What is the Role of a Trustee in My Bankruptcy?
If you’ve decided to get a fresh start on your financial situation and file for bankruptcy, you’re going to be interacting with several professionals throughout the process. Among these are your bankruptcy attorney, the bankruptcy judge, and a bankruptcy trustee.
Balancing the interest and rights of the debtor against those of their creditors is one of the goals of the bankruptcy process. While the judge has the final decision on these matters, a person called a bankruptcy trustee is appointed to these cases to facilitate settlements.
What is a Bankruptcy Trustee?
When you file for bankruptcy in the U.S., the court creates a “bankruptcy estate,” which consists of all your assets and financial interests. The court gets jurisdiction over this bankruptcy estate and is in charge of administering it according to the law. This is where the bankruptcy trustee comes in.
A bankruptcy trustee is appointed to your case by the Office of the United States Trustee, which is part of the U.S. Department of Justice. Your bankruptcy trustee is required to oversee your case and take a variety of actions depending on the type of bankruptcy you have filed.
What is the Role of a Trustee in Bankruptcy Cases?
If you’ve ever heard of a trust, then you are familiar with the term “trustee.” The role of a bankruptcy trustee is to act as a fiduciary to the debtor’s creditors. Bankruptcy trustees play a vital role as independent third parties between the debtor, the bankruptcy court, and the creditors. They aren’t affiliated with any of these entities.
The bankruptcy trustee’s primary role is to ensure things go smoothly. They also serve as a watchdog to prevent any unethical or fraudulent activity. The U.S. Bankruptcy Code grants broad powers to bankruptcy trustees. Judges take their opinions and actions seriously. But their roles and responsibilities can vary depending on the type of bankruptcy being filed.
Chapter 7 Bankruptcy Trustees
In a Chapter 7 bankruptcy, the goal is to discharge your allowable debts at the end of the process. The Chapter 7 trustee is called the “interim trustee,” who essentially takes over the role of the debtor so that they can administer the bankruptcy estate.
The Chapter 7 trustee will legally possess your assets until the point that they transfer any allowable assets back to you. The trustee has the power and duty to sell your assets and take other actions on behalf of your bankruptcy estate. Some of the primary powers and duties of a Chapter 7 trustee include:
- Thoroughly review the bankruptcy petition
- Report any signs of fraud to the Bankruptcy Court
- Schedule and attend the 341 Creditors Meeting
- Liquidate all non-exempt assets and pay off credits
- Return allowable assets to the debtor
- Report all actions to the Bankruptcy Court
It’s important to understand that you will be able to keep exempt assets in a Chapter 7 bankruptcy case. These might include a portion of our family residence, your primary vehicle, household furnishings, and tax-exempt retirement plans.
Chapter 13 Bankruptcy Trustees
Chapter 13 bankruptcy focuses on helping an individual or business create an agreed-upon repayment plan that requires the debtor to make affordable monthly payments. Some of the benefits of Chapter 13 bankruptcy are that you are not required to liquidate any assets and whatever debt is left after making three to five years of regular payments is eligible for full discharge.
A trustee’s role in a Chapter 13 bankruptcy is a bit different than in a Chapter 7 case. As the debtor, you will still meet with the trustee to help them learn more about your assets and debts. Instead of selling off assets and discharging your debts, the trustee will create a repayment plan and supervise your case from start to finish. Some of their duties include:
- Analyzing the debtor
- Examining the debtor’s bankruptcy filing and schedules
- Reviewing the debtor’s proposed Chapter 13 repayment plan
- Objecting to any terms of the plan where necessary
- Collecting and distributing regular payments to various creditors
- Motioning to dismiss a debtor’s case for non-compliance when necessary
Learn More About Filing for Bankruptcy Protection
If you are struggling with overwhelming debt, the U.S. bankruptcy code offers an option that can provide relief. But you probably have a lot of questions about this process. An experienced bankruptcy attorney can give you the answers you need and the peace of mind to move toward greater financial freedom. Your Gulf Coast Bankruptcy Attorney is committed to providing Gulf Coast residents with the resources necessary to make the most informed decisions.