Bankruptcy Alphabet – T is for Trustee
by Jeff Curl
The term trustee is used in bankruptcy quite a bit, and you might be wondering, “who is the bankruptcy trustee?” In typical consumer cases there is a Chapter 7 trustee or a Chapter 13 trustee, and then there is always the United States Trustee.
Chapter 7 Trustee
If you file for Chapter 7 bankruptcy, this is the trustee you will meet with at your meeting of creditors. For every Chapter 7 case that is filed, the United States Trustee appoints a Chapter 7 trustee to oversee the case. While appointed by a government agency, the Chapter 7 trustee is a private individual essentially operating a business.
Upon filing Chapter 7 bankruptcy, all of your property goes into the bankruptcy estate. The Chapter 7 trustee is the trustee of that bankruptcy estate, i.e., your property. This means that he or she controls your property upon filing bankruptcy. The trustee’s primary job is to examine your assets to determine if he or she can take and sell them, i.e., liquidate your belongings for the benefit of unsecured creditors.
In most Chapter 7 filings, the debtor is able to exempt and protect all property. In such cases, the trustee will not take and attempt to sell any of your property. A trustee gets paid a flat $60 for administering such a case. On the other hand, if the trustee is able to liquidate assets, he or she gets a percentage of from the sale.
Chapter 13 Trustee
Like a Chapter 7 trustee, a Chapter 13 trustee is appointed by the United States Trustee. A chapter 13 trustee does not take and liquidate your assets like a Chapter 7 trustee. In Chapter 13 you propose a plan to pay some portion of your debt over the period of time. The Chapter 13 trustee is charged with examining the proposed plan to ensure that the plan is fair.
Whereas a Chapter 7 trustee is usually more concerned with assets, a Chapter 13 trustee focuses on income and expenses, to ensure you repay a fair amount. The trustee may either challenge or recommend your proposed plan for confirmation. Confirmation is where the judge allows your proposed plan payment.
In Chapter 13, you send a check to Chapter 13 trustee each month, and he or she will take that money, and distribute it to the creditors over the life of your plan.
United States Trustee
The United States Trustee (UST for short), is a government agency. The UST is a division of the Department of Justice. The UST oversees the trustees and reviews all cases filed under Chapter 7 and Chapter 13 bankruptcy. In Chapter 7, the UST looks for abuses by the debtor, and will look at excessive fees paid to attorneys or bankruptcy petition preparers.
In Chapter 13, the UST spends more time overseeing the Chapter 13 trustee, ensuring that the Chapter 13 trustee is bonded, audited, monitored for trust accounting and reviews his or her budget.
Photo courtesy of chrisinplymouth