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What is a Bankruptcy Trustee’s Role?

Bankruptcies in the United States are overseen by a trustee appointed by the court. However, a bankruptcy trustee is not the same as the United States Trustee, the federal office charged with overseeing the bankruptcy process throughout the country. The United States Trustee maintains a list of private individuals who are qualified to act as bankruptcy trustees — the person who administers your personal or business bankruptcy.

Chapter 7 bankruptcy trustees

The bankruptcy trustee’s role differs depending on the type of bankruptcy.  In a Chapter 7, or liquidation bankruptcy, the bankruptcy trustee first reviews your petition to ensure its accuracy. The information you provided the court about your debts, property, income and the state of your financial affairs is checked against paystubs, bank statements and other documents.  About 30 days after filing, the bankruptcy trustee convenes a hearing called a 341(a) meeting of creditors where you answer questions under oath about your filing documents. The bankruptcy trustee is then responsible for selling your nonexempt assets and distributing the proceeds to your creditors.

If, however, you don’t have any nonexempt assets, the trustee produces a report advising the creditors that they won’t receive any distributions. If you tried to circumvent the rules and paid off some creditors before the bankruptcy proceeding, the trustee can invalidate these payments, recuperate the money and distribute it equitably to your creditors.

Chapter 13 bankruptcy trustees

In a Chapter 13 bankruptcy, you are allowed to keep your property, reorganizing your debts so that you can pay them off over three to five years.  A payment plan is one of the documents you submit with your bankruptcy petition.  The bankruptcy trustee checks your petition against tax documents and pay stubs. If the trustee disagrees with your payment plan, they can ask you to increase your payments. If you and the trustee can’t agree on the plan, a judge makes the final decision.  Then the trustee oversees a meeting with your creditors where you answer questions under oath.

Within 30 days of the approval of your plan, you begin sending your monthly payments to the trustee who distributes the funds. In order to get paid, your creditors must file a “proof of claim” within 90 days of your creditor meeting. The trustee reviews the creditors’ proof and supporting documents for accuracy and rejects any that do not meet the required standards. The trustee keeps records of receipts and payments until all your debts have been repaid.

The bankruptcy trustee can make your bankruptcy petition flow smoothly — or be a nightmare. A qualified and experienced bankruptcy attorney helps you to prepare and submit your bankruptcy filing, working to ensure that the process is as painless as possible and supporting you in maintaining an excellent relationship with your bankruptcy trustee.

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