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If I receive a settlement after my Chapter 7 bankruptcy has been dismissed, do I have to turn it over to the bankruptcy court?

Little Rock, AR |

My husband and I filed bankruptcy because the builder did not build our house up to code. There wasn't enough piers supporting the beams which caused them to twist, and we had mold that was making us sick. The builder is trying to file bankruptcy and us, along with other homeowners who had homes built by this company, are trying to stop him. I would like to know if we do get a settlement out of this, will we have to turn it over to bankruptcy court even though our Chapter 7 bankruptcy has already been dismissed?

Attorney Answers 4


If your bankruptcy case was actually dismissed, this is a non-issue. I think you may have meant that you received a "discharge", which is completely different. Did you list the potential claim you had against the builder in your bankruptcy case and exempt it? If not, then you would have to turn over any recovery to the Trustee in your bankruptcy case (or at least inform the Trustee of it and let him/her decide if they want to re-open your case to administer that asset).

Mark J. Markus, Attorney at Law
Handling exclusively bankruptcy law cases in California since 1991.

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Mr Marcus is absolutely right - if your Chapter 7 case dismissed and you did not receive a discharge, you owe the bankruptcy court nothing.

But if you received a DISCHARGE, you completed your bankruptcy & must inform the Trustee of this asset (if you didn't already do so from the start). The Trustee may be entitled to take any award you become entitled to receive and use the money to pay your creditors.

Don't feel like doing this? BAD IDEA! You could have your discharge revoked as a punishment, and never be able to eliminate your debts. Also, the builder could use your bankruptcy as a reason not to pay any award to you. BUMMER! Don't think he will find out? OK, you are obviously one of those people who likes dancing on the edge of a cliff & the dark. LOL in lawyer speak means Lots of luck!

Hope this perspective helps!

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The question is a somewhat confusing as previously noted. Have a bankruptcy attorney in L'il Rock review your bankruptcy petition to see how the possible settlement was listed. You may need to re-open the case to list the settlement and exempt it.

Disclaimer of California Attorney. Laws differ from state to state. Although the above response is believed to be accurate, it should not be relied upon as any type of legal advice because the information provided is incomplete. It is intended to educate the reader and a more definite answer should be based on a consultation with a lawyer. No attorney client relation is formed with me without a written contract. Good Luck starts with a strategy and a plan. Robert J. Suhajda, MS,CPA Attorney-At-Law 17721 Norwalk Blvd. #43 Artesia, CA 90701 562-924-8922 Tax Relief Lawyer. Former financial auditor and controller. Admitted to US Tax Court, Income Tax, IRS representation, Fiduciary income tax returns, Estate and Gift tax returns, Homeowner Association Strategist.

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If your bankruptcy case did not list the lawsuit against the builder the lawsuit will be dismissed if the right to bring the action existed at the time you filed your bankruptcy. Talk to your bankruptcy lawyer about the timing.

Disclaimer: This answer does not constitute legal advice. I am admitted in the States of New York, New Jersey and Massachusetts only and make no attempt to opine on matters of law that are not relevant to those three States. This advice is based on general principles of law that may or may not relate to your specific situation. Facts and laws change and these possible changes will affect the advice provided here. Consult an attorney in your locale before you act on any of this advice. You should not rely on this advice alone and nothing in these communications creates an attorney client relationship.

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