You probably have a general understanding of bankruptcy as a debt relief option for struggling consumers. Yet, if you are facing challenging debt, you may stand to benefit from a more intimate knowledge of the specifics.
One of the most important players in consumer bankruptcies is the bankruptcy trustee. A bankruptcy trustee performs many functions, and can deeply affect your case.
Trustees Operate At Different Levels for Chapter 7 and Chapter 13 Bankruptcies
The bankruptcy trustee system is multilayered. At the top are United States Trustees. United States Trustees perform different functions depending on the type of bankruptcy being filed.
Chapter 7 bankruptcy, sometimes called liquidation, involves an almost immediate discharge of debt. An individual going through Chapter 7 bankruptcy must forfeit all nonexempt property in order to partially repay creditors (do not let this worry you too much – exemptions are generous and the vast majority of Chapter 7 filers do not have to surrender any property).
In Chapter 7 bankruptcy, a United States Trustee may initiate a court action to challenge any aspect of the case that affects the integrity of the bankruptcy system. For instance, the United States Trustee might:
- Make an argument that discharging the consumer’s debt would constitute a “substantial abuse” of the bankruptcy system
- Take legal action against bankruptcy petition preparers (non-attorneys that prepare bankruptcy papers in exchange for a fee)
- Challenge any fee requested by the consumer’s attorney that is viewed as excessive
One of the most important responsibilities of United States Trustees in Chapter 7 cases is appointing and supervising Chapter 7 trustees. If a consumer going through Chapter 7 has nonexempt assets, a Chapter 7 trustee takes control of them, sells them and distributes the proceeds to creditors. The Chapter 7 trustee will also appear at the “creditor hearing,” where he or she will likely ask the consumer some simple questions about information in the bankruptcy filing.
Chapter 13 bankruptcy, often referred to as a “wage-earners plan,” involves court consolidation of debts on terms more manageable to the consumer. Someone going through a Chapter 13 bankruptcy makes payments under a repayment plan for three to five years, after which he or she is eligible for a complete discharge of most types of remaining debt.
A United States Trustee serves a slightly different purpose in a Chapter 13 case compared to a Chapter 7 case. In Chapter 13 proceedings, United States Trustees supervise the private trustees who directly administer Chapter 13 cases. Supervisory actions may include:
- Reviewing trustees’ case reports, financial reports, management skills, court performance and any other pertinent information
- Ensuring that trustees are independently audited
- Providing training for trustees
- Keeping an eye on trust account funds
The private trustees who are being supervised by a United States Trustee have an important role in Chapter 13 cases. These trustees investigate the consumer’s financial affairs, investigate and (where appropriate) contest creditor claims, make recommendations for the consumer’s Chapter 13 repayment plan and ensure that the plan is fair and feasible as implemented. As part of a Chapter 13 plan, the consumer makes payments directly to the trustee, who in turn distributes the funds to creditors. Just like in a Chapter 7 case, the trustee for a Chapter 13 case will also appear at the creditor hearing.
Speak To a Bankruptcy Attorney to Learn More
Bankruptcy trustees handle many cases, and their experience helps guide the decisions they make. Equally important to trustees, however, are your individual circumstances and the arguments you present in your bankruptcy filing.
Naturally, you want a bankruptcy case that gets you out from under debt, and at the same time allows you to keep as much of your hard-earned cash as possible. In order to achieve the best results, you need to put together a strong case, and this means retaining an attorney experienced with consumer bankruptcies. Your attorney can help determine which form of bankruptcy is right for you, and will help you craft a favorable bankruptcy strategy.
No one is excited to go through bankruptcy. But, with the right help, it is nothing to be feared. Talk to a bankruptcy attorney today and start getting your financial life back on track