The Role of a Trustee in a Bankruptcy Case
Within a few days of filing, you will receive a notice naming the trustee assigned to your case. The trustee is neither the judge nor your lawyer. Trustees administer bankruptcy cases on behalf of creditors and check that the system is being used honestly. What your trustee actually does depends on the chapter you file.
Who appoints the trustee
Trustees are appointed and supervised by the U.S. Trustee Program, a part of the Department of Justice. A Chapter 7 case goes to a member of a panel of private trustees in your district, usually an attorney or an accountant. Chapter 13 cases in an area are all handled by a standing trustee, whose office runs the payment plans for that region.
What a Chapter 7 trustee does
- Reviews your paperwork. The trustee reads your petition and schedules and asks for supporting documents such as your most recent tax return and pay stubs.
- Runs the meeting of creditors. Called the 341 meeting after the section of the Bankruptcy Code that requires it, this is a short session where you answer questions under oath. Creditors may attend, but they rarely do, and many meetings now take place by video.
- Looks for property to sell. If you own something that no exemption protects, the trustee can sell it and pay the proceeds to creditors. The trustee can also recover certain payments or transfers you made before filing, such as repaying a relative.
- Closes most cases with nothing to distribute. In the large majority of consumer cases everything the filer owns is exempt, and the trustee simply reports that there is nothing to collect.
What a Chapter 13 trustee does
- Evaluates your plan. The trustee checks that your plan commits the income the law requires and that you can realistically make the payments, and can object before the judge confirms it.
- Runs the 341 meeting. The questions focus on your income, your expenses and your plan.
- Collects and pays. You send one monthly payment to the trustee, often by payroll deduction, and the trustee pays your creditors under the confirmed plan. Creditors are paid only on claims they have filed, and a claim that is wrong can be challenged.
- Watches the case until the end. For the three to five years of the plan the trustee may ask for each year’s tax return, may ask the court to raise your payment if your income goes up, and may move to dismiss the case if payments stop.
A Chapter 13 trustee does not sell your property. You keep it, and the plan payments take the place of a sale.
How to work with your trustee
Honesty matters more than anything else. List every asset, every debt and every recent transfer, even ones that seem unimportant. Leaving something out can cost you your discharge, and a false statement under oath is a federal crime. Bring a photo ID and proof of your Social Security number to the 341 meeting, and answer the trustee’s document requests promptly. Most trustees are professionals doing a routine job, and a well-prepared case usually goes smoothly.
How we help
Your attorney prepares you for the 341 meeting, gathers the documents the trustee asks for and handles any objection to your exemptions or your plan. If you are considering bankruptcy in Utah or California, a free consultation with Lincoln Law will show you what a trustee is likely to look at in your situation.
Author: Carl Gustafson
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