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What Is The Role Of A Bankruptcy Trustee?

Many different individuals come to the table when it comes to filing for bankruptcy, whether it be through Chapter 7 or Chapter 13.

A bankruptcy trustee is one of these key individuals, but not everyone understands what this person’s role is. Who is the bankruptcy trustee, and why is this individual so important to the bankruptcy process?

The Bankruptcy Estate

The bankruptcy trustee oversees what is known as the bankruptcy estate, so it is important to understand this term as well. The bankruptcy estate is all of the debtor’s property.

As soon as bankruptcy is filed, the bankruptcy estate is created and placed under the court’s control, overseen by the bankruptcy trustee. The bankruptcy trustee is the person who ensures that everything is in the estate, including all assets and debts.

It is imperative that everything is accounted for before the bankruptcy process begins. If anything is left out of the estate that should be there, that could through off the case which would jeopardize the goal of the process – to get the debtor to a stable financial situation.

Who Is The Bankruptcy Trustee?

When a debtor files for bankruptcy, whether it be Chapter 7 or Chapter 13, he or she is expected to appear in bankruptcy court. However, in these cases the debtor will see the bankruptcy trustee rather than a judge.

This person, normally an attorney, is appointed directly by the court and reports to the court on the progress of the case. The trustee has a number of important duties, and these can vary depending on the type of bankruptcy that is being filed.

The Role Of The Bankruptcy Trustee In Chapter 7 Bankruptcy

Chapter 7 bankruptcy involves complete liquidation of the debts of the person filing for bankruptcy so it is important that the trustee account for all of the debts and assets, as well as ensure that those that qualify for liquidation are considered and those that do not are discarded as part of the process.

The duties of the bankruptcy trustee in Chapter 7 boil down to the following:

  • He or she is in charge of accounting for all of the debtor’s property and debts;
  • The trustee must go through the debts to see which ones are secured and which ones can be liquidated;
  • The trustee also sells any of the bankruptcy estate that is allowed to be sold after accounting for secured debts;
  • The trustee distributes the proceeds of this sale to the creditors who qualify, based upon a determined percentage;
  • The trustee is in charge of discharging the remaining debts, after seeing to all objections given by creditors who object to their debt being discharged;
  • Finally, the trustee shall report to the court the status and progress of the case on into closure of the matter.

The Role Of The Bankruptcy Trustee In Chapter 13 Bankruptcy

In Chapter 13 bankruptcy, the debts are not completely liquidated. Rather, this type of bankruptcy is considered a reorganization bankruptcy. The debtor is allowed to keep possession of his or her property during the bankruptcy while he or she goes through a structured debt repayment plan.

This plan is created by the trustee upon review of the debtor’s petition and submitted paperwork. The trustee in a Chapter 13 proceeding does the following tasks:

  • He or she reviews the debtor’s bankruptcy petition, debts and assets;
  • The debtor normally submits a proposed repayment plan, and the trustee reviews this to see if it is sufficient and follows the law;
  • If it needs revision, the trustee can object to the plan and can modify as needed;
  • The trustee receives and collects payments from the debtor according to the approved repayment plan;
  • Once these payments are received, the trustee then distributes them accordingly to the creditors.
  • Upon the end of the repayment plan, the trustee has the discretion to liquidate the remaining debt.

Working With The Bankruptcy Trustee

If the debtor wants success in his or her bankruptcy, it is extremely important that this person work with the appointed trustee. The trustee is the voice to the bankruptcy court and is the person who ensures the success of the process.

For instance, in Chapter 13, if the debtor decides to no longer pay according to the repayment plan, the trustee is the one who informs the court of this development. Keeping the trustee happy and willing to work with the debtor is key in terms of successfully navigating the way through the bankruptcy system.

Contact RLC Lawyers & Consultants Today

At RLC Lawyers & Consultants, we are here to walk you through this stressful process of bankruptcy. To request to schedule a free consultation, please call us at (561) 440-7130 today.