What Is a Bankruptcy Trustee?

What Is a Bankruptcy Trustee?

💡 A bankruptcy trustee is a neutral third party who helps manage a bankruptcy case. 

They don’t work for the person filing bankruptcy, and they don’t work for any particular creditor. Instead, they oversee certain parts of the case to make sure everything is done according to bankruptcy law. 

Trustees are there to help make sure the case is handled fairly under bankruptcy law and that creditors are treated equally.

🔎 There are two main types of bankruptcy trustees: Chapter 7 trustees and Chapter 13 trustees. While their specific roles are different, both types are responsible for reviewing paperwork, overseeing the process, and making sure things are fair and accurate.

Many trustees have legal or financial backgrounds — some were bankruptcy attorneys before taking on the role — but that’s not required.

How Are Trustees Appointed to Bankruptcy Cases?

Bankruptcy trustees are assigned by the local U.S. Trustee’s office, which is part of the Department of Justice. 

Once someone files their bankruptcy case, the court clerk’s office uses a blind rotation system to assign a trustee. This means trustees are assigned randomly.

The filer will find out who their trustee is when they receive Form 309A after filing, which includes the trustee’s name and contact information along with other important case details.

What Does a Chapter 7 Bankruptcy Trustee Do?

The Chapter 7 trustee plays a key role in reviewing and managing your case. Their main job is to review your paperwork, look for any property that isn't protected by an exemption, and make sure the rules are followed.

❗In most personal Chapter 7 cases, there aren’t any assets for the trustee to sell or recover. 

These are called no-asset cases. Even then, the trustee still reviews your forms, leads the meeting of creditors, and files a report with the court confirming there’s nothing to distribute to creditors. Once that’s done, the case moves forward toward discharge and closure.

Here are the typical tasks a Chapter 7 trustee may handle:

• Review the bankruptcy forms and financial documents

• Examine the filer’s property and exemptions

• Lead the meeting of creditors

• Manage the bankruptcy estate

• Sell non-exempt property (this rarely happens)

• Recover certain payments made before filing

• Reclaim property given away or sold for less than its value

• File a report if there are no assets to distribute

Below is more information about each of these tasks.

Review the Bankruptcy Forms and Financial Documents

The trustee reviews all the paperwork filed in the case, including the bankruptcy forms, pay stubs, and recent tax returns. They check for accuracy and consistency between documents. If something seems incomplete or suspicious, the trustee can ask for more information or clarification.

If they believe the filer is hiding assets or committing fraud, they can refer the case to the U.S. Attorney’s Office for investigation. Accusations of fraud aren’t very common.

Examine the Filer’s Property and Exemptions

Exemptions are laws that let you protect certain property in bankruptcy — like your car, personal belongings, or some money in your bank account. The trustee checks the filer’s list of property and the exemptions they’re claiming to see if everything is properly protected under the law.

If they think an exemption is being used incorrectly, they can file an objection. A bankruptcy judge will then decide whether that item can be protected. Trustees must file any objections within 30 days after the meeting of creditors (341 meeting) is complete.

Lead the Meeting of Creditors

Also called the 341 meeting, the meeting of creditors is a required part of every bankruptcy case. 

The trustee runs the meeting and asks the filer a few questions under oath. They’ll also confirm the filer’s identity using a photo ID and proof of Social Security number.

Creditors are allowed to attend and ask questions, but in most Chapter 7 cases, they don’t show up.

Manage the Bankruptcy Estate

The bankruptcy estate is a legal term for everything the filer owns when the case is filed. The trustee is in charge of this estate and can take steps to recover property that should be included but isn’t. This might include money, personal items, or other assets.

Though it’s a common concern, Chapter 7 filers rarely lose any property.

Sell Non-Exempt Property

If the filer owns anything that isn’t protected by an exemption (non-exempt property), the trustee can take control of it, sell it, and use the money to pay unsecured creditors. 

This can include things like a tax refund, extra cash, or valuable property. The trustee also files a detailed report explaining how the money was handled.

Recover Certain Payments Made Before Filing

If the filer paid a specific creditor in the 90 days before filing — especially a large or unusual amount — the trustee may try to recover that money. This helps ensure all creditors are treated fairly by avoiding preferential transfers.

If the payment went to a family member or close friend, the trustee can look back as far as 12 months before the case was filed.

Reclaim Property Given Away or Sold for Less Than It’s Worth

If someone gives away valuable property or sells it for much less than it is worth before filing bankruptcy, the trustee may be able to get it back. These are called fraudulent transfers. The idea is to stop people from trying to keep property out of the bankruptcy process unfairly.

This doesn’t apply to typical gifts or donations, like birthday presents or holiday donations.

File a Report if There Are No Assets To Distribute

Most Chapter 7 cases are no-asset cases, meaning all of the filer’s property is protected by exemptions. Even in these cases, the trustee still completes a full review and runs the meeting of creditors. 

If there's nothing to distribute, they file a Report of No Distribution. This lets the court and creditors know the case can move toward discharge and closure.

Will the Trustee Take My Property or Money?

This is one of the biggest worries for people filing Chapter 7 bankruptcy. But the good news is, most filers don’t lose anything. 

That’s because exemption laws protect the things you need to live, like your car (up to a certain value), household items, clothes, and even some money in your bank account.

When you file, you’ll list your property and choose the exemptions that apply. The trustee will review this to see if anything isn’t fully protected. 

If they find non-exempt property — meaning something that isn’t covered by an exemption — they may ask for it to be turned over or offer you the chance to buy it back by paying the non-exempt value into your case. This is fairly rare, and it usually only happens if the item is worth enough to justify selling.

If you’re unsure whether something is protected, look at Schedule C of your bankruptcy forms, which lists your claimed exemptions. If you use Upsolve, our tool walks you through this as part of your filing process.

