27 Jul Bankruptcy Basics: What Does The Chapter 7 Trustee Do?
When a person files for bankruptcy, the instant the person files–an estate is created. The Bankruptcy Court appoints a “trustee” to be in charge of the estate. The Chapter 7 Trustee has many responsibilities: looking over the schedules of assets and liabilites that the person has filed; reviewing the exemptions used by the person, checking for domestic support obligations owed by the person (under the 2005 Bankruptcy Act, the Trustee is mandated to contact the child support recipient to make sure that person knows of the bankruptcy filing); and determining whether there are assets within the estate to pay creditors. The Chapter 7 Trustee Handbook outlines each and every duty.
Typically, the Chapter 7 Trustee meets the debtor(s) in person at what is called a “Meeting of Creditors” or a “341(a)” meeting. (Section 341(a) of the U.S. Bankruptcy Code provides that this meeting will happen). The Trustee verifies the identity of the person who filed for bankruptcy and checks the proof of social security number. The Trustee asks a series of questions about the schedules filed with the Court and follows up with more direct questions on any issues raised while reviewing those schedules. The questionning may be more complicated if any transfers occurred recently or if a business is involved.
The Trustee has the power to undo any transfer made fraudulently or with the intent to keep property out of the hands of creditors. The Trustee “steps into the shoes” of the debtor(s) and can sue in their name (or the name of the estate) and can recover money wrongfully seized by one creditor, in order to split that money between all creditors. The Trustee can also hire an attorney to proceed on behalf of the estate to start a lawsuit, if necessary.
The Chapter 7 Trustee is not an employee of the Bankruptcy Court. The Chapter 7 Trustee’s responsibility is to maximize the estate for the benefit of creditors. Dealing with a Chapter 7 trustee can be an intimidating task. Your lawyer can help you understand the job of the Trustee, the job of the attorney, and the job you have interacting with the all of them.
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