What Is a Bankruptcy Trustee?
The bankruptcy trustee plays an important role in a bankruptcy case. When you file a Chapter 7 or a Chapter 13 bankruptcy petition, it can be extremely helpful to understand the responsibilities of the bankruptcy trustee serving in your case. It is also helpful to understand some of the authorities granted to the bankruptcy trustee serving in your case.
A key factor to understand is that the bankruptcy trustee is not “out to get you” because you filed for debt relief. The bankruptcy trustee has a clearly defined set of rules and regulations that the trustee must follow. The person serving as trustee is simply doing a job and is bound by the law just like any other person involved in your bankruptcy case.
What is the United States Trustee’s Office?
The U.S. Trustee Program has been operating for 30 years. The Bankruptcy Reform Act of 1978 established the U.S. Trustee Program. As a section of the U.S. Department of Justice, the U.S. Trustee’s Office is tasked with overseeing bankruptcy trustees. The office also oversees the administration of bankruptcy cases filed under all chapters of the Bankruptcy Code.
The U.S. Trustee’s Office makes sure that bankruptcy laws are followed and issues dealing with bankruptcy fraud are handled correctly. Thankfully, most debtors never deal with the U.S. Trustee’s Office.
The office does randomly select one out of every 250 bankruptcy cases filed to be audited. In most cases, the audit is performed by sending a letter to the debtor requesting information and documentation. Misstatements or issues are only found in a small percentage of cases. The key is to respond to the audit request promptly and provide all requested information.
What is a Chapter 7 Bankruptcy Trustee?
A Chapter 7 bankruptcy trustee administers cases filed under Chapter 7 of the Bankruptcy Code. The trustee is appointed to your case when you file your Chapter 7 petition. You do not have a choice of which bankruptcy trustee is appointed to administer your case. Many bankruptcy jurisdictions have more than one Chapter 7 bankruptcy trustee.
A Chapter 7 bankruptcy trustee reviews the bankruptcy forms filed in your case for accuracy. The trustee may request additional information to determine if the forms are complete and accurate. The Chapter 7 bankruptcy trustee may also object to various items in the bankruptcy forms, including bankruptcy exemptions. If the Chapter 7 bankruptcy trustee believes the debtor has committed bankruptcy fraud or fails to perform all duties required by law, the trustee can object to the debtor’s discharge.
One of the important roles of the Chapter 7 bankruptcy trustee is to conduct the 341 Meeting of Creditors. The 341 Meeting usually takes about five to ten minutes to complete. The debtor is placed under oath while the trustee asks questions about the bankruptcy forms and the debtor’s financial matters. Creditors rarely appear to ask questions.
Another important role of the Chapter 7 trustee is to review each of the debtor’s assets to determine if any property might have non-exempt equity. The trustee reviews the value of the asset, less any bankruptcy exemptions claimed and any secured liens, to determine the net equity.
If enough equity exists in the property, the bankruptcy trustee may sell the property. The proceeds of the sale are used to pay the claims of unsecured creditors on a pro-rata basis.
The good news for you is that most of the Chapter 7 cases filed in the United States are no-asset cases. In a no-asset Chapter 7 case, the debtor keeps all property while getting rid of most or all unsecured debts.
Matching bankruptcy exemptions to each asset listed on the bankruptcy schedules is important to determine if any property may be at risk. It is important to list all property you own because you cannot benefit from bankruptcy exemptions if you do not list the property on your bankruptcy forms.
What is a Chapter 13 Bankruptcy Trustee?
A Chapter 13 bankruptcy trustee has many of the same duties as a Chapter 7 bankruptcy trustee. The Chapter 13 bankruptcy trustee reviews the debtor’s schedules for accuracy and conducts the 341 Meeting of Creditors.
However, a Chapter 13 bankruptcy trustee must also review the proposed repayment plan to determine if the plan complies with bankruptcy laws. The Chapter 13 may require amendments to the plan to correct any problems before the court confirms the plan.
During a Chapter 13 case, the Chapter 13 bankruptcy trustee receives the debtor’s monthly payments. The trustee reviews, approves, or objects to the claims filed by creditors. Once a claim is approved, the Chapter 13 bankruptcy trustee pays monthly payments to the creditor as outlined in the bankruptcy repayment plan.
During the Chapter 13 case, the bankruptcy trustee may periodically review the debtor’s tax returns and payment history to ensure the repayment plan does not need to be amended. In addition, the Chapter 13 bankruptcy trustee reviews motions to incur debt, motions to sell property, and other motions filed by the debtor.
When the debtor makes the last bankruptcy plan payment, the Chapter 13 bankruptcy trustee conducts an exhaustive audit of the case. The debtor typically has nothing more to do except to wait for the final report of the Chapter 13 bankruptcy trustee.
Once the U.S. Trustee’s Office approves the final report filed by the Chapter 13 bankruptcy trustee, the court typically issues the order closing case and order of discharge. Chapter 13 cases can be difficult to file because repayment plans are complex to calculate. Most people retain a bankruptcy attorney to help them file a Chapter 13 case. However, you may qualify to file a Chapter 7 case, and many people file a Chapter 7 case without an attorney.
Do You Need to File a Chapter 7 Bankruptcy Case?
If you have debts that you cannot afford to pay, you may be able to get rid of those debts by filing for bankruptcy relief. In many Chapter 7 cases, debtors get rid of all unsecured debts while they keep all their property.
Some people are afraid of filing a Chapter 7 case because Chapter 7 is known as a liquidation bankruptcy. The “liquidation” refers to a bankruptcy trustee selling property that is non-exempt. However, as we discussed above, most Chapter 7 cases are no-asset cases, so you can get a fresh start without worrying about losing your property.
While hiring a bankruptcy attorney is certainly advisable if you can afford to hire an attorney, people who do not have enough money for an attorney can still get the same debt relief by filing a Chapter 7 bankruptcy case without an attorney.
Filing Chapter 7 Without an Attorney
If this sounds like the solution for you, we invite you to request more information about Upsolve, a non-profit company who assists low-income households file a Chapter 7 bankruptcy case at no cost. We have developed a system that provides the information, guidance, and support that allows you to file for bankruptcy relief without an attorney.
We do not charge attorney fees or other fees for our services. It is our mission to help low-income individuals get out of debt.
Watch past users, who were in the same financial position as you are right now, explain how they filed a Chapter 7 bankruptcy with the help of Upsolve. Their success stories will uplift you in addition to encouraging you. You can file Chapter 7 even if you cannot afford to pay a bankruptcy attorney.