When Louisiana residents file for Chapter 7 bankruptcy, they usually do so because they have few assets and no realistic hope of being able to pay off their debts in the future. At the time of the bankruptcy, the debtor is expected to turn over all nonexempt assets to the bankruptcy trustee for liquidation, with the proceeds distributed to creditors. Only then can most of the the debtor’s remaining unsecured liabilities be discharged by the court.

Sometimes, however, it isn’t always clear what a pre-bankruptcy asset is. For example, it is possible for somebody who has begun the bankruptcy process to receive some property or money before the discharge is complete. At that point, there may be some question as to whether the money or property belongs to the bankruptcy estate.

In a case in Massachusetts, an attorney found himself in just the sort of situation. Before his bankruptcy filing, he had agreed to take on a case and was billing his client on a monthly basis. Money was paid to him by the client after he filed for bankruptcy. The bankruptcy trustee argued that this money was part of a pre-bankruptcy agreement and thus belonged to the bankruptcy estate. The debtor argued that the funds had been received after he had filed for bankruptcy. The court agreed with the trustee and ordered the debtor to turn over the funds for distribution to creditors.

Because there is no one-size-fits-all approach to bankruptcy, it is important that debtors be aware of all of their legal rights and responsibilities during the process. Many individuals may benefit from consulting with an experienced bankruptcy attorney who can be of assistance throughout the process.