Most New York bankruptcy cases end with a discharge and then a final decree. With that the case is closed, and debtors get their fresh starts. Occasionally, debtors will want to reopen their bankruptcy cases, but it’s usually for technical reasons. But what if the trustee wants to reopen a case? If so, then the debtor faces a highly unpleasant challenge—but one that can be managed. Here are a few reasons a trustee might want to reopen a debtor’s bankruptcy case.
The most common reason has to do with the debtor’s assets in a chapter 7 bankruptcy, specifically ones that were not included in the debtor’s case. If a debtor does not include an asset in his or her bankruptcy, then it can’t be brought into the bankruptcy estate and then sold to benefit the creditors. As it is the trustee’s job to ensure that all the debtor’s non-exempt assets are liquidated—and the trustee’s commission depends on it—it’s understandable that a trustee would want to reopen a case if a significant non-exempt asset failed to make it into bankruptcy.
Obviously many of these scenarios include the possibility that the debtor committed some kind of malfeasance by hiding the asset from bankruptcy to use or sell later. If so, then depending on the severity of the debtor’s actions, it’s possible the trustee will move the bankruptcy court to revoke the debtor’s discharge. If successful, the debtor’s case will be dismissed, probably with prejudice, and the debtor will be required to repay all of his or her pre-bankruptcy debts, much to the creditors’ delight. Read here for the six situations in which a discharge order can be revoked.
Naturally, if the debtor inadvertently omitted the property from the bankruptcy, then the trustee is much less likely to try to revoke the debtor’s discharge. The property in question can be anything, from second homes to jewelry to unlisted accounts, like a PayPal account. If a debtor sincerely forgot to include the asset in the bankruptcy, then he or she will probably be able to apply an exemption to it, if available.
One less frequent reason prompting a trustee to reopen a closed bankruptcy case is that there was some kind of material defect in the debtor’s bankruptcy filing. Again, bankruptcy fraud might be involved, otherwise the debtor would want to correct the errors.
There isn’t a statute of limitations on when a bankruptcy case can be reopened, so debtors who have hidden assets can be punished long after their bankruptcy cases have been closed. There may be practical issues down the road, like the identities of the creditors and whether they’ve already charged off any of the debtors’ debts.
Debtors whose cases are most likely to be reopened by trustees are those who chose to file without lawyer. If your financial situation involves sophisticated assets, then you are better off getting it right the first time with an experienced New York bankruptcy handling your case.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.
Rosenberg, Musso & Weiner, L.L.P
26 Court St # 2211
Brooklyn, NY 11242, USA
718-855-6840
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