There are different types of bankruptcy. Specific chapters in the US Bankruptcy Code refer to each situation. Are you a company that is in debt? In this case, you may be able to file for bankruptcy under Chapters 7, 11 or 13, if you satisfy certain conditions. However, if you and your attorney have found that you should file a petition under Chapter 7, this article is worth reading, as it specifically underlines the responsibilities of a bankruptcy trustee.
In general, one of the primary purposes of bankruptcy is to help the debtor to discharge his or her debts and create an opportunity for a new start. However, a debtor isn’t eligible under Chapter 7 to discharge its debts, if the debtor is a partnership or corporation. To start a Chapter 7 case, you as a debtor should file a petition with the bankruptcy court of your area of activity. Besides the petition, the following should be attached:
- Schedules of assets and liabilities
- A schedule of current income and expenses
- A statement of financial affairs
- A schedule of executory contracts and unexpired leases
- Copy of the tax return statement
The Bankruptcy Estate
To understand the responsibilities of a trustee, first, we should understand the concept of a “bankruptcy estate.” When someone decides to file for bankruptcy, the bankruptcy estate is created under the bankruptcy law and it is made up of the debtor’s property. In fact, the bankruptcy estate is not a person, and that is the reason a bankruptcy trustee is needed. He or she oversees the bankruptcy estate and perform a set of duties in accordance with both the law and the circumstances of the case.
The Role of the Bankruptcy Trustee
After filing a Chapter 7 petition, the US trustee or the bankruptcy court appoints a bankruptcy trustee. He or she is primarily in charge of administering the case and liquidating the debtor’s nonexempt assets. This liquidation should be done in a manner to maximize the return to the debtor’s unsecured creditors. To accomplish this task, the trustee sells the debtor’s property. You cannot carry out the sale if the property is not free and clear of liens. The trustee may also try to recover money or property under his or her so-called “avoiding powers.” These powers include the following powers:
- Set aside preferential transfers to creditors within 90 days before submitting the petition
- Undo security interest and other transfers of property made before filing the petition
- Pursue non-bankruptcy claims (fraudulent conveyance, transfer remedies, etc.)
Thus, the bankruptcy trustee has various duties depending on the type of the case and does not do the same things for all cases.
Statutory Duties of the Bankruptcy Trustee
According to a handbook released by the US Department of Justice, the trustee’s primary statutory duties are defined in section 704 of the Bankruptcy Code.
“A chapter 7 trustee must be personally involved in carrying out the trustee’s duties and other fiduciary responsibilities. 28U.S.C. § 586(a). If the trustee is or becomes unable to be directly involved in the performance of these duties and responsibilities for any time period, the trustee must advise the United States Trustee immediately. (28 U.S.C. § 586(a), 28 C.F.R. § 58.3(b).’’
One of the main duties of a trustee is to make sure that the debtor filed the documents as required and on time. He or she should review the documents to find any evidence of abuse to provide the basis for a motion to dismiss the bankruptcy under section 707(b). 11 U.S.C. § 704. The creditors’ meeting should confirm the evidence. Besides many other responsibilities, the trustee should also make sure the individual debtors bring the following data:
- Personal photo identification
- Evidence of Social Security number
- Statement of current income (for instance, a recent pay stub)
- Statements of all bank, investment, and other financial accounts
- Documentation of monthly expenses (additional food and clothing expenses, education expenses, home energy costs, etc.)
As we have already mentioned, the trustees are responsible for developing and maintaining knowledge of the Bankruptcy Code, case law, rules, etc. The United States Trustee provides regional and local training for all trustees. The training may cover program standards and other requirements, which the trustee should perform. New trustees may participate in a mentoring program led by an experienced member of the panel.
While the above gives you the general idea about a Chapter 7 trustee, it is insufficient to get a clear understanding of a bankruptcy trustee and the whole bankruptcy process. You need to consult a bankruptcy attorney. Contact us for legal support and save both your time and money. Filing for bankruptcy does not mean you have already lost. You may even benefit from filing for bankruptcy if you file on time and with proper legal advice.