I Know What My Bankruptcy Trustee Does, But How about the U. S. Trustee?

If you are about to file a Chapter 7 or Chapter 13 case, you’ve heard who your trustee is what he or she does.

In a Chapter 7 case, your bankruptcy trustee looks over your paperwork and talks with you for a few minutes at the “meeting of creditors,” primarily to determine if you own anything that is not “exempt” so that you have to surrender it to your creditors.

In a Chapter 13 case, your trustee verifies that the Plan we file meets legal requirements and tells the court if it appears not to. After that this trustee gets your monthly Plan payments and distributes them to your creditors.

The “Office of the United States Trustee” is something altogether different. It mostly works in the background, but in a rare case it can cause you problems. So it’s worth knowing what it does.

The U. S. Trustee (UST) is part of the U.S. Department of Justice, and has two primary tasks including:

1) helps the Bankruptcy Court administer bankruptcy cases, and

2) enforces bankruptcy law.

In its administrative role, the UST appoints and supervises the Chapter 7 and Chapter 13 trustees.

It oversees bankruptcy cases for administrative efficiency, and reviews and can object to fees charged by attorneys and other professionals.

In its enforcement role, the UST can get involved in two primary ways:

1) in a Chapter 7 case, object to you being in Chapter 7 and so try to “convert” your case into a Chapter 13 one; and

2) accuse you of giving inaccurate information on your bankruptcy documents or while under oath during your hearing with the trustee.

As nasty as these sound, most of the time staying clear of the UST’s enforcement arm is not that hard. Just do the following:

First, as for avoiding your Chapter 7 cases being challenged as not belonging under Chapter 7, this is mostly a matter of meeting the “means test,” a potentially complex set of income and expense disclosures.

Avoid this kind of challenge by the U. S. Trustee by working closely with your attorney before your case is filed to make sure the means test disclosures are presented accurately and that you clearly meet this test.

And second, as far as avoiding allegations of accuracy, again it’s a matter of appropriate preparation. Diligently provide your attorney with the paperwork and information needed so that all of the documents are accurate and complete.

If after all this you and your attorney still hear from the UST, most of the time the concern can be resolved favorably.

What’s crucial is to address and respond quickly to any contact from the UST, because it is dealing with some immediate legal deadlines and so will be compelled to get aggressive fast if doesn’t get fast cooperation.

You and your attorney share the goal of having your bankruptcy case go as smoothly as possible. So treat issues involving the UST carefully before filing bankruptcy, and respond right away if they do contact you during your case.

/by

I Know What My Bankruptcy Trustee Does, But How about the U. S. Trustee?

If you are about to file a Chapter 7 or Chapter 13 case, you’ve heard who your trustee is what he or she does.

In a Chapter 7 case, your bankruptcy trustee looks over your paperwork and talks with you for a few minutes at the “meeting of creditors,” primarily to determine if you own anything that is not “exempt” so that you have to surrender it to your creditors.

In a Chapter 13 case, your trustee verifies that the Plan we file meets legal requirements and tells the court if it appears not to. After that this trustee gets your monthly Plan payments and distributes them to your creditors.

The “Office of the United States Trustee” is something altogether different. It mostly works in the background, but in a rare case it can cause you problems. So it’s worth knowing what it does.

The U. S. Trustee (UST) is part of the U.S. Department of Justice, and has two primary tasks including:

1) helps the Bankruptcy Court administer bankruptcy cases, and

2) enforces bankruptcy law.

In its administrative role, the UST appoints and supervises the Chapter 7 and Chapter 13 trustees.

It oversees bankruptcy cases for administrative efficiency, and reviews and can object to fees charged by attorneys and other professionals.

In its enforcement role, the UST can get involved in two primary ways:

1) in a Chapter 7 case, object to you being in Chapter 7 and so try to “convert” your case into a Chapter 13 one; and

2) accuse you of giving inaccurate information on your bankruptcy documents or while under oath during your hearing with the trustee.

As nasty as these sound, most of the time staying clear of the UST’s enforcement arm is not that hard. Just do the following:

First, as for avoiding your Chapter 7 cases being challenged as not belonging under Chapter 7, this is mostly a matter of meeting the “means test,” a potentially complex set of income and expense disclosures.

