What is a Trustee in Chapter 7 Bankruptcy?
A trustee is appointed in nearly every consumer bankruptcy case to oversee and administer the process. The trustee is independent and will work primarily for the benefit of the debtor’s unsecured creditors. Although the trustee’s role is significant, his responsibilities will vary depending on the chapter that is being filed. Our South Florida bankruptcy attorneys are providing additional insights on the duties of a trustee throughout a Chapter 7 filing.
What is a Bankruptcy Estate?
Bankruptcy law declares that once an individual files for bankruptcy, an estate must be created. This bankruptcy estate is comprised of the debtor’s property, and it’s referred to as a distinct entity, separate from the debtor. A bankruptcy trustee is required to oversee the bankruptcy estate and to perform the duties required by law.
Who is a Chapter 7 Trustee?
Chapter 7 trustees are private citizens, often attorneys or accountants, who are appointed and overseen by the Office of the U.S. Trustee to administer cases under the bankruptcy code. Panel trustees must pass an FBI background check and be bonded.
The trustee will receive a small fee in exchange for reviewing the bankruptcy paperwork, along with a percentage of any assets that are sold. This structure serves as incentive for the trustee to analyze the estate before the bankruptcy filing.
When and why is a Trustee appointed?
Upon filing of a bankruptcy petition, the United States Trustee will appoint an interim trustee. A Section 341 hearing will be held approximately one month following the filing. During this meeting a trustee may be elected or designated. If one is not appointed at the hearing, the interim trustee will continue in the permanent position.
A debtor will be required to supply documents which disclose personal and financial information regarding property, debts, income, and an overview of the state of their financial affairs. The trustee will conduct a review of the bankruptcy petition and schedules filed with the court and determine the existence of any non-exempt assets available for distribution to creditors. In the event that a debtor has property that is not exempt under state or federal law from creditors, then the trustee may sell that property and divide the money among creditors.
If you or someone you know is considering filing for bankruptcy, it is extremely likely that a trustee will be assigned to your case. The South Florida bankruptcy attorneys at Kelley, Fulton & Kaplan have the knowledge needed to answer your questions about a trustee and how to manage the case based on your unique circumstances. Contact us today to schedule your free consultation.