What is the Trustee’s Role in a Chapter 7 Bankruptcy?
When a person or business files for Chapter 7 bankruptcy, the petition and related paperwork provide the court with information about the debtor’s assets and liabilities, income and expenses and general financial condition. The court then assigns a trustee, whose role is to review the bankruptcy petition and other documentation and to supervise and administer the bankruptcy estate.
As a debtor, you can expect the Chapter 7 trustee to ask you to provide documents, such as tax returns and pay stubs, to substantiate the information you listed in your petition. At this stage, the trustee is tasked with verifying that the information in your petition and supporting documents reflects your true financial position. The trustee receives a nominal fee (less than $100) for examining the paperwork. But the trustee also gets compensation based on a percentage of the assets sold off during the proceeding, so trustees normally scrutinize the debtor’s property very carefully.
There will be a creditors’ meeting about a month after your filing. The trustee runs this meeting. He or she will ask you a series of mandatory questions and ask for input from any creditors in attendance. If your Chapter 7 petition indicates that all of your property is exempt, meaning you get to keep it, the trustee verifies that this is true. At that point, the trustee’s role is finished. This is because there is no property to sell to pay creditors. The trustee will end the meeting and you likely won’t hear anything further from him or her. You will go on to complete a debt education course and then wait for your bankruptcy discharge.
If you have non-exempt property, the trustee can seize it for the benefit of creditors. The trustee will examine the creditors’ claims to ensure they are valid. Then, the trustee can sell the non-exempt assets and distribute the proceeds to the creditors. You may be able to negotiate with the trustee to buy back certain non-exempt assets that you really want to keep. The assets that the trustee is allowed to sell depend on the exemptions claimed in your petition. Your attorney can help you understand the different exemptions and related buy-back options.
If you are considering Chapter 7 bankruptcy, The Law Offices of Michael Jay Berger in Beverly Hills can walk you through the process so you know what to expect, including explaining the role of the trust in detail. I’ll work to help you get the fresh start you need. Please call 310-271-6223 or contact me online to schedule a free, no-obligation consultation.