What Does a Bankruptcy Trustee Do?

What is a Bankruptcy Trustee?

A Bankruptcy Trustee is an individual who is appointed by the United States Trustee’s Office, (a Division of the United States Department of Justice), to administer bankruptcy cases within a particular State and District. In Pennsylvania, there are 3 Bankruptcy Districts: The Eastern, Middle and Western Districts. In Chapter 7 cases the Trustees are appointed by the United States Trustee and are referred to as Panel Trustees. The Panel Trustee’s are generally attorneys who have considerable bankruptcy experience, normally have practices within the District and are appointed to cases on a rolling basis within a given geographic range. Chapter 13 Trustees are often referred to as Standing Trustees, there are generally fewer Chapter 13 Trustees, they tend to serve longer terms and have larger staffing needs due to the greater demands and workload in the administration of Chapter 13 filings. Like Chapter 7 Trustees, the Chapter 13 Trustees also serve under the auspices of the Office of the United States Trustee for the State and District in which they serve.

Bankruptcy Estate in Chapter 7 and Chapter 13 Bankruptcy

Generally speaking the Trustees are appointed to administer bankruptcy estates. In Chapter 7 and Chapter 13, a bankruptcy estate comes into existence when an individual, a husband and wife or certain type of business(es) file a Bankruptcy Petition. While we generally think of an estate as something that comes about when someone dies, there are certain similarities in that both a decedents estate and a bankruptcy estate consist of everything that is owned or owed, (assets and liabilities) as well as certain legal rights and remedies as they may relate to creditors and third parties. The main difference is that a bankruptcy filing involves a living person or existing entities estate. In bankruptcy this person(s) or entity is referred to as the “debtor.”

What is the Role of a Bankruptcy Trustee?

Whenever a debtor files bankruptcy, the Trustee assigned to the case is is said to “step into the debtor’s shoes.” This means that within the limits of the Bankruptcy Code the Trustee has the ability to take any action regarding the bankruptcy estate that the debtor would otherwise have. By way of example the Trustee could decide to bring a legal action against a third party even if the debtor did not want to pursue the action themselves. Within this same authority, the Trustee can also set aside certain transactions, avoid certain liens and object to the payment of certain creditors as well. Ultimately the determining factor will be whether the Trustee has reason to believe that assets are available to the bankruptcy estate that could be used for the benefit of estate creditors.

In a Chapter 7 Bankruptcy the Trustee sells any non-exempt property, if any, and utilizes the funds from the sale of those assets, to paying administration expenses and distributes the balance to the owed creditors. While Chapter 7 is referred to as “liquidation,” this designation is in many respects a misnomer, as the marked majority of Chapter 7 filings are what are referred to as “no asset” cases, as there are no “non-exempt” funds or assets to be distributed to creditors. In a Chapter 13 Bankruptcy sometimes referred to as “reorganization,” the Trustee is responsible for receiving the debtor’s monthly plan payments and distributing those payments in accordance with the debtor’s plan of reorganization. In Chapter 13 the Bankruptcy Trustee will act on behalf of the debtor to guarantee that both the creditors’ and the debtor’s interests are maintained in accordance with the bankruptcy laws, and will sometimes act as a mediator between the two parties interests.

Our Pennsylvania Bankruptcy Lawyers Can Help

The Chapter 13 Trustees in Pennsylvania often have different Rules and Procedures for their particular District and Office. Notwithstanding, All Chapter 13 Trustee’s in Pennsylvania are bound to act in accordance with the Bankruptcy Law as that law is reflected in both the Bankruptcy Code and the case decisions by the Judges of their District and of the higher level United States Courts. Consequently, it is always advisable to obtain legal counsel who is familiar with the Trustee(s) within your district.

Filing for bankruptcy can be a stressful time in someone’s life. Do not go through this process alone. For a free consultation about filing for Chapter 7 or Chapter 13 bankruptcy in Pennsylvania, contact the bankruptcy attorneys at Young, Marr & Associates at (215) 701-6519.