Chapter 7 discharged but trustee wants to reopen and convert to 13

[pizza1]

oh wow, so sorry OP!! What a nightmare for you to have to go thru!

First, probably a big mistake keeping the license in your name, but whats done is done now, and the trustee knew all this? My bet is that the trustee thinks that the business is profitable enough, since its legally in your name, for you to be able to pay back your creditors and turn it to a BK13.

If thats the case...you will have to pay back everyone. Im not familiar too much with 13, since Im a 7, but there are a few here that have filed 13, (like TRC..Im sure he will help out here)...and give you some advice.

My advice is get a different attorney or request a different trustee...you can do that actually. Good luck to you, and keep your head up. Sorry this is happening, but you ll get thru it. I wouldnt worry about credit at this point, because your reports are gonna have different reporting for awhile, until whats done is done, and final. 

keep us posted...hang in there!

[TRC_WA]

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@egold1234 wrote:

 I do have some private student loan debt and tax debts that weren't discharged so maybe this might help me pay them down (I've tried settling after bankruptcy and I simply can't afford it)

My biggest concern now is what happes to all my hardwork over the last few months with building my credit? Will all my accounts be closed when I convert to a 13?

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Yes... those tax debts/private student loans can be included in the plan.  I had a $750 IRS bill and a $600 GA state tax bill included in mine.  The IRS got paid first of course... before anyone else including my attorney.  They were a "priority" creditor.  Not really surprising...

As others said, your credit is the least of your concerns right now.  Yes the accounts will be closed.  For what it's worth rebuilding out of a 13 has been super easy.  I didn't even have to use garbage lenders like Credit One and First Premier or go with a secured card... which is pretty common for Ch 7 filers.  My scores were also in the 630 range and I've gained 40-50 points in 2 years... with everything due to fall off in the next 4-7 months with early exclusion.  I'm expecting 750+ across the board once my reports are free of the BR.

Ch 13 wasn't all that difficult or stressful once I got beyond the initial court appearances... I just mailed my payment each month and never heard a peep from the trustee.  There was no direct debit from my employer due to the fact I requested I be able to mail my payment for privacy concerns.

Let me know if you have any other questions.

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@pizza1 wrote:

 Im not familiar too much with 13, since Im a 7, but there are a few here that have filed 13, (like TRC..Im sure he will help out here)...and give you some advice.

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That TRC guy is a real character I hear...

[DaveInAZ]

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@egold1234 wrote:

I was discharged Nov 2014. I have a state license in my name but the buisness is actually my ex-girlfriends. She asked me to hold the license in my name because at the time she did not qualify to hold the license herself. I disclosed this to the trustee at the 341 hearing orginally but now he decided since I hold the license that I am the buisness owner. In hindsight we should have just waited a few months and she would have qualified herself and this would never have been an issue. 

So to protect an asset that isnt actually mine I have to do a chapter 13 and essentially pay for what the buisness is valued at. My girlfriends faimly offered to help me out with this but it still sucks. I do have some private student loan debt and tax debts that weren't discharged so maybe this might help me pay them down (I've tried settling after bankruptcy and I simply can't afford it)

My biggest concern now is what happes to all my hardwork over the last few months with building my credit? Will all my accounts be closed when I convert to a 13?

I'm reaching the point where it may just be more beneficial for me to relocate to another country where faimly is located. The stress of dealing with all this has me down 30lbs in the last 2 weeks (a plus, I guess) but I'm really not ready to go through this again.

Thanks

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Hmm, sounds like it's a alcohol license for a bar or bar & restuarant? And if you were discharged Nov. 2014, your 341 hearing had to be at least 60 days prior to that, so Sept 2014? So suddenly 6-8 months after you told the Trustee about the license they decided you actually own the business? Sounds like someone locally who isn't your friend went to the Trustee and claimed you owned the busines, not just holder on the license. The Trustee has to prove that, not just rely in heresay. I would not accept conversion to Ch 13, you need to fight this tooth and nail! Take your ex-girlfriend's family offer of help and hire the best attorney you can afford . Discharged Ch 7's can generally only be revoked & reopened in instances of fraud, and you sure as heck do not want that monkey on your back, as others have said, your credit rebuild is the least of your worries. If how you stated things is true (not accusing anything, just being careful in my phrasing) it should be easy for you to prove through your bank records you invested no money in the business and did not receive any income from it.

