U.S. Trustee, bankruptcy estate, bankruptcy trustee — these are all terms that are often used in relation to U.S. bankruptcy cases. Some of them might even seem like they mean the exact same thing. However, they mean very different things in a bankruptcy case. In order to keep it all straight, we’re going to go through it piece by piece with you. We’re going to talk about the U.S. Trustee, what a bankruptcy trustee does, how they handle your bankruptcy estate, and why a trustee is an integral part of any bankruptcy ruling.
Table of Contents
What Is a Bankruptcy Trustee
A bankruptcy trustee is someone who works on a bankruptcy case in conjunction with a judge. While the judge has the power to dismiss or finalize a case, the trustee is there to provide assistance on the clerical and administrative side. A trustee is assigned to each bankruptcy case in order to assure all information provided to the court is legitimate and that there is no fraudulent behavior taking place.
Bankruptcy trustees are independent individuals who are asked by the U.S. Federal Trustee Office to provide their assistance on any given bankruptcy case. In other words, they do not actually work directly for the federal government. They are simply asked by the bankruptcy courts to help them legitimize cases that come in. It’s the job of the U.S. Trustee Office to handle all cases of bankruptcy fraud. As such, outside bankruptcy trustees are often brought in to help. In addition, bankruptcy trustees are often lawyers or other individuals who are similarly familiar with federal law and bankruptcy law.
What Is a Bankruptcy Estate?
When a bankruptcy trustee is brought in on your case, they will take a look at your entire financial portfolio, and gather up all of your assets that could potentially be used to pay back creditors. This is called your bankruptcy estate. It’s the job of the trustee to take a detailed look at your bankruptcy estate and handle all duties assigned therein. The judge will make a ruling regarding your financial state and whether or not a discharge should be given. The trustee will then handle any and all assets in your bankruptcy estate that are up for liquidation.
Duties of a Trustee in Bankruptcy
In addition to being the sole person who is able to sell your assets and pay back the money to your creditors, a bankruptcy trustee is there to guarantee that no fraudulent activity is taking place under a given case. As we discussed above, bankruptcy trustees are often lawyers or other persons that are familiar with bankruptcy law. As such, they are experts in catching cases that contain fraudulent behavior, including hidden assets and income, false documents, and/or multiple cases being filed in separate states etc.
Chapter 7 Bankruptcy Trustee
In a chapter 7 bankruptcy case, the court is usually dealing with an individual who is unable to pay back the debts they have taken on. If they are able to pay back anything, it’s usually very little. In this instance, the trustee will likely have quite a small bankruptcy estate to capture, if anything at all. They will isolate the bankruptcy estate, they will sell it for the highest price possible, and they alone will pay back the creditors directly. This task is not handled by the judge or the court itself.
Just as with any bankruptcy case, the trustee will take a very detailed look through all of the paperwork associated with the case. They will examine all of the details provided to the court to ensure their validity. They want to make sure that all documents are filled in properly and that no information was accidentally or intentionally omitted. It’s fairly common for individuals to try and hide some of their assets in order to qualify for a chapter 7 case. Those who have steady income and are able to pay back some of their debt often qualify for chapter 13 instead of 7. This means, if the bankruptcy trustee finds assets of yours that weren’t surrendered to the court, your case is likely to be dismissed. You may also get charged with bankruptcy fraud, which would be a serious fine and even possible jail time.
Chapter 13 Bankruptcy Trustee
As for a chapter 13 case, individuals and businesses filing for bankruptcy usually have the means to pay back at least some of their debts, which means processes for this chapter will vary a little bit. Chapter 13 cases focus on reorganization of assets and coming up with a repayment plan. If it is necessary for some assets to be liquidated in order to fulfill debts, the bankruptcy trustee will take care of that. They may also aid in the examination of current assets alongside the judge. The judge will then come up with a repayment plan, usually lasting three to five years, and after that time the remaining debts will be discharged.
Just as we discussed with a chapter 7 case, the bankruptcy trustee will also take a trained eye to all documents to make sure nothing is falsified. For example, in a chapter 13 case, individuals may hide some of their income in order to avoid higher payments. The trustee will take a detailed look at all forms of income so that the judge can make a truly informed decision about what kind of repayment plan is appropriate and necessary. Of course, the same laws apply here, any falsified information or documents can and will be used against someone filing for bankruptcy, which may result in fines and jail time.
Although some of this information may seem intimidating, the bankruptcy trustee assigned to your case is truly there to make sure that everything goes as smoothly as possible. It’s their job to validate all assets and documents that come in, set up your bankruptcy estate, liquidate assets if necessary, and help close out the case quickly and seamlessly. They don’t want your case to be any harder for you and the courts than it has to be. They are the professionals and the experts in this field. So, put faith in your bankruptcy trustee that they will give the judge all the information they need to know in order to make the right decisions for your financial future.
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