Bankruptcy Trustee

Bankruptcy trustee summary:

• Bankruptcy trustees’ duties depend on the type of bankruptcy cases they are working on. 

• For a Chapter 7 bankruptcy, a bankruptcy trustee sells the items the court says the filer can’t keep, and then distributes the proceeds to creditors. 

• For a Chapter 13 bankruptcy, a bankruptcy trustee collects the filer’s monthly payments to distribute the money to creditors. 

Bankruptcy trustee definition and meaning

A bankruptcy trustee is a court-appointed person who manages bankruptcy cases. Bankruptcy trustees have specific duties they're required to carry out for different kinds of bankruptcies.

In a Chapter 7 bankruptcy, the trustee is responsible for selling the items that the court says the debtor (the person filing bankruptcy) can’t keep. Then they distribute the money to the creditors in the case. In a Chapter 13 bankruptcy, the trustee collects the debtor’s monthly payments and distributes the money to the creditors in the case.

Key concept: A bankruptcy trustee is the administrator for bankruptcy cases. The bankruptcy court appoints trustees, and those trustees can make recommendations about how a debtor's estate should be handled. Final approval for any decision-making related to a bankruptcy case rests with the bankruptcy judge. 

Duties of the bankruptcy trustee

Bankruptcy trustees oversee bankruptcy cases. What they do depends on the type of bankruptcy. For personal bankruptcy cases, that means Chapter 7 or Chapter 13. 

• In a Chapter 7 bankruptcy, you might be required to give up some of the things that you own (assets). For example, if you have multiple cars, you might have to give up all but one. Things you’re allowed to keep are called bankruptcy exemptions. Everything else is a non-exempt asset. The trustee's primary role is to sell those and distribute the money to your creditors. 

• In a Chapter 13 case, you don’t have to give up any of your assets. Instead, you’ll make a monthly payment for three or five years. It's the bankruptcy trustee's job to collect those payments and distribute the money to your creditors. 

The trustee can also make recommendations to the court about a debtor's bankruptcy case. 

For example, say you file Chapter 13 and commit to a three-year repayment plan but stop making payments after 18 months. Your bankruptcy trustee could recommend that your case be dismissed. It would ultimately be up to the bankruptcy judge to decide whether to follow through. 

Bankruptcy trustees are fiduciaries. That means they're required to act in your best interests at all times. If you believe a bankruptcy trustee has acted unethically or that a conflict of interest exists, you can ask the court to have a new trustee appointed to your case. 

Bankruptcy trustee and the meeting of creditors

The bankruptcy process has certain required steps, and one of them is the Section 341 meeting, or the meeting of creditors. You have to attend this meeting, and failure to appear could be grounds for your case to be dismissed with no debt forgiveness. 

It's the trustee's job to oversee this meeting for Chapter 7 and Chapter 13 filers. During the meeting, the trustee can:

• Review your bankruptcy petition to verify information about your debts, income, and expenses

• Ask you questions about your financial situation and any relevant matters that might affect the discharge of your case

• Test your understanding of the bankruptcy process

Creditors can attend this meeting but aren't required to. If creditors attend, they can also ask you questions. The trustee may ask for a continuance of the meeting if they feel additional information is needed for your case.