Seizure of Unprotected Assets of the Bankruptcy debtor
When a Chapter 7 bankruptcy Trustee finds unprotected (non-exempt) assets to seize on behalf of Creditors of a bankruptcy debtor, the process of orderly administration and distribution of the assets typically takes several months, but can take years if the asset is property that is difficult to sell, or is a chose in action or pending lawsuit.
Discharge Order Does not Bar Administration
The bankruptcy Trustee can continue administration of the bankruptcy estate assets long after the Order of Discharge has been entered on behalf of the bankruptcy debtor.
No Distribution in Kind, Only in Money (Liquidated Assets)
As Trustees do not distribute personal or real property ("in kind"), they must await the liquidation of the the asset before starting the final phase of payout of the assets of the bankruptcy estate to qualifying Creditors & Others.
Creditor Submission of their Proofs of Claim
Upon liquidation of the unprotected assets, the bankruptcy Trustee sends out notices to Creditors to file their claims with adequate documentary proof, if these "proofs of claims" are accepted, the Creditor gets to share in the distribution of the money held by the bankruptcy Trustee.
Reduction of the Bankruptcy Estate by Commissions, Fees & Costs
The bankruptcy Trustee has the right to a commission for administering assets on behalf of Creditors. The bankruptcy Trustee usually hires an attorney, upon court approval, who submits a bill for payment. Other professionals might also be hired (a realtor, for example) who would also be entitled to fees. Each of these parties may also bill for costs.
Payout of Liquidated Assets of the Bankruptcy Estate
After allowed commissions, fees and costs are taken from the liquidated assets of the bankruptcy estate, allowed Creditors obtain funds, that may be less than 100% of their proven claim.
If there is any remainder of the bankruptcy estate, it will be returned to the bankruptcy debtor.
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