Law Office of Robert L. Firth
The Chapter 7 and 13 Trustees, and the U.S. Trustee
The Chapter 7 trustee decides whether to liquidate anything, the Chapter 13 oversees your case, and the U.S. Trustee is the enforcer.
When you hear the term “trustee,” that could refer to various people or roles.
Some are not directly related to the bankruptcy process. For example, in many states the “trustee sale” is the final event of a home foreclosure. A trustee legally conducts the foreclosure instead of your lender.
More broadly, a trustee is a person given certain powers to administer property or to fulfill some other tasks on behalf of others.
In bankruptcy, a trustee gets assigned to your case when you file a Chapter 7 or Chapter 13 case. You and your bankruptcy lawyer will meet with that trustee briefly. Sometimes you’ll have more contact with the trustee, especially in a Chapter 13 case. Generally speaking these trustees have certain powers over you and your property, and act on behalf of your creditors.
There is also the U.S. Trustee. He or she usually works behind the scene; in most consumer cases you’ll never meet this person.
The Chapter 7 Trustee
Chapter 7 “straight bankruptcy” is a liquidation procedure, although in consumer cases usually no liquidation takes place. (Nothing of yours gets liquidated and sold to pay your creditors if everything you have is “exempt,” or protected.) The Chapter 7 trustee is the person who determines whether or not you have any assets to liquidate. In those cases in which the trustee sells debtor assets, he or she is also responsible to distribute the proceeds to the creditors as required by law.
The Chapter 7 trustee presides at the so-called “meeting of creditors.” That’s usually the only time you’ll see him or her. This 10 minute or so meeting takes place within about a month after you and your bankruptcy lawyer file your case. At this short meeting the trustee will ask you some (usually quite simple) questions about your bankruptcy documents. Your lawyer will prepare you for them and help at the hearing as needed.
The trustee is assigned to your case from a “panel” of potential trustees. Generally your lawyer can’t predict or influence who will be your trustee.
See Section 704 of the U.S. Bankruptcy Code about the duties of a Chapter 7 trustee.
The Chapter 13 Trustee
Chapter 13 “adjustment of debts” is a procedure involving the court approval and the implementation of a payment plan. The Chapter 13 trustee administers and oversees the process.
This trustee has a number of roles. The primary one is to enforce your obligations under Chapter 13 law. For example, the trustee tries to ensure that you pay your creditors what they are entitled to. The trustee
- reviews your proposed payment plan and other court-filed documents,
- presides at your so-called “meeting of creditors”
- can raise objections to your plan with the bankruptcy court as appropriate
- after court approval of your plan, receives your plan payments and distributes them to the creditors as specified under the terms of the plan
- files motions with the bankruptcy court if you are not complying with the plan
- at the end of your case tells the court when you have successfully completed your plan obligations
Unlike the Chapter 7 trustees, there is usually a single “standing Chapter 13 trustee” assigned to all the Chapter 13 cases filed in a particular area. Since most handle a large volume of cases most of them have a staff of assistants. Your lawyer will very likely have a long-standing working relationship with the trustee and staff. You’ll know in advance who will be your Chapter 13 trustee.
See Section 1302 of the Bankruptcy Code about the duties of the Chapter 13 trustee.
The United States Trustee
The U.S. Trustee is the enforcer within the bankruptcy system—the watchdog over the bankruptcy process.” You generally hope to avoid hearing from the U.S. Trustee—it’s often not good news.
As described on its website:
The United States Trustee Program is a component of the Department of Justice that seeks to promote the efficiency and protect the integrity of the Federal bankruptcy system. To further the public interest in the just, speedy and economical resolution of cases filed under the Bankruptcy Code, the Program monitors the conduct of bankruptcy parties and private estate trustees, oversees related administrative functions, and acts to ensure compliance with applicable laws and procedures. It also identifies and helps investigate bankruptcy fraud and abuse in coordination with United States Attorneys, the Federal Bureau of Investigation, and other law enforcement agencies.
The main responsibilities of the local U.S. Trustee in consumer cases is to:
- appoint and supervise Chapter 7 and Chapter 13 trustees
- take legal action to prevent fraud and abuse of the bankruptcy system
- investigate and refer matters to the appropriate enforcement authorities (as mentioned above) for criminal prosecution
See 28 U.S. Code Section 586 for the duties of the U.S. Trustee.