If you are considering filing for bankruptcy or have filed bankruptcy, you may be wondering what does a bankruptcy trustee do? If you are debating whether to file personal bankruptcy, you may file a chapter 7 bankruptcy or a chapter 13 bankruptcy. A chapter 7 bankruptcy is often called the “fresh start” bankruptcy as you may discharge most unsecured debts such as credit cards and medical bills. A Chapter 13 bankruptcy allows debtors to make monthly payments based on their disposable income. If you are considering filing a chapter 13 bankruptcy it probably means that you are trying to make up payments that you are behind on a mortgage payment, your household income is above your states median income for your family size, or you have assets you may lose in a chapter 7 bankruptcy as they are worth more than the exemptions you may use to protect them.
When you file a chapter 7 bankruptcy, chapter 13 bankruptcy, small business chapter 11 bankruptcy or a farm chapter 12 bankruptcy, a Washington state bankruptcy trustee will be assigned to your case. Bankruptcy trustee’s, who are most often attorneys themselves, are appointed by the United States department of justice and serve to to look out for the best interest of your creditors. This means their interested in making money for your creditors and often their position is in opposition to what is in your best interest. When you file bankruptcy all of your assets become part of your bankruptcy estate. As long as all of your assets are protected by allowed bankruptcy exemptions you will not lose your assets. In Washington state, your bankruptcy attorney will be able to inform you if it would be advisable to use the Washington State bankruptcy exemptions or the Federal bankruptcy exemptions, both of which may be allowed, but they may not be combined and you need to choose either Federal or Washington State exemptions but not both. In Washington state, the state exemptions allow for a debtor to retain a home with up to $125,000 in equity, although this Washington state homestead exemption may soon be adjusted up to reflect the median income of the county where the debtor lives. If a debtor does not own real estate used as a primary residence in Washington state, then the federal bankruptcy exemptions may be the best option as they allow for more protection of other assets under a higher “wild card” exemptions worth $13,900 of protect and doubled for a married couple.
A bankruptcy trustee receives a flat fee for administering chapter 7 bankruptcy cases and a percentage of any assets that they liquidate on behalf of creditors. In a chapter 13 bankruptcy, the trustees office will receive a percentage of all funds paid out to creditors which can range from 6-10% on average. These percentages vary by jurisdiction and can affect the amount that a debtor must pay in to a chapter 13 plan. The lower the trustee fee, the better it is for the debtor. Additionally a chapter 13 trustee is responsible for collecting all payments from debtors in chapter 13 plans, making sure debtors are paying all available disposable income in to their plan, and managing chapter 13 cases from start to finish. it is common for the chapter 13 trustee’s office to object to plans filed and enforce the law under the bankruptcy code to make sure debtors plans and other motions meet the requirements set forth in the local rules and the bankruptcy code.
Most chapter 7 bankruptcy cases are considered “no asset cases”, which means the bankruptcy trustee does not take any assets from the debtor because all of the assets are exempt. If the case is considered a no asset case then the debtor will receive their official bankruptcy discharge in about 90 days from the original filing date. In a chapter 13 bankruptcy, if a debtor is above the allowable exemption limit, the debtor may elect to pay additional funds into their chapter 13 bankruptcy plan to provide the trustees office the amount that they would have otherwise received if the debtor filed a chapter 7 bankruptcy. This makes chapter 13 bankruptcy, the safer chapter to file if you own an asset, such as a home, that is worth more than you are allowed to protect.
Finally there is the US Trustee’s office broken down by region, which monitors all bankruptcy cases that are filed. They are primarily interested in making sure debtors abide by the laws of the bankruptcy code and may request to audit a bankruptcy filing, for instance if somebody is close to the median income and trying to qualify for chapter 7 bankruptcy. The US trustee also prosecutes bankruptcy fraud cases and hold debtors accountant if they believe they are acting in bad faith. The US trustee can take away a debtors discharge if fraud is proven and they may object to bankruptcy filings if they believe a debtor should be in a chapter 13 case instead of a chapter 7 case based on available disposable income or not passing the means test. Most cases never have to encounter the US trustee’s office, but an occasional audit is always possible which is why all filings should contain truthful and accurate information so that there are no issues should an audit be conducted at some point in the future.
If you have additional questions regarding what a Washington State bankruptcy trustee might do in your case, please set up a free bankruptcy consultation with Symmes Law Group or call 206-682-7975 to get the counsel you need today.