What if I Get Money or Property After I File?

Some property you receive after filing may still be considered part of your bankruptcy estate. For example:

• Inheritances

• Life insurance payouts

• Divorce settlements

• Certain tax refunds

If you receive any of these within 180 days of filing, you’re required to report them to the trustee. If they aren’t exempt, the trustee may collect that money to help repay your creditors. This doesn’t mean you’ve done anything wrong — it just means the trustee is doing their job under bankruptcy law.

What Happens if the Trustee Wants To Take Something?

If the trustee wants to move forward with collecting or selling non-exempt property, they’ll usually:

• Ask for more documents after your 341 meeting

• Offer you the option to buy back the property

• Send a formal letter asking you to turn it over

If the item is sold, you may receive any portion of the value that was exempt. For example, if your car is worth $6,000 and you have a $4,000 exemption, the trustee might sell it and return the exempt $4,000 to you, using the rest to pay creditors.

🚨 It's important to respond to any trustee requests promptly. 

What Does a Chapter 13 Bankruptcy Trustee Do?

Chapter 13 trustees have many of the same responsibilities as Chapter 7 trustees, like reviewing your paperwork and making sure the case follows bankruptcy rules. But there’s one major difference: Chapter 13 involves a 3–5-year repayment plan.

The trustee plays a key role in managing that plan. One of their main jobs is to review the plan you propose to make sure it meets all legal requirements and that unsecured creditors receive at least as much as they would in a Chapter 7 case.

Once the plan is approved by the court, the trustee acts as a middleman between you and your creditors. You’ll send your monthly payments to the trustee’s office, and they’ll divide and distribute those funds to creditors according to the terms of your plan.

The trustee also keeps track of your payments, monitors whether you’re staying on track, and may raise concerns if anything changes — like a missed payment or a major change in your income.

What Is a Trustee’s Report of No Distribution?

In most Chapter 7 bankruptcy cases, the trustee doesn’t find any property they can sell to repay creditors. These are called no-asset cases. 

👉 If your case falls into this category, and most do, the trustee will file something called a Report of No Distribution (NDR).

This report lets the court and your creditors know that there are no non-exempt assets available to distribute, and that the trustee has completed their review. 

Once the trustee files this report, there’s usually nothing more for you to do. If your discharge hasn’t already been entered, it will typically follow soon after. The court will then close your case.

Reading the Report of No Distribution

The trustee's report is a routine part of the process and doesn’t affect which debts are discharged. If you check your case docket (through PACER or your Upsolve account), you might see a document titled Trustee’s Report of No Distribution a few weeks after your 341 meeting. 

Don’t worry if some of the fields in the form show “$0” or blank numbers. This is normal. It just means the trustee didn’t find any unprotected property to sell.

What if the Trustee Doesn’t File an NDR?

If the trustee does find non-exempt property, they won’t file a Report of No Distribution. Instead, they’ll file a notice to let creditors know they can submit a proof of claim if they want to be paid from the bankruptcy estate. 

This is what turns a no-asset case into an asset case, which typically stays open a bit longer.

Why Might a Trustee Ask Creditors To File a Proof of Claim?

In some bankruptcy cases, you might get a notice saying that your creditors need to file something called a proof of claim. This usually happens when the trustee finds non-exempt property that could be sold to pay creditors.

A proof of claim is a form a creditor files to tell the court they’re owed money and want to be paid through your bankruptcy case. It includes the amount you owe, the type of debt, and documents that back up the claim. The trustee uses these forms to decide how to divide any available money among creditors.

Chapter 7 Proof of Claim

In most Chapter 7 cases, there aren’t any non-exempt assets to sell, so the trustee won’t ask creditors to file a claim. These are called no-asset cases. 

But if the trustee discovers property that isn’t protected by exemptions — like cash, a second vehicle, or valuable collectibles — they may sell it and use the proceeds to pay your creditors. Creditors must file a proof of claim by the deadline if they want to receive any of that money.

Chapter 13 Proof of Claim

In Chapter 13 cases, proofs of claim are more common because the trustee is distributing money from your monthly repayment plan. If a creditor doesn’t file a claim, they typically won’t get paid, even if you listed them in your bankruptcy paperwork.

How Are Bankruptcy Trustees Paid?

If you're filing bankruptcy, you don’t pay the trustee directly. But trustee fees can still affect how much money goes to your creditors or how much your monthly payment is in a Chapter 13 case.

In Chapter 7, the trustee is paid a small flat fee (currently $60) for each case. This is built into the court filing fee, so you’re not paying it separately. In most cases, that’s the only payment the trustee receives.

If the trustee finds non-exempt assets that can be sold, they’ll also earn a percentage of the money that’s collected and paid to creditors.

In Chapter 13, the trustee is paid a percentage of your monthly plan payments. This fee covers the cost of managing your case and operating the trustee’s office. 

You don’t pay this fee separately. It’s built into the payments you make each month as part of your repayment plan. There’s a cap on how much a trustee can earn from these fees, and any amount beyond that goes toward operating expenses.

What if I Have a Complaint About My Bankruptcy Trustee?

If you believe your bankruptcy trustee is acting unprofessionally or not following the rules, you can contact your local U.S. Trustee’s office. This is the agency responsible for overseeing bankruptcy trustees and handling complaints.

That said, keep in mind that not every disagreement is considered misconduct. For example, if the trustee is selling property that isn’t protected by an exemption, they’re just doing their job, even though that may be frustrating.

The U.S. Trustee’s office is more likely to step in if the complaint involves serious concerns like unethical behavior, discrimination, or failure to follow bankruptcy procedures.

Frequently Asked Questions About Bankruptcy Trustees

Here are some answers to commonly asked questions about bankruptcy trustees.