If you're planning on filing for Chapter 7 bankruptcy, it's important to know how the process works. When you file with the court, it will appoint a bankruptcy trustee to oversee and administer your case, acting as a neutral party that will work to protect the best interests of everyone involved; both you and your creditors. The trustee has many different duties and responsibilities, and knowing what they have to do can help you better understand what to expect if you file for Chapter 7.
What does the trustee do in your bankruptcy case? The answer: a lot. A bankruptcy trustee is designed to act as a third party who acts purely in the interests of everyone involved to help ensure any discharges are given based on fair terms and circumstances. To ensure this, your trustee receives a small fee for their services, as well as a commission based on a percentage of the assets sold, which gives them the incentive to closely scrutinize your property before allowing any debts to be discharged. Here are some of the things your bankruptcy trustee will do as part of your case.
- Review Your Bankruptcy Petition: When you file for bankruptcy, you'll need to submit a thorough, complete, and detailed petition, disclosing all of your financial affairs such as what property you own, what debts you have, how much income you make, and more. You'll probably have to prove your claims, which means you'll also have to submit things like pay stubs, bank statements, tax returns, and asset information. The trustee's job is to review these submissions and figure out if your claims are accurate based on all submitted information.
- Examine You as a Debtor: You'll be required to attend your 341 meeting of creditors about a month after filing for bankruptcy. Your trustee's job is to conduct this hearing and ask you questions about the information contained in your documents while you are under oath. If your creditors believe you are hiding assets, they'll use this opportunity to try to figure out whether or not you're doing so.
- Liquidate Your Assets: Selling your assets is an important part of the bankruptcy process. Whatever you cannot protect using exemptions is “liquidated” or sold off and the funds obtained are distributed to your creditors as part of the Chapter 7 process. The trustee's job is to make sure all exemptions are properly used and all rules are followed before initiating the sale of these assets.
- Protect Those Involved: If your creditors or trustee find that you might be trying to hide assets using illicit means, your trustee can overrule and avoid certain transfers, rendering them null and void in order to get the assets back and distribute them amongst your creditors. However, they can also protect you as a debtor—should a creditor have failed to properly place a lien on something, the trustee can avoid this lien and sell the property in question free and clear without any claims from a creditor.