24 Sep 6 Things You Need to Know About Bankruptcy Trustees and What They Do
When people fall on difficult financial times and consider filing for bankruptcy, they often don’t know much about the process. While you should always talk to a lawyer about any bankruptcy concerns you have (if you are in North Carolina, you can call us at 919-313-4636 to set up a free consultation), learning about what goes on during the process can be helpful.
In all bankruptcy cases, the bankruptcy court will appoint a trustee to supervise the process. The trustee is a lawyer who has specific duties, and acts as a sort of case manager. The specific duties the trustee have will differ slightly depending on the type of case involved, but they perform a similar role in all bankruptcy cases. Here are six things you should know about bankruptcy trustees and how they play a role in the bankruptcy process.
1. The trustee reviews your case.
To begin the bankruptcy process you have to file court papers with the appropriate bankruptcy court. These documents, known as the bankruptcy petition, include important details about the status of your finances and the basis for your bankruptcy claim. Once filed, the court will appoint a trustee to review all this paperwork. The trustee will, for example, go over your tax returns, income statements, and other information to make sure that the petition you filed accurately reflects your financial position.
2. The trustee manages your property.
Once you file for bankruptcy protection your property comes under the protection of the bankruptcy court. It’s the trustee’s responsibility to manage all that property, which is collectively called the bankruptcy estate. Even though the bankruptcy estate will stay in your possession until the trustee determines what to do with it, its up to the trustee to make sure that those assets are protected. For example, if someone damages your property during the bankruptcy process, it’s the trustee’s duty to collect damages or pursue those who owe you money.
3. The trustee conducts the meeting of creditors.
Under section 341 of the Bankruptcy Code, the trustee must conduct a hearing in which he or she asks the debtor questions under oath. This is known as a “341 meeting” or a “meeting of the creditors,” and typically takes place 30 to 45 days after a debtor files for bankruptcy. During this hearing the debtor must answer the trustee’s questions under penalty of perjury. These questions cover everything from the type of property the debtor owns, to questions about income, and about other facts related to the bankruptcy case. Creditors can also attend this hearing to ask the debtor questions, though creditors will rarely attend a 341 meeting.
4. The trustee evaluates creditor claims.
As part of the bankruptcy process, your creditors have to submit proof that you owe them money. It’s the trustee’s job to evaluate the claims the creditors file, and to raise objections if the trustee believes the creditors haven’t provided the necessary documentation or evidence. It falls to the bankruptcy court judge to determine if the creditor’s claims are valid, or of the trustee’s objection is correct, but the trustee can file an objection and asked the court to make a determination about the creditor’s claims.
5. The trustee liquidates non-exempt assets.
Chapter 7 allows debtors who are in financial trouble to stop any further actions their creditors might take against them. In return, the debtor allows the bankruptcy court, through the trustee, to take control over the debtor’s assets. It then becomes the trustee’s job to determine the value of those assets and sell, or liquidate, them to repay the creditors.
While some Chapter 7 bankruptcy case involves trustees liquidating assets, the majority of cases have no assets to speak of. Further, bankruptcy law categorizes different assets as either exempt or nonexempt property. The trustee is not allowed to sell assets that are exempt to satisfy creditor claims, but can liquidate nonexempt assets.
6. The trustee will review and administer your repayment plan.
Unlike a Chapter 7 bankruptcy, Chapter 13 bankruptcy doesn’t involve a liquidation of assets to pay back creditors. Instead, with a chapter 13 you and your creditors enter into a payment plan that will allow you to repay your debts, or a portion of those debts, over a period of years.
When you file your Chapter 13 repayment plan with the Bankruptcy Court, it’s the trustee’s job to review that plan. After submitting a repayment plan, as well as after the bankruptcy court approves any plan, the trustee will also act as the go-between between you and your creditors. Under the terms of your plan you will be responsible for paying monthly payments to the trustee, who will then distribute that money
to your creditors.
About the Law Office of James C. White
We represent individuals and businesses in Durham, Wake, Orange and surrounding counties in North Carolina Chapter 7, Chapter 11 and Chapter 13 Bankruptcies. We are both trial lawyers and bankruptcy lawyers and work on cases that involve serious financial injury. Our clients range from high-net-worth individuals and successful small to mid-sized businesses who have millions of dollars at stake to people who have lost their homes through foreclosure fraud to people facing overwhelming debt. We provide individualized service and attention to each of our clients, looking at their financial situation to see whether bankruptcy could help save their home or offer a fresh start. You can contact us to schedule a free consultation to talk through bankruptcy issues by calling us at 919-313-4636.