Any bankruptcy case, regardless of how complicated or simple, will always have certain parties with different roles to play in the process. The first party is the debtor, or the person who files for bankruptcy due to unpaid debt. There is your attorney, who is there to represent your interests and to make sure the bankruptcy process proceeds in a timely manner. Then there are the creditors. These entities who provided property or services to the debtor with the expectation they would receive compensation in return at some future date and will now seek to get some portion of what they are owed from the bankruptcy estate. Next, there is the trustee. This person or entity is responsible for administering the bankruptcy estate and usually appointed by the United States Trustee Office. This person plays a very important and crucial role in bankruptcy and is therefore held to a high standard of conduct. A seasoned professional trustee out of South Florida found himself in trouble for not upholding these standards when a court found he overstepped his authority by filing for bankruptcy on behalf of a company he was trying to liquidate for the benefit of creditors. Finally, there is the bankruptcy judge. The judge has the ultimate say on any settlements between the trustee and creditors, whether the debtor filed for the right type of bankruptcy, and any motions filed on behalf of the debtors or creditors. While all these parties play an integral role in bankruptcy, this post will focus on the functions and duties of the trustee.

Qualifications of a Trustee

As noted above, the U.S. Trustee Office appoints trustees in most bankruptcy cases. However, these appointed trustees are private and not employees of the U.S. Trustee Office. An individual or corporation may serve in this role and must possess the following qualifications:

• Possess integrity and good moral character;
• Have the physical and mental capability to perform the job;
• Be courteous and responsive to requests for information about a case;
• Not hold any prejudices that would interfere with completing their duties;
• Not be related to anyone in the U.S. Trustee’s Office or Department of Justice; and
• Work as a licensed attorney, public accountant or have a college degree in a business-related major.

Duties of the Trustee in a Chapter 7 Bankruptcy

A Chapter 7 bankruptcy is for consumers who want to discharge their debt still outstanding after liquidating assets to pay creditors. Discharging debt means the debtor is no longer responsible for the unpaid amount on certain kinds of debt, and the creditors no longer have the legal right to pursue the debtor for payment. A trustee in this case is required to gather the debtor’s non-exempt property, manage the proceeds generated from selling the non-exempt assets, and distribute any money left after expenses to the creditors. However, most Chapter 7 cases involve individuals without any applicable assets to sell, or they only own property with valid liens, which makes the process faster and means creditors will have little participation. If there is property a trustee can sell, the trustee must make a good faith effort to get as much for the property as possible so creditors have the maximum opportunity to be paid, and depending on the type of debt, creditors are paid in a specific order. This means some creditors may receive nothing even if there is money to distribute.

Consult a Bankruptcy Attorney

Filing for bankruptcy is a big decision and one that should not be made without consulting an attorney. There are different types of bankruptcy, and if you file for the wrong one, it could affect your ability to re-file in the future. Christopher L. Arrington, P.C. represents bankruptcy clients in central Indiana and can help you determine what the best course of action is to stabilize your financial situation. Contact him today to schedule an appointment.