What is a Bankruptcy Trustee?

Filing personal bankruptcy is a life-altering decision that requires careful consideration and weighing of options. Gone is the stigma of filing for bankruptcy; in it's place is the understanding that sometimes people just need to start over. In fact, a record-breaking two million Americans filed for bankruptcy last year which means you're not alone.

If you decide to file for bankruptcy, you'll want to have some idea of what to expect and that includes knowing who the bankruptcy trustee is and what role they play in the entire bankruptcy process.

Regardless of whether you file for Chapter 7 or Chapter 13 bankruptcy, you'll have a trustee intimately involved in your case. Chapter 7 and Chapter 13 bankruptcy trustees are appointed by United States' Trustees. While United States' Trustees are government employees, Chapter 7 and 13 trustees are usually attorneys and accountants. You'd be well advised to realize and remember that the trustee assigned to your case represents your creditors (not you) and is looking out for their best interests.

Trustees appointed to a Chapter 7 bankruptcy case generally have a more limited role than they do in Chapter 13 cases. First, your Chapter 7 trustee will attend creditors' meetings (the 341) and ensure everything is going smoothly with your case. He'll also look at your list of assets (if you have any) to determine what assets are exempt from the bankruptcy proceedings.

If you have non-exempt assets, your trustee will oversee the process of selling them and distributing the proceeds equally among your creditors. Trustees in no-asset cases make only $60 for their work, although the National Association of Bankruptcy Trustees is hoping to pass legislation that will increase that fee to $100 in no-asset cases. In asset cases, the trustee earns that fee in addition to a commission from the assets that have been sold.

The bankruptcy trustee in a Chapter 13 case has a bigger role than he does in a Chapter 7 case as the trustee has a dual role with Chapter 13 cases. As we've already discussed, his goal is to represent and look out for the best interest of the creditors (again, not you). However, he's also responsible for reviewing your repayment plan and ensuring you have no difficulties following that plan. You send each month's payment to him and he will distribute the funds among your creditors. Unlike with Chapter 7 bankruptcy, you can generally keep your assets in Chapter 13 since you'll be repaying, in full or in part, your debt.


Ultimately, it's important to keep in mind that the bankruptcy trustee wants to recoup as much money as possible for the creditors. Those trustees who work on Chapter 13 bankruptcies earn a percentage of the money collected during the case.

Finally, there is the United States Trustee, of whom you'll likely never have dealings. The United States' Trustee appoints and monitors bankruptcy trustees. In addition, he recommends to the United States Attorneys and Federal Bureau of Investigation that legal action be taken against those suspected of bankruptcy fraud and abuse. In short, according to the United States Department of Justice, the United States Trustee is the "watchdog over the bankruptcy process".

Ultimately, the role the trustee will have in your specific case will be determined on whether you file for Chapter 7 or Chapter 13. Your bankruptcy attorney should be able to answer any questions and address any concerns you may have about the bankruptcy trustee. If you're filing pro se (do it yourself) be sure to remember who the trustee represents and seek advice from a legal professional if you need to.

Related Articles:


+   The ins and outs of chapter seven bankruptcy
+   How to coose a bankruptcy attorney
+   Is do it yourself bankruptcy the right option for you?
+   Find general information about chapter 13 bankruptcy