Avoid this kind of challenge by the U. S. Trustee by working closely with your attorney before your case is filed to make sure the means test disclosures are presented accurately and that you clearly meet this test.

And second, as far as avoiding allegations of accuracy, again it’s a matter of appropriate preparation. Diligently provide your attorney with the paperwork and information needed so that all of the documents are accurate and complete.

If after all this you and your attorney still hear from the UST, most of the time the concern can be resolved favorably.

What’s crucial is to address and respond quickly to any contact from the UST, because it is dealing with some immediate legal deadlines and so will be compelled to get aggressive fast if doesn’t get fast cooperation.

You and your attorney share the goal of having your bankruptcy case go as smoothly as possible. So treat issues involving the UST carefully before filing bankruptcy, and respond right away if they do contact you during your case.

/by

The Multiple Roles of Your Chapter 13 Trustee

You’re going to spend 3 to 5 years dealing with your trustee. To have that happen as smoothly as possible, it helps to understand his or her roles.

Your Chapter 13 trustee can help you have a successful Chapter 13 case. Maybe more importantly, having a good relationship with your trustee and his or her staff increases your odds of success.

The trustee has a number of different roles, some of them somewhat contradictory.

The gatekeeper of your case: Requires you and your attorney to play by the rules—as she or he interprets them—before allowing court-approval of your Chapter 13 Plan.

Payment maximizer to your creditors: Make you pay as much as the law requires to your creditors. In this respect the trustee is the creditors’ advocate in your case.

Creditors’ disbursal agent: Receives your money and pays it out exactly as your Plan specifies.

Plan overseer: Throughout your case, monitors your Plan payments and other obligations, and raising issues with the bankruptcy court if you’re not complying.

Income monitor: During your case, verifies that you are paying all you can afford, mostly by reviewing your annual tax returns that you must provide. If your income rises significantly in a way not anticipated in your Plan, the trustee can require you to amend your Plan accounting for the increase.

Your helper: In the midst of all this, the trustee is also supposedly required to help you through the Chapter 13 case. The Bankruptcy Code specifically says that the “trustee shall—advise, other than on legal matters, and assist the debtor under the plan.”

Each trustee takes this more or less seriously. So follow your attorney’s lead on how your particular trustee can help. Most trustees do genuinely want you to have a successful Chapter 13 case, and can sometimes be a resource for getting you there.

Here’s a good final word on this, from the website of one of the Chapter 13 trustees:

“The role of the chapter 13 trustee is unique. The trustee does not take into his or her possession or control property of the estate. The trustee does not operate the debtor’s business. Rather, the trustee receives payments from the debtor, and disburses those payments to the debtor’s creditors pursuant to the debtor’s plan. The chapter 13 trustee does, however, counsel with and advise the chapter 13 debtor on all matters relating to the plan other than legal matters. In short, the chapter 13 trustee is an amalgam of social worker and disbursing agent.”

Each trustee balances these roles somewhat differently. But this gives you an idea of the balancing that they must do as they serve you and all their other constituencies.

And frankly, different trustees balance these sometimes contradictory roles differently

Chapter 13 Trustee: Determines if your proposed Chapter 13 Plan meets legal requirements, raises objections, and works with your attorney to adjust your Plan to satisfy any such objections. The trustee or a staff attorney usually presides at your Meeting of Creditors.

You send your Plan payments to the trustee (or a designated collection office), who disburses these funds to your creditors according to the terms of your Plan. The trustee and his or her staff cannot give you legal advice, but will provide you some help in completing your case successfully.

U.S. Trustee: Is part of the U.S. Department of Justice, overseen by the U.S. Attorney General. The U.S. Trustee (“UST”) appoints and supervises the group (“panel”) of Chapter 7 trustees and the “standing” Chapter 13 trustees.

Each regional UST, through a staff usually including an attorney and/or accountants, monitors the administration of bankruptcy cases, most closely with Chapter 11 business cases.

They are most often involved in consumer cases in raising objections to the eligibility of debtors to file Chapter 7 cases. In rare cases, they can refer potential bankruptcy crimes to the U.S. Attorney for investigation and prosecution.

Again, in my next blogs I’ll tell you more about each one of these trustees, especially how to avoid worrying about them by taking the right steps in your bankruptcy case.

/by

The Easiest Way to a Smooth Chapter 7 Case Is Cooperating with Your Trustee

The way to keep the Chapter 7 trustee happy is by making it easy for him or her to do his or her job.

