Filing bankruptcy is a life-changing decision that requires careful consideration. If you decide to file for bankruptcy, you’ll want to have some idea of what to expect and that includes knowing who the bankruptcy trustee is and what role they play in the entire bankruptcy process.
Regardless of whether you file for Chapter 7 or Chapter 13 bankruptcy, you’ll have a trustee intimately involved and who will oversee your case. The bankruptcy trustees are not government official, but are private contractor hired by the U.S. Department of Justice. While United States’ Trustees are government employees, Chapter 7 and 13 trustees are usually attorneys and accountants. You’d be well advised to realize and remember that the trustee assigned to your case represents your creditors (not you) and is looking out for their best interests.
The role of a trustee is different depending upon whether you file for Chapter 7 or Chapter 13 bankruptcy:
Chapter 7 Bankruptcy Trustee is the person who administers Chapter 7 cases. He’ll look at your list of assets (if you have any) to determine what assets are exempt and non-exempt from the bankruptcy proceedings under California law; to distribute the money obtained from the sale among the creditors; to review claims of exemption and the debtor’s entitlement to a discharge. He is essentially a representative for the creditors as a group. He is appointed by the United States Trustee, an officer of the Department of Justice, who oversees his performance.
The trustee presides at the first meeting of creditors. He ensures everything is going smoothly with your case. He can file objections to claims of exemption or oppose the debtor’s discharge, but he doesn’t decide those questions. The judge decides disputed questions.
The Chapter 13 Bankruptcy Trustee is also a private individual appointed by the UST. The Chapter 13 case has a bigger role than he does in a Chapter 7 case as the trustee has a dual role with Chapter 13 cases. He serves the same review function as a Chapter 7 trustee, (read the schedules and see if the case complies with the Bankruptcy Code and oppose matters that don’t comply with the law.) His goal is to represent and look out for the best interest of the creditors (again, not you). However, he’s also responsible for reviewing your repayment plan and ensuring you have no difficulties following that plan. He will be responsible for collecting your payments and distributing the money to your creditors. The trustee also has the ability to initiate a modification of the payment plan. Unlike with Chapter 7 bankruptcy, you can generally keep your assets in Chapter 13 since you’ll be repaying, in full or in part, your debt.
Chapter 13 Trustee’s role lasts from the initial filing to the end of the three- to five-year payment plan. Usually, one Chapter 13 trustee serves all the cases in his/her division or district. The trustee gets a small percentage of the funds that flow through the Chapter 13 case. That percentage is fixed by the UST after review of the Chapter 13 trustee’s operating expenses.
Finally, there is the United States Trustee of whom you will likely never have dealings. This trustee is a government employee whose job is to appoint and oversee the Chapter 7 and Chapter 13 trustees. The UST has standing to appear before the court as an interested party. UST is in-charged with reviewing Chapter 7 cases for abuse or denial of discharge. Since the 2005 bankruptcy law amendments, they appear to be more active in this oversight role and more aggressive in trying to force cases into Chapter 13. In addition, he recommends to the United States Attorneys and Federal Bureau of Investigation that legal action be taken against those suspected of bankruptcy fraud and abuse. In short, according to the United States Department of Justice, the United States Trustee is the “watchdog over the bankruptcy process”.
For a free initial consultation about filing for bankruptcy with Lozano Law Offices, call (510) 538-7188 or contact us online. Our office is open weekdays from 8:30 a.m. to 5:30 p.m. Saturday appointments are available for limited time only.