Bankruptcy trustees are a key part of the bankruptcy process, which sheds your unmanageable debts and grants you financial freedom.
The two most common types of consumer bankruptcies that trustees oversee are Chapter 13 and Chapter 7. Our bankruptcy lawyers help you review the trustee’s role in your bankruptcy case.
What is a Bankruptcy Trustee?
A trustee is appointed to your case by a Department of Justice officer to oversee the Chapter 13 or Chapter 7 bankruptcy process and ensure compliance with bankruptcy laws and regulations. Overall, the bankruptcy trustee represents the court in dealings with your creditors and their job is to oversee your bankruptcy process. For their work on your case, a trustee receives a small fee by way of a small percentage of the total Chapter 13 plan payments.
The Role of a Trustee in a Chapter 13 Bankruptcy
In a Chapter 13 bankruptcy, you are very likely to keep your property and assets. Instead, you will repay your debts through monthly payments over the course of three to five years. That’s where the trustee comes in: their job is to receive your monthly payments and pay your creditors. Reducing your multiple debt payments to a singular one per month and eliminating your interactions with creditors.
Similar to Chapter 7, the trustee will review your information to make sure it’s complete and accurate. During the meeting of the creditors, the trustee will ask questions about your property and discuss your proposed payment plan. Having a bankruptcy attorney to state your case in the best light and fight for the best budget for you is especially important in this step to circumvent any objections.
The trustee will then approve your proposed plan or object to it. If an objection comes up then you will need to make the requested changes or file an opposition justifying your plan—another step where professional legal assistance is helpful!
The trustee collects payments directly from you and distributes the money to your creditors. The trustee will prioritize debts that can’t be discharged, followed by secured debts and then unsecured debts. This involves processing the creditors’ proof of claim forms, and managing and documenting the corresponding payments. If you face a financial event that significantly alters your status, like unemployment or income changes, the trustee can then help adjust the plan. After the final payment, the trustee sends you a Notice of Completed Payments, and soon after that, you’re done!
The Role of a Trustee in a Chapter 7 Bankruptcy
A Chapter 7 bankruptcy can take as little as four months to complete. In a very small number of Chapter 7 cases where the debtor may choose to surrender property, the trustee then oversees the liquidation of any surrendered assets to alleviate debts. Because the goal of this type of bankruptcy is to erase all debts for a completely fresh financial start, some property may be sold to ensure your debt-free financial future. In our extensive history as legal advocates and over 4,000 cases, Sadek Bankruptcy Law Offices is proud to say that our expert lawyers have never had a client have to liquidate assets that they did not wish to surrender.
First, the trustee makes sure your documents are honest and accurate. Then they schedule and oversee a 341 meeting. It is technically a meeting of the creditors, but don’t worry—it is very unlikely that creditors will show up. More likely, the trustee will ask you simple questions, such as “Do you own a vehicle?” or “Have you previously filed for bankruptcy?” and that’s it! Typically, these meetings are extremely short. A bankruptcy lawyer can be there to prepare you in advance, state your case in the best light, and ensure that there are no objections to your bankruptcy case.
In most cases, most property and assets a debtor would wish to keep are protected by bankruptcy exemptions that make it so the debtor does not have to sell any essential items. In the unlikely event that there is any property that the debtor chooses to surrender, the trustee then handles the listing of any surrendered property for sale on behalf of the debtor. In some cases, the trustee may choose to not liquidate your surrendered property at all if the value is too low. If there aren’t any assets to sell, the trustee can also deem your case a “no-asset” bankruptcy. After your Chapter 7 bankruptcy is complete, you will start a new, debt-free life thanks to the work of the trustee and your bankruptcy lawyer!
As you can see, bankruptcy isn’t as complicated as you might expect! An experienced bankruptcy lawyer will help you negotiate the best bankruptcy terms for your unique case, while the trustee will handle your creditors and debts moving forward. Ensuring you receive some peace of mind. By filing, you are taking a major step toward a better future, essentially giving yourself a fresh start—and hiring a local bankruptcy lawyer can help make the process even easier!