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What Does a Trustee Do in Bankruptcy?

Posted By Allmand Law Firm, PLLC || 24-Sep-2013

What Does a Trustee Do in Bankruptcy?

A bankruptcy trustee helps administer the case while it proceeds through the court process. The trustee is actually a part of a U.S. Trustee program developed through the Bankruptcy Reform Act of 1978 under the Department of Justice through the Attorney General. Depending on which chapter is filed, the role of the trustee varies.

In Chapter 7 bankruptcy, the trustee may liquidate assets the debt surrenders to satisfy creditors. For most cases, the trustee may not have assets to liquidate if they are considered exempt. When a debtor has no assets to liquidate, they ensure the filing process is completed by reviewing related paperwork and petition details. They also may conduct the meeting of the creditors before discharge of debt is granted.

In Chapter 13 bankruptcy, the trustee collects monthly payment from the debtor to disperse to creditors. The trustee also conducts the meeting of creditors. For debtors in this chapter, the trustee makes sure any remaining income left over from paying necessary expenses (disposable income) is used in their Chapter 13 plan to help pay down debt obligations.

Some states may not have a trustee or the bankruptcy attorney acts as the trustee during the process. The trustee helps maintain fairness on both sides of the case (between the debtor and creditor) according to the bankruptcy code. It is also important to disclose pertinent details about your finances to your trustee truthfully. You can learn how to protect assets legally from creditors before you begin the filing process.


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