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The Argument For Not Filing an Asset Chapter 7 Bankruptcy Case

The Argument For Not Filing an Asset Chapter 7 Bankruptcy Case
"Let's begin by defining a Chapter 7 bankruptcy with assets. A Chapter 7 bankruptcy case involving assets indicates that there are assets that cannot be exempted from the bankruptcy estate, and creditors are entitled to the value of these non-exempt assets. For the advantage of creditors, the trustee assigned to the case will administer the bankruptcy estate.What then is the argument against pursuing a Chapter 7 bankruptcy case with assets? What is in the best interest of creditors, or those to whom money is owed? Let's assume that the total value of the assets available to creditors is $20,000. The trustee will receive 25% of the initial $5,000, 10% of the subsequent $45,000, 5% of the subsequent $950,000, and 3% of the remainder. Here we have a sliding gauge. For a total estate of $20,000, the Chapter 7 trustee will receive roughly $3,500. These fees are mandated by law. Depending on the jurisdiction, a typical Chapter 13 trustee will receive about 10% of the estate for administering the case. Therefore, if the total value of the estate is $20,000, the Chapter 13 trustee will receive approximately $2,000 for managing the estate.Then, what is the issue? There is not a significant difference in trustee fees, correct? In Chapter 7 bankruptcy, the trustee will likely retain the services of an attorney. The majority of attorneys who work for trustees charge between $300 and $600 per hour. In the example given above, if the attorney for the Chapter 7 trustee spends only 10 hours on the case, he or she would receive approximately 25% of the total estate of $20,000. Therefore, the Chapter 7 trustee receives approximately $3,500 plus attorney fees of $5,000, totaling $8,500 in fees. This constitutes nearly half of the available funds for creditors. Contractually, the Chapter 13 trustee receives approximately $2,000 total. What then is in the creditors' best interest?Given the additional labor required, most bankruptcy attorneys must charge higher fees for a Chapter 13 to be fair. Therefore, the bankruptcy attorney fees could theoretically equal the professional fees levied in a Chapter 7. In most jurisdictions, however, fees for a fundamental Chapter 13 case are capped. These limits can differ significantly by jurisdiction. In some Chapter 7 cases, the trustee must employ an attorney to assist in the administration of the bankruptcy estate. This is especially true when questions exist regarding the value of assets and which assets are included in the bankruptcy estate. Major news outlets have recently reported on the fees that bankruptcy professionals charge in Chapter 11 reorganization cases. Some of the hourly rates exceed $1,000 per hour. It is difficult to balance what is in the best interest of creditors, particularly when the majority of creditors do not partake in Chapter 7 and Chapter 13 cases involving small assets.
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"The Argument For Not Filing an Asset Chapter 7 Bankruptcy Case" was written by Mary under the Finance / Wealth category. It has been read 136 times and generated 1 comments. The article was created on and updated on 01 June 2023.
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