Bankruptcy Trustees Balance Duty To Creditors And Debtors

Bankruptcy trustees universally seek to maximize the recovery of estate assets for distribution to unsecured claims. Plain and simple, trustees want to pay as much money as possible to creditors. Trustees examine bankruptcy schedules, elicit debtor testimony and comb through financial records in an effort to discover non-exempt assets. The trustees act as debt collectors and they collect a fee based on the amount of money collected.

But there is a dual role to that job. There is a duty to protect debtors from abuse. The local trustee is on the front line of protecting the integrity of the bankruptcy system. Across the country, these trustees serve at the pleasure of the Executive Office of the Unites States Trustee Program, through the regional US Trustees. Mark Redmiles is the Deputy Director of the Executive Office. Mr. Redmiles appears at bankruptcy organization seminars across the country. He puts a face on the office and he is popular on the tour, both of creditor and debtor organizations. Everyone wants to know what the US Trustee is up to. As I indicate on my Illinois Bankruptcy Attorney Blog, Mr. Redmiles recently clarified the duty of the US Trustee Program to include the duty to protect debtors from misconduct committed by creditors. He stressed that local case trustees are often best suited to protect debtors from abusive creditor tactics. He specifically mentioned three examples of concern: 1) false and inaccurate proof of claims, 2) the imposition of unreasonable post petition charges, and a hot topic of mortgage servicer abuse, 3) misapplication of mortgage payments.

Local trustees who are used to maximizing the recovery of assets, now must balance that aspect of the job against keeping a watchful eye on the cookie jar of payments to creditors, so says the Deputy Director.