The Chapter 7 trustee is the person appointed to look at what you own, decide whether any of it can be sold to pay your creditors, and report the answer to the court. In most consumer cases filed in Las Vegas the answer is that there is nothing worth selling, and the trustee says so in a short filing and closes the file.
I can describe this job from the inside, because I do it. I am currently one of only four Chapter 7 bankruptcy trustees in the District of Nevada. On trustee cases I sit on the other side of the table from the person who filed. On my own clients' cases, I already know what the trustee sitting across from them is going to ask.
The trustee is not the judge, and does not work for you
This is the part that surprises people most. The trustee is not a judge and does not decide whether your debts get wiped out. The trustee also is not your lawyer and has no duty to look out for you. The job is to administer the estate for the benefit of creditors, and the Bankruptcy Code spells out the duties in 11 U.S.C. section 704: collect and reduce to money the property of the estate, investigate the financial affairs of the debtor, examine proofs of claim and object to improper ones, oppose the discharge of the debtor if advisable, and make a final report.
Read that list again and notice what is missing. Nothing in it is personal. A trustee who asks a hard question at your meeting is not angry at you. That is the assignment.
Most Chapter 7 cases end with a report that there is nothing to collect
The reason is exemptions. Nevada opted out of the federal exemption list, so Nevada's own statute controls what you keep, under NRS 21.090(3). Property that falls inside those limits is not available to creditors, and the trustee cannot sell it.
A few examples from that statute: equity in one vehicle up to $15,000 under NRS 21.090(1)(f), household goods, furnishings, electronics, clothing and yard equipment up to $12,000 under NRS 21.090(1)(b), and the tools, equipment and supplies you use in your trade up to $10,000 under NRS 21.090(1)(d). Nevada's homestead exemption is $605,000 under NRS 115.010, which is one of the most generous in the country.
When everything a person owns fits inside those numbers, the case is what trustees call a no-asset case. The trustee files a report saying there is no property to distribute, and that is the end of the trustee's involvement.
Here is what I read before the meeting
Schedules, then everything that can be checked against them. Tax returns. Pay stubs. Bank statements. Vehicle values against loan balances.
What I am looking for is short and predictable: a car worth noticeably more than what is owed on it, a business interest or side company, a pending lawsuit or insurance claim, an inheritance, a second piece of property, a tax refund that has not arrived yet, and money that moved shortly before the filing.
Money that moved before you filed gets a closer look
This one catches honest people off guard. If you repaid a debt shortly before filing, a trustee may be able to recover that payment from whoever received it, because creditors are supposed to be treated alike. Under 11 U.S.C. section 547 the window is generally 90 days before the filing, and between 90 days and one year if the person paid was an insider, which includes relatives. Separately, under 11 U.S.C. section 548, transfers made within two years before filing can be examined if you gave something away or sold it for far less than it was worth.
So paying your brother back $4,000 two months before you file can turn into a letter to your brother. Whether a payment is actually recoverable depends on the specific facts, and plenty of them are not. It is simply the kind of thing worth mentioning to a lawyer before you file rather than after.
If something is worth selling, that is usually not the end of the conversation
A trustee can abandon property that is burdensome to the estate or of inconsequential value and benefit to it under 11 U.S.C. section 554. In other situations a debtor can work out a buyout of the non-exempt portion. Which of these is realistic varies case by case, and it depends on the numbers.
The real problem is leaving something off
An asset you disclose and claim as exempt is routine. An asset the trustee finds that you did not list is a different conversation, and it is one reason the Code lets a trustee oppose a discharge. Complete and boring is what you want your paperwork to be.
If you are weighing Chapter 7 and want to know how your own list of property would look to the trustee reviewing it, the consultation is free and we handle it by phone or video. Call the Law Office of Brian D. Shapiro at 702-386-8600.