When a chapter 7 petition is filed, the court appoints an impartial “trustee” to administer the case and liquidate the debtor's nonexempt assets. 11 U.S.C. §§ 701, 704. If all the debtor's assets are exempt or subject to valid liens, the trustee will normally file a "no asset" report with the court, and there will be no distribution to unsecured creditors. Most chapter 7 cases involving individual debtors are no asset cases. But if the case appears to be an "asset" case at the outset, unsecured creditors must file their claims with the court within 90 days after the first date set for the meeting of creditors. Fed. R. Bankr. P. 3002(c). A governmental unit, however, has 180 days from the date the case is filed to file a claim. 11 U.S.C. § 502(b)(9). In the typical no asset chapter 7 case, there is no need for creditors to file proofs of claim because there will be no distribution. 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. 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 in a chapter 7 case who has a lien on the debtor's property should consult an attorney for advice.
Commencement of a bankruptcy case creates an "estate." The estate technically becomes the temporary legal owner of all the debtor's property. It consists of all legal or equitable interests of the debtor in property as of the commencement of the case, including property owned or held by another person if the debtor has an interest in the property. Generally speaking, the debtor's creditors are paid from nonexempt property of the estate.
The primary role of a chapter 7 trustee in an asset case is to liquidate the debtor's nonexempt assets in a manner that maximizes the return to the debtor's unsecured creditors. 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. The trustee may also attempt to recover money or property under the trustee's "avoiding powers." The trustee's avoiding powers include the power to: set aside preferential transfers made to creditors within 90 days before the petition; undo security interests and other prepetition transfers of property that were not properly perfected under nonbankruptcy law at the time of the petition; and pursue nonbankruptcy claims such as fraudulent conveyance and bulk transfer remedies available under state law. In addition, if the debtor is a business, the bankruptcy court may authorize the trustee to operate the business for a limited period of time, if such operation will benefit creditors and enhance the liquidation of the estate. 11 U.S.C. § 721.
Section 726 of the Bankruptcy Code governs the distribution of the property of the estate. Under § 726, there are six classes of claims; and each class must be paid in full before the next lower class is paid anything. The debtor is only paid if all other classes of claims have been paid in full. Accordingly, the debtor is not particularly interested in the trustee's disposition of the estate assets, except with respect to the payment of those debts which for some reason are not dischargeable in the bankruptcy case. The individual debtor's primary concerns in a chapter 7 case are to retain exempt property and to receive a discharge that covers as many debts as possible.
TRUSTEE(S) COVERING THE EASTERN DISTRICT OF NEW YORK
Neil H. Ackerman 190 Willis Avenue Mineola, NY 11501 Phone: (516)747-0300 R. Kenneth Barnard 384 W. Main Street Babylon, NY 11702 Phone: (631)661-0906 David J. Doyaga 26 Court Street, 10th Floor Suite 1002 Brooklyn, NY 11242 Phone: (718)488-7500 Robert L. Geltzer 1556 Third Avenue, Suite 505 New York, NY 10128 Phone: (212)410-0100 Lori L. Jones 98 Cutter Mill Road Suite 201 North Great Neck, NY 11021 Phone: (516) 466-4110 Kenneth I. Kirschenbaum 200 Garden City Plaza Garden City, NY 11530 Phone: (516)747-6700 Debra Kramer 98 Cuttermill Road, Suiter 466 South Great Neck, NY 11021 Phone: (516) 482-6300 Fax: (516) 482-6317 Paul I. Krohn 40 Clinton Street, Suite 1G Brooklyn, NY 11201 Phone: (718)875-7431 Richard J. McCord 90 Merrick Avenue East Meadow, NY 11554 Phone: (516)794-1616 Allan B. Mendelsohn P.O. Box 510 33 Queens Street Syosset, NY 11791 Phone: (516)921-1670 Gregory M. Messer 26 Court Street, Suite 2400 Brooklyn, NY 11242 Phone: (718)858-1474 Robert J. Musso 26 Court Street, Suite 2211 Brooklyn, NY 11242 Phone: (718)237-9059 Alan Nisselson 156 West 56th Street New York, NY 10019 Phone: (212)237-1021 Richard E. O’Connell 24-44 Francis Lewis Blvd., 2nd Floor Whitestone, NY 11357 Phone: (718)767-6400 John S. Pereira 150 East 58th Street, 14th Floor New York, NY 10155 Phone: (212)758-5777 Marc A. Pergament 400 Garden City Plaza, Suite 403 Garden City, NY 11530 Phone: (516)877-2424 Robert L. Pryor 675 Old Country Road Westbury, NY 11590 Phone: (516)997-0999 Kenneth P. Silverman 100 Jericho Quadrangle Jericho, NY 11753-3302 Phone: (516)479-6300 Richard L. Stern 135 Pinelawn Road, Suite 120 South Melville, NY 11747 Phone: 631)549-7900 Andrew M. Thaler 90 Merrick Avenue, Suite 400 East Meadow, NY 11554 Phone: (516)228-3553 Edward Zinker 278 East Main Street, Suite C Smithtown, NY 11787 Phone: 631)265-2133