BANKRUPTCY SALES
October 12th, 2008Recently America has experienced a number of business and personal financial crises unequaled since the Great Depression of the 1930s, and I predict this situation will become worse in the 1990s. However, remedies are available to those who stand to lose everything when overstretched budgets reach the breaking point. Whenever corporations or individuals become insolvent, they can file a repetition for bankruptcy and stop creditors from attaching their assets. The purpose of bankruptcy proceedings is to convert the debtor’s assets into dollars for distribution among the creditors. Personal bankruptcies have increased steadily in the past few years; the rate for 1988 was 60 percent higher than that for 1980. To begin bankruptcy proceedings, an individual or corporation files a petition at their local bankruptcy court or district court if there’s no specific bankruptcy court in their area. All liquidation proceedings are governed by the Federal Bankruptcy Act and subsequent amendments. The bankruptcy court appoints a trustee in bankruptcy, who disposes of the debtor’s assets subject to the court’s control and direction. With the exception of certain personal property, any and all assets of the debtor’s estate can be sold. (However, certain assets related to the debtor’s ordinary course of business normally won’t be sold; for example, a plumber who declared bankruptcy would be allowed to keep the tools needed to continue working and earning a living as a plumber.) Assets can range from personal to real property, which means that in addition to real estate, individual bankruptcy sales often include furniture, jewelry, cars, tools, hobby and sports equipment, recreational vehicles, and boats. A business bankruptcy sale would include any assets used in the course of that business and available for sale (that is, not claimed for payments owed to whoever sold them to the business). Depending on the business, this could be almost anything: machinery and tools, office equipment, merchandise from a store inventory, and so on. If the business went under because management allowed itself too many luxuries which is an all-too-common source of business problems assets might even include such items as company cars, an executive plane or two, and maybe even some resort property. Trustees in bankruptcy are private companies and, as such, make their own choices in the procedures they use to dispose of a debtor’s estate. Generally sales are held at a public auction. The general public is notified and invited to bid. The trustees have complete jurisdiction over which auction house will handle the sale. In the case of real estate sales, some trustees will simply turn over the property to a licensed real estate broker. If you happen to be a creditor, you will be notified at least ten days before any such sale is held. The bidding procedures of a bankruptcy sale also vary, according to the individual trustee. Trustees can use both oral and sealed bidding to liquidate the assets. At oral auctions, competitive bids are accepted in typical auction fashion. At sealed bid auctions, the bidder simply writes down and “seals” in an envelope an offer for a particular item, usually along with a deposit of 10 percent of the amount of the bid in the form of certified funds. All of the envelopes are opened at one time, and the highest bid wins. When the bidding is closed, the trustee must approve the bids and present the high bid to the court for confirmation. Usually the court will approve this bid, at which time the bidder must present full cash payment to the court. Because of the specific rules involved in a bankruptcy process dure, bankruptcy sales usually take a few months to consummate. The time involved is commonly from thirty to ninety days and can; sometimes take six months or more. Your first important step in learning about bankruptcy sales is to get your name on the mailing list for your area. In some parts of the country, the bankruptcy court maintains its own mailing list for all auctions under its jurisdiction. In other areas, each trustee keeps his or her own list. Contact your nearest bankruptcy court for information on what system they use. (You’ll usually find the bankruptcy court in the federal building in your area, and it should; be listed in the “Government Offices” section of your local telephone directory. If you have difficulty finding it, ask the clerk at your county courthouse.)