[despritfreya]

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@DaveInAZ wrote:

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Hmm, sounds like it's a alcohol license for a bar or bar & restuarant? And if you were discharged Nov. 2014, your 341 hearing had to be at least 60 days prior to that, so Sept 2014? So suddenly 6-8 months after you told the Trustee about the license they decided you actually own the business? Sounds like someone locally who isn't your friend went to the Trustee and claimed you owned the busines not just holder on the license. The Trustee has to prove that. . . Discharged Ch 7's can generally only be revoked & reopened in instances of fraud. . . 

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DaveinAZ,

I like the idea of the liquor license.  In Arizona, depending upon the class, it could have a value of $80k.

I just want to clarify what is most likely going on here.  The Trustee's inquiry (6 months after the entry of the discharge) is probably not the result of someone "spilling the beans" sort of speak.  It is more likely to be the result of the UST (the Trustee's boss) asking about the status of a case that is 6 months past the discharge date.  Please note OP's case was never closed.  I believe the Trustee simply forgot about dealing with the asset and is now doing his job.  I have seen these issues linger for up to 2 years before a 7 Trustee does what needs to be done.

I suspect OP did not have an attorney.  Had he/she had one, the ducks would already be in a row to as it relates to proving the asset is not legally his (or he would never have filed a 7). 

As to the burden of proof, the asset being in the debtor's name is prima facie proof of ownership.  If a Complaint for Turnover is filed it will be the debtor's burden (or more properly the burden of the true owner) to show otherwise.  Assuming the debtor can establish no equitable interest, such a Complaint should never materialize.

I hope OP comes back with updates as it would be nice to know if he/she has sought out the assistance of a competent attorney.

Des.

[DaveInAZ]

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@despritfreya wrote:

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@DaveInAZ wrote:

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Hmm, sounds like it's a alcohol license for a bar or bar & restuarant? And if you were discharged Nov. 2014, your 341 hearing had to be at least 60 days prior to that, so Sept 2014? So suddenly 6-8 months after you told the Trustee about the license they decided you actually own the business? Sounds like someone locally who isn't your friend went to the Trustee and claimed you owned the busines not just holder on the license. The Trustee has to prove that. . . Discharged Ch 7's can generally only be revoked & reopened in instances of fraud. . . 

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DaveinAZ,

I like the idea of the liquor license.  In Arizona, depending upon the class, it could have a value of $80k.

I just want to clarify what is most likely going on here.  The Trustee's inquiry (6 months after the entry of the discharge) is probably not the result of someone "spilling the beans" sort of speak.  It is more likely to be the result of the UST (the Trustee's boss) asking about the status of a case that is 6 months past the discharge date.  Please note OP's case was never closed.  I believe the Trustee simply forgot about dealing with the asset and is now doing his job.  I have seen these issues linger for up to 2 years before a 7 Trustee does what needs to be done.

 _____________________________________________________________________________

- Well, the thread title says "Chapter 7 discharged but trustee wants to reopen" so I took that as case was closed. I thought when a discharge is issued the case is closed, mine certainly was.

@despritfreya wrote:

I suspect OP did not have an attorney.  Had he/she had one, the ducks would already be in a row to as it relates to proving the asset is not legally his (or he would never have filed a 7). 

As to the burden of proof, the asset being in the debtor's name is prima facie proof of ownership.  If a Complaint for Turnover is filed it will be the debtor's burden (or more properly the burden of the true owner) to show otherwise.  Assuming the debtor can establish no equitable interest, such a Complaint should never materialize.

I hope OP comes back with updates as it would be nice to know if he/she has sought out the assistance of a competent attorney.

Des.

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Yeah, it sounds like the OP did their BK pro se. As for burden of proof, if it is a state liquor license permitting sale of alcohol there would also have to be a state license for collection of sale tax, and local city/county licenses to operate a business and health permit. If the OP is correct in saying he only held a state license his GF didn't qualify for, then someone else would be on those other licenses, as well federal & state income tax filings disclosing ownership.

[egold1234]

Yes this is for a liquor license. My name is not on any of the finacial filings. I do however take a small salary of about $250 a week helping out with the resturant. It's a small buisness that struggled alot initially so they relied on my experience in the field. I don't have any other real source of income due to previous health issues that kept me from working full time. 

I do have an attorney but he was the one who actually suggested that I try to convert to a 13. I suppose he feels it would be the easiest way to appase the trustee.

I believe the trustee is simply following up and decided for further clarification.

I'm going to gather all the documents I have and show them to my attorney so he can better decide to procede.

