When discussing bankruptcy, you will often hear references to the “trustee of the case.” The trustee is a court-appointed individual that oversees your bankruptcy case.
While many debtors have an initial fear of the trustee, it is generally unwarranted. A trustee is not attempting to sabotage your bankruptcy case. In all likelihood, the trustee would prefer for your case to succeed just as much as you, although your opinions of the most beneficial outcome may differ somewhat.
Role of the Trustee
Every consumer bankruptcy case that is filed will be assigned to a trustee. Contrary to popular perception, the trustee is not an employee of the bankruptcy court, but instead an independent contractor, usually a local attorney.
The trustee performs the necessary duties required to administer your bankruptcy case, which may vary depending on which chapter of bankruptcy has been filed. Both Chapter 7 and 13 trustees share many of the same duties, which includes:
- reviewing the bankruptcy petition for accuracy
- examining the debtor during the 341 Meeting
- challenging creditor claims if necessary
- avoiding fraudulent/preferential payments made prior to the case being filed
Chapter 7 Specific Duties
The main duty that is exclusive to a Chapter 7 trustee is determining whether the debtor owns any nonexempt assets, which are assets, or property, that is not protected by the bankruptcy laws. Most Chapter 7 cases are considered to be “no asset” cases, meaning the debtor does not own any significant, nonexempt assets that the trustee can seek to acquire.
In the small number of cases where there are nonexempt assets (usually a vehicle or real property), the trustee is responsible for gathering those assets from the debtor and selling them. The trustee will then distribute the proceeds of the sale to creditors appropriately.
Chapter 13 Specific Duties
In a Chapter 13 bankruptcy, the debtor is allowed to keep any nonexempt assets in exchange for making a monthly payment to the trustee for three to five years. Therefore, a Chapter 13 trustee is not responsible for selling and distributing assets.
A Chapter 13 trustee is instead responsible for reviewing the Chapter 13 payment plan, collecting the monthly payments, and then distributing those payments to creditors as necessary. A chapter 13 trustee is also responsible for objecting to your bankruptcy case should you fail to make the necessary monthly payments.
When do I Talk to the Trustee?
While a trustee will be immediately assigned to your bankruptcy case, in almost all occasions, you will not interact with him/her until about 30 days after the bankruptcy petition is filed. Around this time, there will be a hearing scheduled that is often referred to as the 341 Hearing, or the Meeting of Creditors.
It is at this hearing that you will first communicate directly with the trustee. While many debtors are nervous about this meeting, there is usually no cause for concern.
The trustee will typically ask a few basic questions that usually revolve around confirming the information that you have already disclosed in your bankruptcy petition. Here in the Northern District of Alabama, 341 Hearings rarely last more than a couple of minutes.
Contact a Trusted Bankruptcy Attorney Today
The trustee plays an important role in a bankruptcy case, so it is important that you are familiar with your jurisdiction’s trustees and how they typically administer a bankruptcy case. Being able to predict what a trustee is looking for goes a long way in streamlining the bankruptcy process, which means less stress and hassle for the debtor.
Here at Bond & Botes, we have established a great relationship with our local trustees throughout our 30 years of operation. If you are considering a bankruptcy option and need assistance please contact one of our locations nearest you for a free, confidential consultation with one of our experienced, licensed attorneys.
Grafton Weinacker is an Associate Attorney at the Bond & Botes Law Offices in Birmingham, Alabama. He holds a Bachelor of Science from Birmingham-Southern College, and a Juris Doctorate from Cumberland School of Law at Samford University. He joined the Bond & Botes team of bankruptcy attorneys in July of 2018. Read his full bio here.