Bizzare new question may face Massachusetts bankruptcy debtors

questionI watched about an hour’s worth of “section 341″ meetings recently, and was surprised to hear the trustee asking a question I don’t think I’ve heard before.

The trustee showed the debtors their Schedule C, and then asked:

“Have you purchased any of these assets within one year of filing the bankruptcy case?

That’s a little weird, because its not against the bankruptcy code — or any other law I know of — to buy ordinary things before filing a case. Luxury goods, yes, there is a ban on stocking up on those, but it would be tough to imagine someone not buying any thing at all for a year (even though everyone I heard get asked this answered “no”).

My best guess is that this particular trustee might be trying to flush out if debtors are engaging in bankruptcy planning — a practice that itself is not exactly illegal, although it is not beyond being questioned in the courts.

A typical example of bankruptcy planning: a 40 year old single debtor (call him Doug) has $8,000 in a bank account bit no car to get to work. The Massachusetts bankruptcy exemptions for a bank account are $2,500 and for a car are $7,500. So he takes $6,000 to buy a used car, and now falls within the limits for both categories.

I don’t know if this annoying new question is something that is going to spread statewide, or is just confined for now to a particular trustee in Worcester. But if I hear it from anyone else, I’ll post it here.


By Doug Beaton