What does a bankruptcy trustee do?

Bankruptcy Lawyer Bryan W. Stone answers the question: “What are the pros and cons of bankruptcy?”


The bankruptcy process can seem opaque. Few people understand how filing for bankruptcy works and it can be hard to get reliable information from those who do know. This lack of information can have the unfortunate side effect of discouraging people who might otherwise benefit from bankruptcy from pursuing it. In an attempt to help demystify the whole process, let’s explore an aspect of the bankruptcy system that is likely unfamiliar to most people: the bankruptcy trustee.


Money Questions Charlotte Debt LawyerWhat is a trustee?


A bankruptcy trustee is appointed in almost every kind of consumer bankruptcy case. The trustee is given various powers and obligations and is tasked with acting as a neutral party, a kind of moderator between the debtor, the creditors and the court.


How is the trustee chosen?


The trustee in your bankruptcy case will be appointed by the regional office of the U.S. Trustee. Trustees are often bankruptcy attorneys, but this isn’t required. The trustee should have experience in business and finance, someone who can understand and dissect the complicated financial matters that must be dealt with.


Is the bankruptcy trustee paid?


Yes, the bankruptcy trustee gets paid a percentage of the bankruptcy filing fee. If there are no assets in the bankruptcy case, then that’s all the money the trustee will be paid. If there are assets that the trustee collects, then the trustee will receive a commission on the money collected and distributed to creditors. The commissions are based on a sliding scale


Who does the trustee represent?


The bankruptcy trustee is not your ally. To be fair, the trustee isn’t the ally of your creditors either. The bankruptcy trustee is instead the ally of your bankruptcy estate. When a bankruptcy is filed, the collection of assets and debts is known as the bankruptcy estate. It’s the trustee’s job to impartially manage this estate, collecting as much money as possible to pay creditors with valid claims.


What does the trustee do?


Exactly what the bankruptcy trustee does will depend on the type of bankruptcy being pursued and the facts at issue in your case. Generally, in a Chapter 7 case, the trustee will be tasked with gathering the debtor’s property for eventual sale. The goal is to round up as many assets as possible and then liquidate them to pay creditors’ claims to the greatest extent possible. The trustee is also required to challenge any claims from trustees that are suspicious and must distribute money to creditors that has been collected from the debtor. Finally, the trustee is the person who objects if the bankruptcy shouldn’t move forward at all, for instance, if there aren’t proper grounds for the filing.


In a Chapter 13 bankruptcy case, the trustee’s role is lightly different. Rather than spending time gathering and selling assets, the trustee instead must spend time constructing and reviewing the debtor’s proposed repayment plan. The trustee is also tasked with objecting if the plan has problems and then collecting and distributing money that is paid into the repayment plan.


If you are contemplating bankruptcy in the Charlotte area, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with legally sound advice for your particular situation.


About the Author

Kyle Frost Bankruptcy Lawyer Student loan attorneyKyle Frost joined Arnold & Smith, PLLC in 2013 where he focuses his practice on all aspects of civil litigation and bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.

Born and raised in upstate New York, Mr. Frost attended the University at Albany on a Presidential Scholarship, graduating magna cum laude with a double major in Political Science and Sociology.  He went on to attended Wake Forest University School of Law in Winston Salem, North Carolina.

Following college, Mr. Frost spent over a year teaching English in South Korea. He worked in a private school in Seoul developing curriculum, English programs, and educating both children and adults that were interested in learning a new language.

In his spare time, Mr. Frost enjoys homebrewing, fishing, and travelling.






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