[despritfreya]

I am glad to read that you do have legal counsel.  Please talk to him about these issues:

1. Does your district require the revocation of a discharge before attempting to convert to a 13?

2. If you file the Motion to Convert what is the likelihood that the 7 Trustee will object due to bad faith and, if he objects the likelihood that the court will overrule the objection?

3. Would it simply be more economic to gather all evidence that the asset is not really yours and therefore you have no equitable interest in it, and persuade the 7 Trustee that there is nothing for the bk estate?

4. If you choose to deal with the 7 Trustee and cannot persuade him to go away - what about a "9019 Compromise Settlement" (make sure you use this phrase) for some dollar amount?  We typically settle these types of issue for between $5000 and $7000 with up to a year in monthly payments and no interest - the amount proposed for settlement is what we would expect legal fees to run if we fought it.

Please keep us posted.  (Link cut due to not being allowed to link to another credit repair forum. I would just suggest to google it. -Kenny)

Des

[ezdriver]

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@egold1234 wrote:

Yes this is for a liquor license. My name is not on any of the finacial filings. I do however take a small salary of about $250 a week helping out with the resturant. It's a small buisness that struggled alot initially so they relied on my experience in the field. I don't have any other real source of income due to previous health issues that kept me from working full time. 

I do have an attorney but he was the one who actually suggested that I try to convert to a 13. I suppose he feels it would be the easiest way to appase the trustee.

I believe the trustee is simply following up and decided for further clarification.

I'm going to gather all the documents I have and show them to my attorney so he can better decide to procede.

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This situation is not different from being  a coBorrower on a loan. You cannot separate the license from the business or its assets. The trustee will prevail in this case. Let it go and start rebuilding. 

[despritfreya]

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@ezdriver wrote:
This situation is not different from being  a coBorrower on a loan. You cannot separate the license from the business or its assets. The trustee will prevail in this case. Let it go and start rebuilding. 

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Unfortunately, when dealing with a liquor license (which can be very, very valuable), unless OP simply does not care what happens to the restaurant and its employees (if it has any), letting it go probably is not an option.  I am sure you are not suggesting that what happens to the waitresses, cooks, bar tenders, waiters, etc (if there are any) does not matter.  I would not want OP to just give up and then feel responsible for the loss of those jobs - because, if there are employees, that is exactly what will happen if a solution is not found.

Depending upon the facts and how it is handled, resolving the problem is within the realm of possibility.  OP should be working with the owner of the restaurant, OP's attorney and the Trustee to find a solution that will not end in the closing of the business, the loss of jobs and the loss of tax revenues for the local area.  There may very well be a lot at stake here that goes beyond OP "rebuilding". 

Having dealt with this issue more than once,  I have to wonder if OP's attorney knew of this issue before advising on the Chapter 7 or, if he did know of the issue, really understood the potential ramifications.

Des.

[ezdriver]

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@despritfreya wrote:

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@ezdriver wrote:
This situation is not different from being  a coBorrower on a loan. You cannot separate the license from the business or its assets. The trustee will prevail in this case. Let it go and start rebuilding. 

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Unfortunately, when dealing with a liquor license (which can be very, very valuable), unless OP simply does not care what happens to the restaurant and its employees (if it has any), letting it go probably is not an option.  I am sure you are not suggesting that what happens to the waitresses, cooks, bar tenders, waiters, etc (if there are any) does not matter.  I would not want OP to just give up and then feel responsible for the loss of those jobs - because, if there are employees, that is exactly what will happen if a solution is not found.

Depending upon the facts and how it is handled, resolving the problem is within the realm of possibility.  OP should be working with the owner of the restaurant, OP's attorney and the Trustee to find a solution that will not end in the closing of the business, the loss of jobs and the loss of tax revenues for the local area.  There may very well be a lot at stake here that goes beyond OP "rebuilding". 

Having dealt with this issue more than once,  I have to wonder if OP's attorney knew of this issue before advising on the Chapter 7 or, if he did know of the issue, really understood the potential ramifications.

Des.

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When a trustee decides to seize an asset, he/she is not concerned about economic impact to others. The trustee's primary responsibility is to try everything within his/her legal authority to reimburse the creditors with proceeds from liquidation of seized assets.. Also, a good bankruptcy attorney would have addressed this issue when the asset list was created. Trying to fight a trustee's decision is not a simple or inexpensive matter. My trustee admitted to me that I did nothing wrong with buying my Mercedes prior to filing ch7 ... yet he did his best to seize the car because he decided that the finance company had not "perfected its lien". The finance company fought the trustee and the trustee lost. The trustee and my attorney both told me that I had no say in the matter. That's how bankruptcy laws work.