Before beginning the bankruptcy process, it is very important to understand exactly what the process entails and who is involved. In a typical Chapter 7 bankruptcy case, there are five (5) parties: the person who files the bankruptcy (called the debtor), the debtor’s attorney, the debtor’s creditors, the bankruptcy judge, and the bankruptcy trustee.
Many people do not know about the bankruptcy trustee, which is why working with an experienced attorney can be very beneficial since often attorneys have worked with trustees in the past and know their preferences and their office procedures – even their support staff. Read on to learn more about bankruptcy trustees and what they do during the Chapter 7 process.
Who is the Bankruptcy Trustee?
The bankruptcy trustee is the impartial person who the judge appoints to administer and oversee the Chapter 7 bankruptcy case. Each district typically has at least two or three bankruptcy trustees so not every case is assigned to the same person. Trustees are very knowledgeable about the bankruptcy law and procedures.
What does the Bankruptcy Trustee Do?
As the administrator and overseer of the Chapter 7 case, the trustee’s main duties are reviewing the case paperwork, liquidating qualifying assets to pay creditors, uncovering fraud, and identifying and reversing preferential transfers.
1. Reviewing the documents: When a debtor files a Chapter 7 petition, the debtor must complete several forms that outline the debtor’s income and bills. These forms, which are called schedules, must provide the court with complete and accurate information about all of the debtor’s finances including but not limited to all property the debtor owns or has an interest in, stock portfolios, inheritances, retirement accounts, and lawsuits in which the debtor is involved.
It is the trustee’s job to review these schedules and ask questions or ask for proof of the statements made on the forms. For example, if a debtor states that he/she does not own any property, the trustee may ask for a copy of the lease for the debtor’s residence (to confirm the debtor is renting and truly does not own the residence). It is important to note that a formal examination of the bankruptcy schedules will take place, under oath, at what is called the 341 meeting of creditors.
2. Selling assets and paying creditors: The trustee is in charge of selling any non-exempt property in order to obtain funds to pay off the debtor’s creditors to the best extent possible. The trustee will help value the property, conduct the sale, and distribute the funds. (However, a large majority of Chapter 7 cases are called “no-asset cases” because there is no non-exempt property to sell.)
3. Identifying and reversing preferential transfers: It may seem counterintuitive but if a debtor tries to pay off one or more creditors before filing for bankruptcy, the trustee can reverse those payments under the prohibition against preferential transfers. The bankruptcy law discourages these types of pre-bankruptcy payments to one creditor over another. Preferential transfers are usually found in payments to family members.
If the trustee believes that a preferential transfer has occurred in your case, the trustee with reverse the transfer by obtaining the payment back from the person who received it.
Cooperating with the bankruptcy trustee is just one critical component to the process. To make sure you understand the bankruptcy process and whether it is right for you, contact our office today to speak to an experienced attorney about your case. Call 404-913-1529 or fill out our contact form today!