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What Does a Bankruptcy Trustee Do?

A hard thing for clients to understand is the role of the trustee appointed in their cases. Generally speaking there are three types of trustees involved in bankruptcy cases.

The United States Trustee's Office

The United States Trustee's Office is the government office charged with overseeing the bankruptcy process. The US Trustee is an arm of the Department of Justice. There are twenty-one regional offices across the nation. Each regional US Trustee's office has attorneys on staff assisting in the administration of cases in their regions. The US Trustee appoints standing and interim trustees to administer chapter 13 cases and chapter 7 cases, respectively. According to the US Trustee's Office mission statement:

"The United States Trustee Program is a component of the Department of Justice that seeks to promote the efficiency and protect the integrity of the Federal bankruptcy system. To further the public interest in the just, speedy and economical resolution of cases filed under the Bankruptcy Code, the Program monitors the conduct of bankruptcy parties and private estate trustees, oversees related administrative functions, and acts to ensure compliance with applicable laws and procedures. It also identifies and helps investigate bankruptcy fraud and abuse in coordination with United States Attorneys, the Federal Bureau of Investigation, and other law enforcement agencies."

Standing and Interim Trustees

Debtors are much more likely to be familiar with either standing trustees or interim trustees. Standing trustees are charged with administering chapter 13 plans for debtors and their creditors as well as making sure debtors are eligible to file under chapter 13. The standing Chapter 13 trustees review debtors' petitions, schedules and plans, to make sure the proposed plan is feasible. The Trustee also reviews creditors' proofs of claim and objects to claims if something is not proper about the claim. Debtors make their payments to the Chapter 13 trustee, who makes distributions to creditors in accordance with the Chapter 13 plan. At the end of the case, the standing trustee issues a final report in which it accounts for all monies received and paid during the pendency of the case.

Interim Trustees in Chapter 7 Bankruptcy Cases

Interim trustees operate differently than do standing trustees. The primary job of the interim trustee is to find and liquidate assets for the benefit of creditors. The interim trustee is also supposed to investigate and determine whether the chapter 7 debtor is entitled to a discharge. A standing trustee has many of the same powers, but focused more on debtors' proposed plans, their feasibility and overseeing the plan and making sure creditors get paid. If an interim trustee finds assets that are not exempt, the trustee will disburse funds to creditors on a pro rata basis and then file final reports as does the standing trustee.

Chapter 11 Trustee

Typically, Chapter 11 debtors file a bankruptcy as "debtor-in -possession" and run their own business in attempting to reorganize. Thus, there is no appointed trustee that oversees their case. The US Trustee's Office does oversee their operations on a limited basis, but the debtor in possession is left to run their own business. However, a creditor, the court, US Trustee's Office or the debtor may file a motion to have a Chapter 11 Trustee appointed to run the operations of the business and to file a plan of reorganization. Most of the time, but not always, the court, creditor or US Trustee's Office is not satisfied with the way the debtor in possession is conducting its business and seeks to have a Chapter 11 Trustee appointed to overtake operations and file a plan of reorganization.

Contact a NJ Bankruptcy Attorney

Contact an attorney in one of our New Jersey offices to discuss any bankruptcy issues that you may have. Along with representing primarily debtors, we have represented trustees in many cases. Our founding partner served as Standing Chapter 13 Trustee for 23 years in New Jersey.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.

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