First, let me point out that filing for Bankruptcy is 100% legal in the United States. There are various laws that protect your property from illegal search and seizure in America. Similarly, the Bankruptcy Code was established to give people a fresh financial start. My clients are not criminals but people who need the assistance of our court system to tackle their debts. Filing for Bankruptcy is just a business decision, and should not be an emotional one.
That being said, when I have a client who has a substantial asset I will carefully craft a strategy to keep the asset or sell the asset before we file a case, in order to avoid losing property. This is called pre-bankruptcy exemption planning. There is nothing illegal about it. It is also important to know what the trustee will want before he/she asks for it. If there is a house I will have an appraisal, for a diamond ring I will get a valuation by a licensed gemologist. When a trustee sees that you have done your homework and not cut corners they typically move on to the next case.
So let’s assume that you have a valuable diamond or a large comic book collection in storage. First, we will make every effort to get a written appraisal and photo of the items. If the trustee still wants to investigate the item we will happily make arrangements for an inspection. The trustees usually do not want to look at your stuff. This costs them time and money, so if you can save them the effort, usually they will not bother with an inspection.
Trouble could arise if your petition was not put together properly. If you have items that are not properly exempted or properly listed the trustee may request an examination of those items. But the trustee will almost never come to your house and search for valuables, unless he/she thinks that something criminal is going on. The trustee would still need a search warrant to go into your house, requiring serious accusations and evidence that something is being hidden.
I have never had a trustee go to a client’s house to search for valuables (as of the date of this article: 8/19/13). As I said, my clients are not criminals so there is never a need for that. As a matter of fact, as of this date, none of my clients have ever lost property that they did not intend on losing.
One particular client had a Co-Op in the Bronx that was sold at foreclosure at a huge discount. He purchased it for approximately $15,000 and it was worth $340,000. He was behind on his rent and mortgage. In that case the trustee reversed the sale of the Co-Op and sold it for market value. This took some time but the trustee was able to pay off all of my client’s debts and give my client a substantial check from the proceeds. This is very rare, but that client made a lot of money by filing for Bankruptcy.
If you are interested in filing for Bankruptcy call my office at 212-244-2882 24 hours a day. Our firm is unique in that we exclusively focus in the area of Bankruptcy.