The trustee has a great deal of power over your Chapter 7 case. He or she is like the traffic light governing progress in your case.

Imagine two intersections with traffic lights—the first about your assets, the second about your discharge (write-off) of debts. Most of the time, you will get through both intersections.

The trustee will want none of your assets for distribution to your creditors because they will be exempt and legally beyond the reach of the trustee.

And the trustee will raise no objections to your discharge. But you want to make sure you to get through those intersections, without any worry or delay. So our goal is two quick green lights to a successful case.

If you do not deal responsibly with your case—by communicating clearly and thoroughly with your attorney, and answering the trustee’s questions truthfully, he or she can slow you down with a yellow light or stop you with a red one.

You could lose assets that you did not expect to or, in extreme situations, lose your right to a discharge of your debts altogether.

Instead, keep the trustee happy, and turning on those green lights by:

Be Honest

Being honest and thorough with your attorney. When in doubt, raise it. If you’re concerned about something, tell your attorney. He or she is on your side, and can’t protect you when blindsided by facts you didn’t disclose.

Understand What You’re Signing

Reviewing the bankruptcy documents carefully before signing them. You are signing most of those documents under penalty of perjury. The trustee expects them to be accurate, and incomplete or inaccurate documents can cause very serious problems. If in doubt about anything on the documents, be sure to ask your attorney or his or her staff.

Provide Information Quickly

Providing whatever information or documents your attorney requests from you as quickly as possible. Some of those go directly to the trustee, Simply getting the paperwork to him or her on time avoids unnecessarily irritating the trustee.

Be Prepared For Your Meeting Of Creditors

Being completely honest with the trustee at the “meeting of creditors” (usually a short hearing with just the trustee and other folks waiting for their turn). If in doubt, ask your attorney who will be there with you.

Be Responsive To Your Attorney

Finally, doing whatever follow-up the trustee or your attorney asks of you, doing so by the deadline given.

Doing these will greatly increase your odds of getting green lights and quickly getting through your Chapter 7 case!

 

/by

Who Are the Three Different Bankruptcy Trustees?

When you file bankruptcy, you will likely only deal with one trustee. Who are the other two, and why do they matter?

The three trustees are: the Chapter 7 trustee, the Chapter 13 trustee, and the United States Trustee.

They’ll be introduced today in this blog, and discussed in more detail in upcoming ones.

The Chapter 7 Trustee:

His or her primary job is to determine whether everything you own is “exempt”—protected from the creditors, and if not, to collect the assets that are not exempt, sell, and distribute their proceeds to your creditor.

Does this by reviewing your documents and asking questions at your Meeting of Creditors. Has the right to investigate further, such as by reviewing the public record, questioning others, although seldom does so.

Can also pursue “fraudulent transfers” or “preferences”—money or assets you either gave or sold to someone, or that creditors took from you, but only within a certain amount of time before your bankruptcy case was filed.

The Chapter 13 Trustee:

His or her primary job is to determine if your proposed Chapter 13 Plan meets legal requirements, and if not can raises objections to the court, but also works with your attorney to adjust your Plan to satisfy any such objections.

The trustee or a member of his or her staff usually presides at your Meeting of Creditors. Your Plan payments are sent to the trustee, who disburses the money to your creditors according to the terms of your court-approved Plan.

The trustee and his or her staff cannot give you legal advice, and in some respects act on behalf of your creditors, but also have an obligation to help you complete your case successfully.

The U.S. Trustee:

You may well never hear about, and hopefully you will never hear from, this trustee. They are the administrators and enforcers of the bankruptcy system.

They are part of the U.S. Department of Justice, overseen by the U.S. Attorney General. The U.S. Trustee (“UST”) appoints and supervises the panel of Chapter 7 trustees and the “standing” Chapter 13 trustees.

The UST monitors the administration of bankruptcy cases, most closely with Chapter 11 business cases. In consumer cases they are most directly involved by raising objections to the eligibility of debtors to file Chapter 7 cases.

They can, in situations of very serious abuse of the bankruptcy laws, refer potential bankruptcy crimes to the U.S. Attorney for investigation and prosecution.

The next blogs will talk about how we work with these trustees to have a smooth bankruptcy case.

 

/by