A trustee in a bankruptcy case is an individual appointed by the courts to oversee and deal with a bankruptcy petition. The trustee is typically an attorney and is selected from a list of eligible trustees. This individual is trusted to be impartial and handle many responsibilities throughout the bankruptcy process. However, it is beneficial for your bankruptcy attorney to have an excellent rapport with your trustee. I have known most of the trustees in Massachusetts for over 30 years. What follows is a list of the responsibilities of a bankruptcy trustee. . .
- Reviewing legal documents. These legal documents contain your personal and financial information including your debts, property, income, and the general state of your financial affairs. It is the trustee’s job to review your bankruptcy petition and verify the information and calculations using your financial documents and other independent sources.
- Running a Hearing with you and your creditors present. During this hearing called the 341(a) meeting of creditors, any of your creditors are free to come and ask you questions regarding your debt. Reality is that few if any creditors ever appear at a 341(a) meeting. However, if they believe that you are hiding assets, creditors may attend, but usually, in such situations, it is easier for the creditors to let your trustee do the work. The bankruptcy trustee’s job is to conduct the hearing and ask you questions while you are under oath about the information contained in your bankruptcy documents. It is extremely important that you are completely upfront and truthful with your trustee. Your financial history is now an open book and there is no benefit derived from being anything less then forthright. I cannot emphasize enough that the anxiety of the 342(a) meeting is usually much worse then the reality.
- Liquidating Nonexempt Assets. Probably the most well-known role of the Chapter 7 bankruptcy trustee is selling the nonexempt assets of the bankruptcy debtor. If you own property above and beyond the amount allowed by your state, it is a nonexempt asset and the trustee may sell it to pay your creditors. However, for Chapter 7 bankruptcy trustees, the path of least resistance is to offer the debtor an opportunity to reacquire their nonexempt for typically some portion of its value.
- Avoiding Certain Transfers or Security Interests. The bankruptcy trustee also has certain powers to avoid any preferential transfers or improperly executed security interests. If you transferred property to someone else or paid back certain creditors you prefer over others (such as family members) before filing bankruptcy, the trustee may be able to avoid these and get the money or property back to distribute it among all your creditors.
A bankruptcy trustee can cause your bankruptcy case to wrap up quickly and without event or result in your case dragging on for a lengthy period of time. However, your bankruptcy attorney’s relationship with your bankruptcy trustee can be a significant factor in you having an uneventful bankruptcy.