Who Is the Bankruptcy Trustee and How Can He or She Help or Hurt Me?

Henry & DeGraaff

The three kinds of trustees in consumer bankruptcy have tremendous power over you. So it’s important to know what they do, and how to stay in their good graces. I’ll introduce them in this blog—the Chapter 7 trustee, the Chapter 13 trustee, and the United States Trustee. Then in the next three blogs I’ll tell you more about each of them.

1. Chapter 7 TrusteeDetermines either that you have no “non-exempt” assets to collect or else pursues any such assets in order to liquidate them and pay the proceeds to your creditors. Reviews your documents and presides at your Meeting of Creditors for this purpose. Can conduct other investigation such as reviewing the public record. Can also pursue “fraudulent transfers” or “preferences”—money or assets either that you gave or sold to someone or that creditors got or took from you within a certain amount of time before the filing of your bankruptcy case.

2. Chapter 13 TrusteeDetermines if your proposed Chapter 13 Plan meets legal requirements, raises objections, and works with your attorney to adjust your Plan to satisfy any such objections. The trustee or a staff attorney usually presides at your Meeting of Creditors. You send your Plan payments to the trustee (or a designated collection office), who disburses these funds to your creditors according to the terms of your Plan. The trustee and his or her staff cannot give you legal advice, but will provide you some help in completing your case successfully.

3. U.S. TrusteeIs part of the U.S. Department of Justice, overseen by the U.S. Attorney General. The U.S. Trustee (“UST”) appoints and supervises the group (“panel”) of Chapter 7 trustees and the “standing” Chapter 13 trustees. Each regional UST, through a staff usually including an attorney and/or accountants, monitors the administration of bankruptcy cases, most closely with Chapter 11 business cases. They are most often involved in consumer cases in raising objections to the eligibility of debtors to file Chapter 7 cases. In rare cases, they can refer potential bankruptcy crimes to the U.S. Attorney for investigation and prosecution.

Again, in my next blogs I’ll tell you more about each one of these trustees, especially how to avoid worrying about them by taking the right steps in your bankruptcy case.

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