What is a Bankruptcy Trustee?
There are a lot of moving parts when it comes to filing for bankruptcy. One crucial aspect is being assigned a bankruptcy trustee.
Take a deeper look at what a bankruptcy trustee does right here.
Introduction
When you file for bankruptcy, many things take place. One important one is being assigned a trustee.
A trustee plays such a big – and important – role in your bankruptcy case that having an idea of their duties can offer you some clarification on the overall process. After all, from reviewing the paperwork you file to deciding whether or not they should dismiss your case is all part of what the trustee does.
Let’s take a closer look at what a bankruptcy trustee does, the types of trustees, and what you need to know about working with them. Today, trustees may be private individuals or corporations that are supervised by U.S. trustee officers and the courts.
What is a Bankruptcy Trustee?
In general, a trustee is someone who is given administrative control over something, such as a trust. However, bankruptcy cases have trustees, too. These individuals are selected by the U.S. Department of Justice’s U.S. Trustee Program as individuals who are highly skilled in matters relating to bankruptcy, such as accounting, business, management, and legal issues. This program was put into place as a result of the Bankruptcy Reform Act of 1978.
In bankruptcy cases, trustees are not selected by you but rather appointed by the trustee program to oversee the case in its entirety. They monitor each of the parties and ensure that all laws are followed and that everyone is working as they should to stay within the bankruptcy plan.
Trustees watch over the bankruptcy process and make sure that everything runs smoothly.
Types of Trustees
There are a few different types of bankruptcy – and that means the roles of the trustees will change. For instance, the role of a chapter 7 trustee is different than that of a chapter 13 trustee. Let’s take a look at the different types – and their different roles.
Trustees will review the paperwork that you filed making sure that your claim is legitimate – and that the financial information you provided is also valid and true. What they do after varies based on the type of bankruptcy.
Chapter 7
Chapter 7 is known as liquidation bankruptcy. It discharges debts and offers the debtor a fresh start, free from creditors. There are no payment plans to manage. However, a chapter 7 bankruptcy trustee is charged with looking at assets and determining what may be sold in order to pay cash to creditors.
In this type of bankruptcy, trustees can be referred to as panel trustees. Why? Because the U.S. Trustee appoints them and then assigns them to a specific case.
Chapter 13
Things are a bit different in a Chapter 13 bankruptcy case. In this one, individuals repay their debts while getting to keep their assets. A payment plan goes into effect for 3 to 5 years, on average, to repay creditors. This repayment plan is approved by the court and the trustee is the one who oversees it.
The trustee in this type of bankruptcy will accept the payments from the debtor and distributes them to the creditors based on the terms set forth in the repayment plan.
Trustees in a Chapter 13 case are referred to as standing trustees because they are the standing or consistent trustee who is responsible for cases in a certain region. They don’t get assigned specific cases, but rather specific areas – and they oversee all the cases.
Chapter 11
And, like the others, a Chapter 11 bankruptcy is also different. This one contains a lot of reorganization. It is typically used for businesses, but some individuals also find this their best option if they own a small business. They can reorganize their debts and continue pressing forward – and operating business as usual.
Many times, there are no trustees appointed in these cases because the debtor is the one who performs the trustee’s functions. However, if a trustee does get appointed for one reason or another, the trustee takes over control of the business and its assets during this reorganization time.
What to Know About Working With Your Trustee
As soon as you file your paperwork for bankruptcy (Chapter 7 or Chapter 13), you will be assigned a trustee. You will know who this person is, but it isn’t likely that you will meet until the meeting of creditors, sometimes referred to as a 341 meeting. This meeting is conducted by your trustee and creditors have the opportunity to clarify any information regarding your financial statements and bankruptcy documents.
Keep in mind that creditors are notified of this 341 meeting and can attend if they desire to, but it is not required. Not having any creditors present doesn’t mean they still aren’t claiming you owe them.
At the meeting, you will prove your identity and will be under oath. The trustee will then proceed with asking you questions to verify that all the information provided in your filed documents – and your financial information – are true and correct.
Once the meeting has concluded, you may or may not see the trustee again. Sometimes, those who have filed a chapter 7 case will have to turn over property that is non-exempt to the trustee after the 341 meeting. In the case of a chapter 13 bankruptcy, monthly payments that you have to make will be with your trustee which may include some interaction.
Though, whether you see your trustee or not, just know that it is their job to continue monitoring your bankruptcy case until it has been concluded.
A Trustee’s Compensation
Finally, do trustees get paid? Of course, they do. It all comes down to the type of bankruptcy we are talking about. For a chapter 7 case, trustees often keep a percentage of your sold assets. Your creditors get some and so does the trustee. In a chapter 13 case, the trustee’s fee is included in the repayment plan.
Be Represented In Your Bankruptcy
If you are filing bankruptcy, the process can be long, tedious, and a bit overwhelming. You want to make sure everything is done correctly so you don’t waste your time – and your money. Hiring an attorney to represent your case ensures that everything will flow smoothly at each step along the way.
Are you in search for a certified attorney to represent you?
Let us help you find one today!