What Is a Trustee in Bankruptcy?

In every consumer bankruptcy case, regardless of whether it falls under Chapter 7 bankruptcy or Chapter 13 bankruptcy, there will be a trustee. The U.S. trustee program states bankruptcy trustees have various obligations and powers, depending on the case.

This article will discuss a trustee's responsibilities in the bankruptcy process. A trustee can help you reach the debt relief you seek.

The Bankruptcy Estate and Bankruptcy Trustee

To understand a trustee's role, you must first know a concept known as the bankruptcy estate. Under bankruptcy law, a bankruptcy filing creates a bankruptcy estate composed of the debtor's property. The bankruptcy estate is a separate legal entity from the bankruptcy debtor.

Of course, since the bankruptcy estate is not a person, a bankruptcy trustee must step in to oversee the estate in bankruptcy court. The trustee will perform various duties required by law and the Bankruptcy Code. You usually will not meet your trustee until the meeting of creditors.

What Does a Bankruptcy Trustee Do?

A bankruptcy trustee's duties vary depending on the type of case and the circumstances of a particular debtor and their creditors. In short, a bankruptcy trustee does different things in every case.

The Trustee in Chapter 7 Bankruptcy Cases

The duties and powers of trustees in Chapter 7 and Chapter 13 are similar in some ways. Many distinctions come down to the difference between each type of bankruptcy. Here are some of the primary duties and powers of a trustee in a Chapter 7 liquidation bankruptcy case:

  1. Round up all of a debtor's property
  2. Sell the bankruptcy estate's property
  3. Participate in creditors' meeting
  4. Distribute proceeds to creditors
  5. Object to a bankruptcy discharge where grounds exist

The Trustee in Chapter 13 Bankruptcy

Unlike the gathering and sale of property involved in Chapter 7 liquidation bankruptcy, debtors in Chapter 13 reorganization bankruptcy keep their property during the bankruptcy. A trustee's main duties in these cases deal with handling payments as well as:

  1. Reviewing the debtor's proposed payment plan
  2. Making objections to the plan as necessary
  3. Receiving/collecting payments from the debtor according to the established repayment plan
  4. Distributing payments to creditors

As the duties above suggest, the trustee will play a big part in most consumer bankruptcies. Whether reviewing claims by creditors, claims by debtors, or challenging other aspects of a bankruptcy case, the bankruptcy trustee plays a central role in how the bankruptcy proceeds.

Are Bankruptcy Trustees Federal Employees?

No. The United States trustee, a federal employee of the Department of Justice, appoints the bankruptcy trustee to administer the bankruptcy estate. Private trustees who administer bankruptcy cases are not federal employees either.

More Questions About a Trustee in Bankruptcy? Talk to a Bankruptcy Lawyer for Legal Advice

Are you considering bankruptcy due to your financial affairs? Talk to an experienced bankruptcy attorney for any legal issues you may have.

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