Duties of a Trustee in Bankruptcy
Chapter 7 Bankruptcy
- A United States Trustee is responsible for liquidating the assets of the debtor in a Chapter 7 bankruptcy. All of the debtor's assets are converted to cash, except those that are exempt, such as her personal residence and property.
Chapter 11 Bankruptcy
- In a Chapter 11 (business-related) bankruptcy, the trustee oversees the reorganization of the debts in question so that the debtor can pay some or all of his creditors. In a Chapter 11 bankruptcy, the trustee is also required to convene creditors' meetings.
Chapters 12 and 13 Bankruptcy
- Chapter 12 bankruptcies apply to family farms and to fishermen. These entities may also reorganize their debts to allow payment of all or some of them. The trustee oversees this reorganization until the debtor has repaid the obligations specified in his reorganization plan. A trustee also oversees the reorganization and repayment plan in a Chapter 13 bankruptcy, also called a "wage-earner" reorganization and usually filed by an individual with a job.
- The general duties of the bankruptcy trustee under the U.S. Bankruptcy Code are: to appoint and supervise private trustees in Chapter 7, 12, and 13 bankruptcies, or to serve as a trust in those instances when a private trustee is not available; to enforce the Bankruptcy Code, taking legal action if necessary; to inform law enforcement personnel when an investigation or criminal proceedings seem to be indicated; make certain bankruptcy estates are properly administered; to manage creditors' committees in Chapter 11 bankruptcies; and to oversee the applications and fees of professionals involved in bankruptcy cases.
Duties Related to Property
- The bankruptcy trustee is responsible for the property of the debtor. She must collect the property from the debtor or from whoever else has possession of the property, sell the property to convert it into cash, and give a comprehensive accounting for what has been done with the property.
Duties Regarding Distribution of Assets
- Once the debtor's property has been liquidated, the trustee's next duty is to distribute the property to the creditors. If the debtor has no property that is not exempt from bankruptcy proceedings, the trustee conducts a meeting of creditors, investigates the debtor's assets and exemptions, and files a report of what steps he has taken. This report is often the last action before the debtor is discharged from her debts. Property that is exempt from the proceedings may not be taken from the debtor to pay creditors, according to bankruptcy law. Exempt property could include the debtor's primary residence, personal property, and vehicle.