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.