What is a bankruptcy trustee? When you file for bankruptcy, whether Chapter 7 or Chapter 13, you will be appointed a bankruptcy trustee that will administer your case. The trustee is the person who reviews your bankruptcy case and look for possible fraud or other red flags. Another big part of their job is to make sure your creditors get as much money as possible.
Your trustee will be the person who reviews your paperwork in regards to your bankruptcy case. The documents you will have to produce for your petition include information about your income, what you owe, what property you may own, and the general state of your financial situation. The trustee will request pay stubs, tax returns, and other financial information, so they can verify the information you submitted on your petition.
After you file for bankruptcy, you will have to appear in court for a hearing in front of the trustee. Your creditors are also invited, but they rarely attend these hearings unless they believe you are hiding assets from the court. Your trustee will be the person who conducts the hearing and will ask you several questions while you are under oath about the information in your petition.
Your trustee will be the person who sells your property in order to settle your debts. Each state allows you to keep a certain amount of property, but if you own anything more than the exempt property, the trustee will liquidate it to pay your creditors. Your trustee decides what, if any, property needs to be sold to pay what you owe. If you do not own anything, the trustee will write a report saying there are no assets and that no distribution will be made to creditors. If property does need to be sold, the trustee has to sell it in such a way as to maximize what your creditors will receive.
The bankruptcy trustee also has to be sure you have not given property to someone in order to hide it. Another thing the trustee can do is void any transactions if it appears you paid back people you like, such as family members, without paying anything to your creditors. By voiding these transactions, the trustee can get the money or property back and sell it to distribute among all of the people you owe.
Your trustee is paid from the administrative fees you pay when you file for bankruptcy. If your fees are waived, they receive no payment. If no property exists to sell, the trustee does not receive any more payment. If assets are sold, their compensation is based on a sliding scale of the amount that was sold to make the payments to the creditors. You will not have to make any additional payments to the court or the trustee once your bankruptcy has been discharged.
While you may not like having a trustee, or what the trustee has to do, bankruptcy trustees are appointed to make your bankruptcy go as smoothly and quickly as possible. They do not want to make your life miserable, but to execute your bankruptcy.