What Is the Role of a Bankruptcy Trustee?
The U.S. Constitution puts bankruptcy proceedings under the authority of the federal government. The U.S. Trustee Program is a branch of the Department of Justice that supervises the bankruptcy process. The program appoints standing trustees for the various federal districts, and they supervise the individuals appointed to act as trustees in individual bankruptcy cases. In bankruptcy, the trustee supervises the claims of both debtors and creditors and helps the parties reach a resolution.
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Identification
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A bankruptcy trustee is the court's representative in a bankruptcy case. He is responsible for examining the documents filed by the debtor and verifying that she qualifies for the bankruptcy chapter under which she's filed. He must also monitor the claims of creditors and verify their validity. The trustee is charged with protecting the integrity of the bankruptcy system.
Function
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Some responsibilities of the bankruptcy trustee are defined by the bankruptcy chapter of the case. Under Chapter 7, the trustee must determine which of the debtor's assets are exempt from liquidation and which can be sold to pay off debts. The trustee takes possession of these latter assets and manages the sale. Under Chapter 13, the trustee's role is to mediate the drafting of a repayment plan. If the plan is approved, the trustee will accept monthly payments from the Chapter 13 debtor and distribute them to the creditors according to the plan.
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Other Responsibilities
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The trustee compiles detailed information on the income, assets and liabilities filed by the debtor and forms a thorough understanding of the bankrupt estate. The trustee convenes the creditor's meeting, during which the claims of the creditors are prioritized and, if appropriate, renegotiated. The trustee essentially represents the interests of the creditors, who are trying to collect against a delinquent borrower, but applies the law fairly.
Considerations
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Under Chapter 13, the debtor's repayment plan must be based on monthly disposable income and be able to satisfy his debts after 60 months (five years). The bankruptcy trustee must assess whether the debtor has the disposable income necessary to fulfill such an obligation. If not, the trustee can file a motion to have the case dismissed or transferred to Chapter 7.
Warning
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Withholding information from a bankruptcy trustee, or knowingly providing false information, can result in the dismissal of a case and possibly federal criminal charges. On the recommendation of the bankruptcy trustee, who informs the U.S. Trustee Program, the Federal Bureau of Investigation and U.S. Attorneys can investigate alleged bankruptcy fraud. The U.S. Trustee Program also audits the individual bankruptcy trustees for breach of fiduciary duty or other ethical or criminal violations.
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