Expert: Mark J. Markus- California Bankruptcy Attorney - 3/9/2009

Question
QUESTION: it's a very complex story but will try to make it as clear as possible. a few years back, my wife started a bus with a friend. shortly after that the friend left the company. they tried to have that friend's name taken out of the joint business account they had but they failed not knowing it. since then, my wife filed for bankruptcy (chapter 7) to protect herself from different creditors. shortly after that our old friend called us to tell us the bank's creditors were going after her. We feel it is our responsibility to pay off that debt to her even though we are in a bad shape already. the only solution we found is to refinance our house and get a portion as cash or check to her. is the trustee going to see it as fraud (even though we had no knowledge of it prior to filing and that particular creditor was listed on the list my wife provided to the trustee)? can we do that without suffering consequences or have the trustee take it back from our friends for himself? My parents are also trying to give us money to help as the trustee takes everything everytime we see him. would this money be ours or can he take it as well. Only my wife filed but it seems that he doesn't care. My wife failed her business, there was never any intention to hurt anyone else, we are trying to do the right thing and so far the "fresh start" promised is nothing like it. the trustee makes her feel like a criminal and our lawyer seems to be afraid of him. we are just trying to do what is right but can't seem to get out of it. thank you for your quick answer.

ANSWER: It sounds to me from the facts you gave, that your wife is STILL in a Chapter 7 case.  If that's true, then she cannot do anything until the Trustee either abandons the assets of the estate back to her, or she obtains permission from the Trustee to do something with the assets (such as refinance, etc.).

---------- FOLLOW-UP ----------

QUESTION: thank you for your prompt answer, on sunday nonetheless. I so appreciate it as we are schedule to refinance our house tomorrow and needed answers prior.

Our home is on the Schedule C list of exempt assets.  Does this answer still apply? My parents already wired the gift to our joined bank account. are we going to loose it to the trustee, do we need to report it? all the research I have done just said to report everything prior to filing nothing after we have filed.

We live in MN by the way. My wife filed in december and it is still pending. is there anyway to approach the trustee and ask if we can refinance or is it pretty much out of the question as if we get cash out of it he would confiscate it before it even reaches our friends (they have been asked to pay the debt in full by march 16), that's why there is a rush.

My wife is trying to help out and working to bring cash in because of all the trustee already took from us. Is the new money she makes after having filed still something the trustee can take or gift from family for that matter.

Answer
If the Trustee is not seeking to sell the property, then there probably is no problem refinancing and using those proceeds any way you wish, but technically it's the Trustee's property until the bankruptcy case is closed.  I don't know how much equity there was in the property on the date your case is filed, or what exemptions she was entitled to under applicable law, so I can't really advise further on that.  Does she not have an attorney in this case?  Did the Trustee file a no asset report after the creditor's meeting?



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