Why is the Appointment of a Trustee Part of a Bankruptcy Filing?

The appointment of a trustee in bankruptcy cases is vital to protect the integrity of the Federal bankruptcy system, according the U.S. Department of Justice (DOJ), which is over the trustee program. The bankruptcy trustee serves different functions depending on the type of bankruptcy people file. For instance, the U.S. Bankruptcy Court has two personal bankruptcy options. A chapter 7 bankruptcy liquidates people debts. Thus, the chapter 7 allows people to eliminate their debts without repaying creditors. However, chapter 13, also called a wage earner’s bankruptcy, permits individuals in pay creditors over a 3 to 5 year period.

The Appointment a Trustee Serves As Administrator in Chapter 7 Bankruptcy

Since chapter 7 bankruptcy eliminates debts, a bankruptcy trustee ensures that bankruptcy filers have not defrauded the court. For example, make sure people haven’t transferred money or property to relatives or friends instead of including them in their bankruptcy cases. In addition, the trustee is responsible for selling non-exempt property bankruptcy filers must turn over and distributing the money to creditors.

The Trustee Serves as a Middleman between Individuals and Creditors in Chapter 13 Bankruptcy

For people trying to pay back their debts, the bankruptcy trustee serves as a middleman. In other words, they make sure that creditors receive the money they are owed. Thus, bankruptcy filers make monthly payments to the trustee during their 3 to 5 year repayment plan. The bankruptcy trustee then distributes the money to creditors.

The Trustee Has the Power to Dismiss Bankruptcy Cases

One of the bankruptcy trustee’s main duties is to keep track of payments made through the chapter 13 bankruptcy cases. If individuals don’t make payments, the trustee can petition the U.S. Bankruptcy Court to dismiss their cases. Also, the bankruptcy trustee can dismiss chapter 7 cases for fraud, abuse, ineligibility or perjury, according to the Moran Law Group.

People Meet the Bankruptcy during the Meeting of the Creditors Court Proceedings

All individuals—whether filing for chapter 7 or 13—must attend the meeting of the creditors. During the meeting, the trustee asks bankruptcy filers questions about their cases.

Seek Legal Advice about What a Bankruptcy Trustee Does

Anyone considering bankruptcy should consult a bankruptcy lawyer. The lawyer will explain the bankruptcy laws and determine which bankruptcy option is best for them. Also, a bankruptcy lawyer will prepare clients for the questions a bankruptcy trustee may ask during the meeting of the creditors.