Email this page to a friendRole of the Trustee Explained: Chapter 7 Trustees
The Executive Office of the United States Trustee is a branch of the United States Department of Justice. The Executive Office of the US Trustee is the executive agency responsible for the administration of the bankruptcy system in the United States. The Executive Office of the US Trustee also has authority to contract with agents to serve certain roles in the program. In Chapter 7 cases, that means the appointment of “interim trustees.” “Interim trustees” are not government employees. Usually they are lawyers from within the community who are appointed by the U.S. Trustee’s office to serve the role of sitting for the 341 and initial review of all bankruptcy cases. There is a panel of trustees in each jurisdiction that are randomly assigned to cases that get filed.
The Chapter 7 Interim Trustee’s first job is to review the bankruptcy petition and all of the schedules filed with the court. They investigate to make sure that there isn’t any property that is not listed in the petition and schedules, review the calculations to make sure they are correct, and make sure that the attorney who filed the case followed all of the bankruptcy laws and rules. The trustee also presides over the Meeting of Creditors which is the meeting in which the trustee asks questions of the debtor in an attempt to verify information.
After reviewing the schedules and presiding at the 341 meeting, the trustee is required to file a report to the court. The report would either be a “Report of No Distribution” or “No Asset Report” or a “Report of Assets.” The trustee is required by law to sell non-exempt assets and distribute money to creditors. In most Chapter 7 cases, all of the debtor’s property is exempt, and there is nothing for the trustee to take or sell. Each state has its own exemptions, and sometimes federal exemption law applies. If you want to know more about whether you may be able to exempt all of your property in a Chapter 7 bankruptcy, call Legal Helpers to set up a free consultation with an attorney near you to explain the exemptions in your jurisdiction.
If there is property that belongs to the debtor that is not exempt, the Chapter 7 Trustee is responsible for taking or selling that property. They sell houses and cars, take the proceeds of non-exempt bank accounts, and sell stocks and redeem bonds that aren’t protected. If there is somebody that you are entitled to receive money from, that is an “asset” as well. For example, if you were involved in a car accident, and could sue the other driver, the trustee may choose to pursue that case, even if you chose not to. They can pursue all kinds of cases - child support, workmen’s compensation, breach of contract, etc. In some cases, the trustee may even operate a business owned by the person who filed.
Once the trustee has received the funds from non-exempt assets, they pay that money to the creditors. The trustee requests that the creditors file a proof of each of their claims. Then, the trustee reviews them to determine whether they are valid, and objects to them if they think they are not. If there is more money than is needed to pay everybody you owe, then after everyone has been paid and all expenses taken out, the rest of the money is refunded to you.
When you file a bankruptcy, you will be required to attend a meeting with the trustee assigned to your case. About a month after you file your case, you attend the meeting. At that meeting, the trustee will ask you several questions. There are two reasons for these questions. Some of the questions are designed to make sure that you aren’t trying to hide anything from the trustee. You may be asked, for example, whether you’ve sold or given away any property recently, or whether you transferred balances between credit cards in the days leading up to your filing. The other purpose of those questions is to help the trustee determine whether there are any non-exempt assets. You may be asked about your house or cars, and how you came up with the values we listed in the bankruptcy. For example, in my jurisdiction, you must provide the trustee with a bank statement showing how much money you had in your bank accounts on the day of filing, so the trustee can see if there is any money in the account that is not exempt.
Once the meeting is concluded and the trustee has filed the report, the case can proceed to discharge. Even in asset cases where the trustee has not yet sold or distributed money, it is common that the discharge would get entered within 60-90 days of the meeting.
