When consumers start researching whether filing for bankruptcy makes sense, they may want to know who is the bankruptcy trustee and what is their role in a bankruptcy case should you decide to file for bankruptcy. The role of a trustee in your bankruptcy case will depend on what chapter of bankruptcy you are filing. Bankruptcy trustee’s are appointed by the United States department of justice and most bankruptcy trustee’s are attorneys themselves, although that is not a requirement as trustee’s often hire out other professionals such as accountants, real estate agents or lawyers to take actions on their behalf. In addition, these professionals are typically paid by the bankruptcy estate, which can include payments from the liquidation of your assets or payments made in a payment plan.
In a chapter 7 bankruptcy case, the bankruptcy trustees job is to liquidate and sell your assets or make a deal with you so that you can keep your stuff if you are over the allowable exemption limits for your state. They then use these proceeds to pay your creditors and themselves and the professionals they hire to administer assets of the bankruptcy estate. In most chapter 7 bankruptcy cases, it is in a debtors best interest to get your assigned bankruptcy trustee out of your life as soon as possible as you are required to cooperate with the bankruptcy trustee’s requests in order to obtain or retain your bankruptcy discharge. If you have a dispute with a bankruptcy trustee, you or your attorney can make any relevant arguments to a bankruptcy judge who can resolve any dispute or arguments among parties in a bankruptcy case. Your bankruptcy attorney can advise you as to whether you will have to worry about a bankruptcy trustee getting involved in your case, outside of your initial 341 meeting of creditors that is required of all debtors to participate in, with regards to a bankruptcy trustee seeking turnover of any assets in your bankruptcy case. If the bankruptcy trustee does not take any of your assets, he will most likely file a notice of no distribution and your case will be considered a no asset case. If the trustee is interested in some of your assets that are over the allowable exemption limits your case becomes an asset case and he will inform you of his intent to look into your case at your meeting of creditors and will file a corresponding report stating as such. While a chapter 7 bankruptcy trustee must administer assets of the bankruptcy estate in a timely fashion, there is no set time limit on how much time a bankruptcy trustee may take to liquidate and sell assets of the bankruptcy estate.
In most cases, you will be able to make a deal with a chapter 7 bankruptcy trustee to keep your assets in exchange for a sum of money to be distributed to your creditors, should your case be an asset case. This amount is know as the liquidation value, or the value of the asset after taking into account the cost to sell the asset such as auction fees, real estate broker fees as well as taking into account any valid and allowed bankruptcy exemptions that you can claim. Being able to settle a claim by a bankruptcy trustee also requires and assumes you will be able to come up with a lump sum to pay a bankruptcy trustee should the need arise. Bankruptcy trustees will stop at nothing to try to get their hands on money for the benefit of your creditors as they are paid a percentage of what they are able to pay to creditors as administrative costs and have a duty to liquidate and sell assets on behalf of the bankruptcy estate.
In chapter 13 cases, a trustee’s role is different than in a chapter 7 bankruptcy case as repayment plans must be approved by the chapter 13 trustee and the bankruptcy court. The Chapter 13 bankruptcy trustees job is to make sure debtors are committing all of their available disposable income as possible and required by law. The chapter 13 trustee is not interested in liquidating or selling assets, but they could ask you to commit any non exempt equity to a repayment plan if you have assets that are valued above the allowed and available exemptions. If the chapter 13 trustee and debtors counsel cannot come to an agreement as to what your plan payments will be, the dispute may end up being heard before a bankruptcy court judge who will make a final binding decision on any disputes or objections that are filed in your bankruptcy case. This process can be stressful for debtors because they don’t know what their final payment plan is going to look like right away and the bankruptcy trustee is not paying most of your creditors prior to confirmation. This process can take several months before your final chapter 13 plan is confirmed and approved and your creditors start getting paid, although you can designate things like a mortgage payment or car payment be paid prior to the confirmation of your bankruptcy case. With that said, no creditors can attempt to collect on a debt without prior court approval from the date your case is filed, due to the bankruptcy automatic stay. Debtors should keep in mind that the bankruptcy trustee is not your friend and their prime objective is to get creditors paid and not look out for your best interest. This is why you should have a bankruptcy attorney on your side who can explain to you the rules and laws so that you will feel comfortable in a bankruptcy case and know that you are being looked after in your case. This is important in protecting your assets and making sure your plan payments are accurate and you will be able to communicate with your attorney in a chapter 13 repayment plan which can last 3-5 years.