Bankruptcy Trustee
Bankruptcy trustee summary:
A bankruptcy trustee manages bankruptcy cases.
The trustee will run the meeting of creditors, during which the person filing bankruptcy answers questions under oath.
The trustee will check the paperwork you submit and make sure you’ve satisfied all the requirements of your case.
Bankruptcy Trustee Definition and Meaning
A bankruptcy trustee is the person appointed by a judge to administer the case. The trustee is involved in every step of the bankruptcy process, from checking documents to monitoring any repayment plans.
If you file for a Chapter 7 bankruptcy, the trustee will examine your finances and look for assets that could be sold to pay creditors. If you file a Chapter 13 case, the trustee will check your income periodically and is responsible for distributing your payments to your creditors.
Key Attributes of a Bankruptcy Trustee
Bankruptcy trustees are often accountants or lawyers, but they could also come from other qualified professions. You're unlikely to deal directly with the judge in a bankruptcy case, but you'll definitely speak with the trustee.
Their work varies depending on the type of bankruptcy you file. For example:
Chapter 7: This is also known as the liquidation bankruptcy because the court could sell some of the things you own and use the money to pay some of your debts. The trustee will manage that process, including figuring out which creditor will get what.
Chapter 13: This type of bankruptcy is about reorganizing your debt. You typically keep the things you own or sell them with the court’s approval. The trustee will review your repayment plan or even propose one. Once it's agreed, the trustee will monitor and collect payments, as well as report back to the court.
Most bankruptcy courts have trustees. They’re sometimes known as the watchdog of the bankruptcy system. They represent the interests of all stakeholders: the debtor (the person who owes money), the creditors (the people or companies who want to be repaid), and the public. In Alabama and North Carolina, they are called bankruptcy administrators, but they perform a similar role.
Bankruptcy trustees check for fraud
One responsibility of a bankruptcy trustee is checking for fraud. It's important that you provide accurate information to the bankruptcy court. If a trustee finds that you haven't declared all your assets, for example, your bankruptcy filing may be denied. You may even face fraud charges.
Bankruptcy trustees and the meeting of creditors
Another important function of a trustee is to run the meeting of creditors, or 341 meeting. Creditors are invited, but they rarely show up. Many of these meetings now take place over Zoom.
This is a required step in every bankruptcy filing. You must answer the trustee's questions under oath about your paperwork and financial situation. Failure to attend could cause your case to be dismissed.
Bankruptcy Trustee FAQs
What about bankruptcy as an option?
For some people, bankruptcy is a suitable option for debt consolidation. While your debts are consolidated via bankruptcy proceedings, there are long-term effects. A Chapter 7 bankruptcy filing stays on your credit report for up to 10 years from the filing date—a Chapter 13 bankruptcy stays on your report for up to seven years. Federal law, not California law, governs bankruptcy.
Bankruptcy can affect more than your credit report. It can also affect future employment. While your current job isn't usually affected, it may harm your chances of obtaining a new job. That’s especially true if the position involves handling finances, such as bookkeeping or payroll. There are better debt consolidation options than bankruptcy.
Is debt relief the same as bankruptcy?
Debt relief is similar to bankruptcy because it allows you to satisfy unsecured debt for less than the amount owed. However, there are differences.
Bankruptcy is a matter of public record. Debt settlement is a private process. Chapter 7 bankruptcy typically takes a few months, while debt relief usually takes two to four years. Chapter 13 bankruptcy takes three to five years. Debt relief and bankruptcy are similar in some ways. They can both result in you paying less than the full amount you owe.
However, note that about half of Chapter 13 bankruptcies result in full repayment, plus bankruptcy and attorney fees. That means those people might have paid less if they had not filed for bankruptcy. So if you don't qualify for Chapter 7 or you don't want to lose assets, debt relief might help you more than Chapter 13.
What hurts your credit more, debt relief or bankruptcy?
All significant derogatory events hurt your credit, and that includes bankruptcy, collection accounts, and debt settlement.
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