Liquidating a trustee company consolidating resort
trustee (or the bankruptcy court in Alabama and North Carolina) appoints an impartial case trustee to administer the case and liquidate the debtor's nonexempt assets. The trustee accomplishes this by selling the debtor's property if it is free and clear of liens (as long as the property is not exempt) or if it is worth more than any security interest or lien attached to the property and any exemption that the debtor holds in the property. Under § 726, there are six classes of claims; and each class must be paid in full before the next lower class is paid anything. In return, the creditor promises that it will not repossess or take back the automobile or other property so long as the debtor continues to pay the debt. Unless the debtor is represented by an attorney, the bankruptcy judge must approve the reaffirmation agreement.
(The Official Forms may be purchased at legal stationery stores or downloaded from the internet at Although a secured creditor does not need to file a proof of claim in a chapter 7 case to preserve its security interest or lien, there may be other reasons to file a claim. A creditor may no longer initiate or continue any legal or other action against the debtor to collect a discharged debt. Debts for money or property obtained by false pretenses, debts for fraud or defalcation while acting in a fiduciary capacity, and debts for willful and malicious injury by the debtor to another entity or to the property of another entity will be discharged unless a creditor timely files and prevails in an action to have such debts declared nondischargeable. If the trustee later recovers assets for distribution to unsecured creditors, the Bankruptcy Court will provide notice to creditors and will allow additional time to file proofs of claim. An individual receives a discharge for most of his or her debts in a chapter 7 bankruptcy case. The debtor will continue to be liable for these types of debts to the extent that they are not paid in the chapter 7 case. Even if filing jointly, a husband and wife are subject to all the document filing requirements of individual debtors. The number of installments is limited to four, and the debtor must make the final installment no later than 120 days after filing the petition.
During this meeting, the trustee puts the debtor under oath, and both the trustee and creditors may ask questions.