What Does the Chapter 7 Trustee DO in My Bankruptcy Case?

by Jay Fleischman, Esq.

February 10, 2010

Debtors are frequently scared of chapter 7 trustees.  They don’t have to be. The general idea of bankruptcy is pretty simple.

An honest debtor gets a discharge in bankruptcy.  The price of a discharge in bankruptcy is that the non-exempt assets of a debtor may be sold (liquidated) and the proceeds distributed to creditors.

In order for the bankruptcy process to work smoothly, both the debtor and the trustee must fulfill their obligations.  We’ll talk about your obligations as a debtor in a future article.  For the moment, let’s consider the things a chapter 7 trustee must do in your case.

In chapter 7 cases, the bankruptcy trustee has the obligation to the following 12 things:

(1) collect and reduce to money the your non-exempt property and close the case as soon as possible

(2) be accountable for all property received

(3) make sure that you perform your intention to reaffirm debts

(4) investigate your finances
(5) check out proofs of claims in your case and object if necessary
(6) oppose your discharge if you’ve given reason for such action
(7) provide information about your case to others unless a court forbids this action
(8) report to the court about the operations of any business operated by the Trustee
(9) provide interim and final accounts
(10) give two notices to holders of any claim for alimony or child support
(11) deal with ERISA qualified plans for businesses in bankruptcy
(12) deal with patient records in health care bankruptcy cases
That, dear debtors, is a lot of work. These days, a trustee gets $60 in cases where there are no assets to be administered. In these cases, the trustee will have to fully examine your schedules and statement of affairs. The trustee will check out public records. The trustee will examine you under oath. The trustee will give notices to your ex-spouse if you are paying alimony.
The trustee probably loses money handling “no-asset” cases. So the trustee wants to find assets you have in order to pay creditors.
To be continued . . .
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Jay S. Fleischman is a bankruptcy lawyer with offices in Los Angeles and New York. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.

Last modified: February 11, 2010