When you file for bankruptcy, your case and your debts can come under the control of the court in the person of the bankruptcy trustee, whose job it is to ensure that bankruptcy laws are obeyed and that your unsecured debts are paid off as much as possible. However, the trustee’s legal powers go beyond these simple administrative duties, as this person assumes legal control of your property and your debts as of the date you file for bankruptcy. To take an action without the consent of the trustee is to risk having your case dismissed.
Who is the Bankruptcy Trustee?
Shortly after you file your bankruptcy papers, you will receive a notice informing you of the name, business address, and business telephone number of your trustee. This person is appointed by the Office of the United States Trustee, a branch of the Department of Justice. A trustee may be a local bankruptcy attorney, or a non-lawyer who is knowledgeable about chapter 7 and chapter 13 bankruptcy and the rules and procedures followed by the court.
Once your trustee has been appointed, he or she may contact you with a list of documents to be submitted to this person, which may include bank statements, property appraisals, canceled checks, or perhaps other such documents, and the date by which these documents should be sent.
The U.S. Trustee
In addition to the trustee appointed to handle your case, another person called the U.S. Trustee will be involved, though most people who file for bankruptcy will never have to deal with the U.S. Trustee. Most of the time the U.S. Trustee will only take action if your chapter 7 bankruptcy papers and/or testimony at the creditor’s meeting indicate that:
– you earn a monthly income greater than the state median
– your actual income is enough to support a chapter 13 repayment plan
– you are suspected of having engaged in some sort of illegal action which warrants investigation, or
– your case is the one in 250 cases randomly selected for audit
Should the U.S. Trustee take action in your case, all parties to the case will be notified of the proposed action.
Chapter 7 Bankruptcy
When you file for chapter 7 bankruptcy, your trustee will have a vested interest in your property, and how much you claim as exempt. The reason for this is that the trustee receives a commission on property that is sold in order to pay off unsecured debts. The trustee’s commissions may be 25% of the first $5000, 10% of everything from $5000 up to $50,000, and 5% of any additional money up to one million dollars (though most of you won’ t have to deal with that much value in your bankruptcy case).
If all of your property is exempt under the applicable state laws, than your case will be considered a “no-asset” case; in such a case your creditors will be told not to file claims since you don’t have any property to sell off to pay them. In such a case, your trustee will not be too interested unless your papers indicate that you may be hiding assets. In the case that you do have nonexempt assets to be sold off, your trustee will manage the selling of these assets.
Chapter 13 Bankruptcy
If you file for chapter 13 bankruptcy, your trustee’s role will be to oversee your payments under the repayment plan. In the event that you miss a payment, your trustee will help you get back on track, even give you a temporary reprieve if you need it. The trustee will also participate in any hearings on the value of your property. However, in most chapter 13 bankruptcies, you maintain complete control of your money and any property you acquire after your bankruptcy filing, so long as you are able to keep up your payment schedule. Your trustee can also amend your payment plan in the event that your income or property increases during the course of your case.