no longer legally required to pay any debts that are discharged. The discharge is not temporary but it is a permanent order prohibiting the creditors of the debtor from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts. This means the debts are wiped out for good, and no one should be calling you as you are under the federal bankruptcy protection. Once you have successfully completed the bankruptcy chapter 7 proceeding, you are under the federal bankruptcy umbrella. Although a debtor is not personally liable for discharged debts, a valid lien (i.e., a charge upon specific property to secure payment of a debt) that has not been avoided (i.e., made unenforceable) in the bankruptcy case will remain after the bankruptcy case. Therefore, a secured creditor may enforce the lien to recover the property secured by the lien.

Timings of Discharge? It all varies, depending on the chapter under which the case is filed. In a chapter 7 (liquidation) case, for example, the court usually grants the discharge promptly on expiration of the time fixed for filing a complaint objecting to discharge and the time fixed for filing a motion to dismiss the case for substantial abuse (60 days following the first date set for the 341 meeting). Typically, this occurs about four months after the date the debtor files the petition with the clerk of the bankruptcy court. In individual chapter 11 cases, in cases under chapter 12 (adjustment of debts of a family farmer or fisherman) and 13 (adjustment of debts of an individual with regular income), the court generally grants the discharge as soon as practicable after the debtor completes all payments under the plan. Since a chapter 12 or chapter 13 plan may provide for payments to be made over three to five years, the discharge typically occurs about four years after the date of filing. The court may deny an individual debtor’s discharge in a chapter 7 or 13 case if the debtor fails to complete “an instructional course concerning financial management.” The Bankruptcy Code provides limited exceptions to the “financial management” requirement if the U.S. trustee or bankruptcy administrator determines there are inadequate educational programs available, or if the debtor is disabled or incapacitated or on active military duty in a combat zone.

How to get a discharge? It is an automatic process and it works smoothly unless there is litigation involving objections to the discharge. The Federal Rules of Bankruptcy Procedure provide for the clerk of the bankruptcy court to mail a copy of the order of discharge to all creditors, the U.S. trustee, the trustee in the case, and the trustee’s attorney, if any. The debtor and the debtor’s attorney also receive copies of the discharge order. The notice, which is simply a copy of the final order of discharge, is not specific as to those debts determined by the court to be non-dischargeable, i.e., not covered by the discharge. The notice informs creditors generally that the debts owed to them have been discharged and that they should not attempt any further collection. They are cautioned in the notice that continuing collection efforts could subject them to punishment for contempt. Any inadvertent failure on the part of the clerk to send the debtor or any creditor a copy of the discharge order promptly within the time required by the rules does not affect the validity of the order granting the discharge.

What does the Discharge Includes? As we stated earlier, not all debts are discharged. The debts discharged vary under each chapter of the Bankruptcy Code. Section 523(a) of the Code specifically excepts various categories of debts from the discharge granted to individual debtors. Therefore, the debtor must still repay those debts after bankruptcy. Congress has determined that these types of debts are not dischargeable for public policy reasons (based either on the nature of the debt or the fact that the debts were incurred due to improper behavior of the debtor, such as the debtor’s drunken driving).

Exceptions to Discharge: Generally speaking, the exceptions to discharge apply automatically if the language prescribed by section 523(a) applies. The most common types of non-dischargeable debts are: – certain types of tax claims, – debts not set forth by the debtor on the lists and schedules the debtor must file with the court, – debts for spousal or child support or alimony, – debts for willful and malicious injuries to person or property, – debts to governmental units for fines and penalties, – debts for most government funded or guaranteed educational loans or benefit over payments, – debts for personal injury caused by the debtor’s operation of a motor vehicle while intoxicated, – debts owed to certain tax-advantaged retirement plans, – and debts for certain condominium or cooperative housing fees. The types of debts described in sections 523(a)(2), (4), and (6) (obligations affected by fraud or maliciousness) are not automatically excepted from discharge. Creditors must ask the court to determine that these debts are excepted from discharge. In the absence of an affirmative request by the creditor and the granting of the request by the court, the types of debts set out in sections 523(a)(2), (4), and (6) will be discharged. A slightly broader discharge of debts is available to a debtor in a chapter 13 case than in a chapter 7 case. Debts dischargeable in a chapter 13, but not in chapter 7, include debts for willful and malicious injury to property, debts incurred to pay non-dischargeable tax obligations, and debts arising from property settlements in divorce or separation proceedings.

Right to Discharge? In chapter 7 cases, the debtor does not have an absolute right to a discharge. An objection to the debtor’s discharge may be filed by a creditor, by the trustee in the case, or by the U.S. trustee. Creditors receive a notice shortly after the case is filed that sets forth much important information, including the deadline for objecting to the discharge. To object to the debtor’s discharge, a creditor must file a complaint in the bankruptcy court before the deadline set out in the notice. Filing a complaint starts a lawsuit referred to in bankruptcy as an “adversary proceeding.” The court may deny a chapter 7 discharge for any of the reasons described in section 727(a) of the Bankruptcy Code, including: – failure to provide requested tax documents; – failure to complete a course on personal financial management; – transfer or concealment of property with intent to hinder, delay, or defraud creditors; – destruction or concealment of books or records; perjury and other fraudulent acts; – failure to account for the loss of assets; – violation of a court order or an earlier discharge in an earlier case commenced within certain time frames (discussed below) before the date the petition was filed. – If the issue of the debtor’s right to a discharge goes to trial, the objecting party has the burden of proving all the facts essential to the objection. In chapter 13 cases, the debtor is usually entitled to a discharge upon completion of all payments under the plan. As in chapter 7, however, discharge may not occur in chapter 13 if the debtor fails to complete a required course on personal financial management.

Can the discharge be revoked? The court may revoke a discharge under certain circumstances. For example, a trustee, creditor, or the U.S. trustee may request that the court revoke the debtor’s discharge in a chapter 7 case based on allegations that the debtor: obtained the discharge fraudulently; failed to disclose the fact that he or she acquired or became entitled to acquire property that would constitute property of the bankruptcy estate; committed one of several acts of impropriety described in section 727(a)(6) of the Bankruptcy Code; or failed to explain any misstatements discovered in an audit of the case or fails to provide documents or information requested in an audit of the case. Typically, a request to revoke the debtor’s discharge must be filed within one year of the discharge or, in some cases, before the date that the case is closed. The court will decide whether such allegations are true and, if so, whether to revoke the discharge. May the debtor pay a discharged debt after the bankruptcy case has been concluded? A debtor who has received a discharge may voluntarily repay any discharged debt. A debtor may repay a discharged debt even though it can no longer be legally enforced. Sometimes a debtor agrees to repay a debt because it is owed to a family member or because it represents an obligation to an individual for whom the debtor’s reputation is important, such as a family doctor.

What can the debtor do if a creditor attempts to collect a discharged debt after the case is concluded? If a creditor attempts collection efforts on a discharged debt, the debtor can file a motion with the court, reporting the action and asking that the case be reopened to address the matter. The bankruptcy court will often do so to ensure that the discharge is not violated. The discharge constitutes a permanent statutory injunction prohibiting creditors from taking any action, including the filing of a lawsuit, designed to collect a discharged debt. A creditor can be sanctioned by the court for violating the discharge injunction. The normal sanction for violating the discharge injunction is civil contempt, which is often punishable by a fine.