When it comes to bankruptcy proceedings, many different individuals are involved in the process: the debtor, the creditor, often the debt collector, and, of course, the bankruptcy trustee.
However, many individuals fail to understand the role of the bankruptcy trustee. Below is some information to explain what role the trustee plays in all bankruptcy proceedings.
The Role of the Bankruptcy Estate
Before the role of the bankruptcy trustee can be understood, the bankruptcy estate must be understood, as the bankruptcy trustee maintains control over the estate. When a bankruptcy petition is filed, the “bankruptcy estate” is established.
This estate includes all of the debtor’s property and is considered separate from the actual bankruptcy debtor. The bankruptcy trustee also oversees the estate and ensures that property and debts are handled appropriately
The Role Of The Bankruptcy Trustee
What the bankruptcy trustee does depends largely on the type of bankruptcy being pursued. The role also depends also varies depending on the circumstances of the debtor as well as the types of creditors involved.
Chapter 7 Bankruptcy And The Bankruptcy Trustee
Chapter 7 bankruptcy is otherwise known as the liquidation bankruptcy. All of the debtor’s property and debts are accumulated and assessed, and at the end of the proceedings, the qualified debts are liquidated.
Therefore, the primary duties and powers the bankruptcy trustee holds include:
- Rounding up the debtor’s property;
- Receiving and reviewing the information submitted along with the debtor’s petition for bankruptcy, as well as creditor’s claims;
- The trustee is responsible for selling the bankruptcy’ estate property that is not otherwise connected to a secured debt;
- He or she is responsible for challenging claims of creditors, when and if it is appropriate;
- Once the estate property has been sold, the bankruptcy trustee distributes proceeds to applicable creditors;
- If grounds exist, the bankruptcy trustee is in charge of objecting to a bankruptcy discharge.
- The bankruptcy trustee also reports directly to the court on the progress of the bankruptcy, as well as any claims creditors may have.
Chapter 13 Bankruptcy And The Bankruptcy Trustee
Unlike Chapter 7 bankruptcy, Chapter 13 bankruptcy is referred to as a reorganization bankruptcy. The debtor keeps possession of the property during the bankruptcy, and the trustee works with him or her to come up with a repayment plan to handle these debts appropriate.
The duties of the trustee include the following:
- The trustee reviews all of the information submitted by the debtor with his or her bankruptcy petition;
- He or she also reviews all claims made by creditors, handling them appropriately;
- The trustee reviews the debtor’s proposed repayment plan;
- If changes are needed, he or she makes objections to the plan and makes needed changes;
- The trustee also receives or collects payments from the debtor under the repayment plan;
- The trustee then redistributes the payments to the creditors, as they are received.
Bankruptcy Trustee Compensation
How the bankruptcy trustee is compensated depends on the type of bankruptcy that is being filed. If the matter is a Chapter 7 bankruptcy, debts are paid off by liquidating property that is deemed nonexempt.
The trustee receives an initial payment under a flat administrative fee to oversee and review the case. This fee is normally paid from the debtor’s initial filing fee.
If the debtor requests a waiver of the fee, the trustee does not receive an administrative fee if that is approved. He or she will instead be paid from a commission from any nonexempt property sold to creditors.
If the debtor does not have any nonexempt property, he or she will only be paid via the administrative fee.
However, before the trustee can be paid at all, over the initial administrative fee, he or she is required to file an application with the court and notifying all interested parties.
Under Chapter 13 bankruptcy, since the trustee does not sell off the debtor’s property, he or she does not get a commission from selling any property.
Instead, he or she is allowed a percentage of the monthly payment plan as compensation. The percentage he or she is allowed depends on the trustee’s operating budget.
Contact Collins & Arnove Today
Facing a bankruptcy can be an intimidating process. We are here to walk you through it every step of the way. If you need assistance, Collins & Arnove can help you. To learn more, call 972-435-9738 for your free consultation today.