thaiboxgirl

Does trustee monitor bank account after case is filed?

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I'm confused. My post may be confusing too, but I'm trying to figure out how to ask this question. I do have an attorney and I have asked him a lot of questions. Still he is not really answering my question regarding the monitoring of our bank account after filing. I don't get a straight answer. We filed on May 3rd and had to send from the bank a fax of our bank account balances and transactions for that day. It was my understanding that the only time it matters about how much is in our bank is the day we file.

 

My attorney has noted in the case that we have rental income of $1,400 per month. That money goes straight to the rental houses mortgage, second mortgage and utilities. My attorney said that if we have to have the money put into the bank account then go ahead but its better not to have the money in the account. Why would this be? Does the trustee monitor the bank account during the entire bankruptcy proceeding? Are they going to seize any extra money we have in there? We don't have any extra money at all, everything goes to bills. Our tenant's rent goes straight to all of the rental house expenses.

 

I hope I didn't confuse the issue too much. Thanks in advance!

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My attorney has noted in the case that we have rental income of $1,400 per month. That money goes straight to the rental houses mortgage, second mortgage and utilities. My attorney said that if we have to have the money put into the bank account then go ahead but its better not to have the money in the account. Why would this be? Does the trustee monitor the bank account during the entire bankruptcy proceeding? Are they going to seize any extra money we have in there? We don't have any extra money at all, everything goes to bills. Our tenant's rent goes straight to all of the rental house expenses.

 

I trust you have not filed a Chapter 7.  If you did file a 7 that rental income does not belong to you and any $$ that you receive should be held until the Trustee tells you what to do with it.  I trust your attny has warned you about this and that is probably the reason he does not want you to have anything to do with the rental $$.  If the tenants are paying, they probably should make payments directly to the lien holders.  Nothing should go to you. 

 

So, the first two questions are. . . did you file a Chapter 7 and, if you did, what did your attny tell you about the income derived from "property of the estate"?

 

Des.

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The attorney told me the best thing would be for the rental money to go straight to the creditor but my tenant wouldn't agree with that. So the attorney said that if we must, have the tenant deposit the rental money into our account on a monthly basis. It is a chapter 7.

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. . . the attorney said that if we must, have the tenant deposit the rental money into our account on a monthly basis.

 

Please, please, please. . . go back to that attny and get explicit (written) instructions as to what to do with the money.  It does not belong to you and, therefore, without the Trustee's approval, you cannot spend a dime

 

Personally, if the funds were to come into my hands in the form of a check I would deliver the check to the Trustee.  If the funds were to be deposited into my account and held for the Trustee I would set up a separate account so that the funds were not commingled with any other money.  And, I would not spend a dime without the express instruction of the Trustee.

 

THIS IS A BIG ISSUE and, to protect yourself you really should get something from the attny directing you on what to do.

 

Des.

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Here in Pennsylvania, this is a non-issue.   The rent comes in, then it goes out.   Sure, its income for the purposes of the means test, but if the trustee wants to take the rents to pay creditors then they take the liens associated with it.  The mortgage and real estate taxes need to be paid to generate the rent proceeds.  If there is large NET rental income, then the property may be subject to seizure as an asset.   This is highly unlikely in most chapter 7 cases.    

 

Twice I have had a trustee threaten to take rent proceeds because my client was collecting rent and not paying the mortgage or real estate taxes.  I argued that the mortgagee (bank) had a lien on rent proceeds (standard language in mortgages), and that the proceeds were untouchable by the trustee even though the bank had not yet moved to attach rents.   Both times, the trustee backed off.

 

One other issue- there has to be a bare minimum of $5,000 - $7,000 of easy assets to get to for a trustee to mark the case as an asset case.  It takes nine months and numerous reports for a trustee to administer an asset case.  A trustee usually bills out at $350/hour, and there has to be the likelihood of a meaningful distribution to unsecured creditors after all costs of administration (determined at the time the trustee makes the decision to mark as asset or not, not after marking as "asset" and discovering new facts).  

 

I would suggest that 10% of my clients have rental properties.   I have yet to have a trustee get to the rents or take a property.  Do please understand that state law varies. 

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More to your core point, the trustee does not monitor the bank accounts after filing.  But that does not matte here.  The income statement from the rental property and any monthly net proceeds is an asset of yours.  The question is, is it an asset worth taking.  That does not require monitoring your bank accounts.  The trustee knows what's coming in and out from your schedule I/J anyway, which is a forward looking set of schedules.

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