What Is A Bankruptcy Trustee and What Do They Do?

Who is bankruptcy trustee

The bankruptcy trustee is the court appointed official who administers the debtor’s bankruptcy estate.

Bankruptcy trustees are appointed by the Department of Justice from a panel of pre qualified individuals.

Chapter 7 trustee

This is the person who administers Chapter 7 cases. His role is to determine whether there are assets to liquidate; to review claims of exemption; and to assess the debtor’s entitlement to a discharge.

He is essentially a representative for the creditors as a group; he’s also tasked with supporting the integrity of the bankruptcy system.

He is appointed by the United States Trustee, an division of the Department of Justice, who oversees his performance. He is not, himself, a government employee.

The trustee presides at the first meeting of creditors. He can file objections to claims of exemption or oppose the debtor’s discharge, but he doesn’t decide those questions. The judge decides disputed questions. More on role of bankruptcy judges.

Trustees are paid in part from the filing fee paid to the court at the commencement of the case. Any compensation they receive above that is a fee based on the money they handle as part of the estate.

If there are no funds in the estate at the end of the day, the trustee gets only his $60 per case.

Chapter 13 Trustee

The Chapter 13 trustee is also a private individual appointed by the UST. He serves the same review function as a Chapter 7 trustee (that is, read the schedules and see if the case complies with the Bankruptcy Code and oppose matters that don’t comply with the law.)

In contrast with the Chapter 7 trustee, the Chapter 13 trustee seldom takes possession of any assets nor sues to recover assets that were transferred before bankruptcy.

He also serves as the disbursing agent for payments made by the debtor into the plan.

Usually,  one Chapter 13 trustee serves all the cases in his/her division or district. The trustee gets a small percentage of the funds that flow through the Chapter 13 case. That percentage is fixed by the UST after review of the Chapter 13 trustee’s operating expenses.

United States Trustee

This trustee is a government employee whose job it is to appoint and oversee the Chapter 7 and Chapter 13 trustees. The UST has standing to appear before the court as an interested party in any bankruptcy case.

UST is charged with reviewing Chapter 7 cases for abuse or denial of discharge.  They also take an oversight role in Chapter 11 cases, especially where there is no creditors committee.

Read more

Going to court in a bankruptcy case

Keeping assets out of bankruptcy

Image courtesy of NABT

About the Author
Northern California bankruptcy lawyer Cathy is a 30+ year veteran of bankruptcy practice in the Silicon Valley. She is known for energetic representation of clients and her command of bankruptcy law.