Working With the Bankruptcy Trustee
What is a "bankruptcy trustee" and what do they do?

Working With the Bankruptcy Trustee

Filing for Chapter 7 bankruptcy means that you'll be dealing with a "bankruptcy trustee" who will be assigned to handle your case. The trustee's job is to gather all non-exempt property you own into the "bankruptcy estate" to determine what (if anything) can be sold and the proceeds distributed to your unsecured creditors. In most cases, there's nothing left — "no-asset" cases make up more than 90% of consumer chapter 7 cases — but the trustee will be looking.
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Updated: 2021-09-30
What is a 341 hearing (creditors meeting)?
 
How Chapter 7 Bankruptcy Works in your state

When you file for bankruptcy, a person called a "Trustee" is appointed to your case.

It's important to understand the role of the trustee and who he or she "works" for.

Although the trustee is appointed by the court, the trustee's job is to get as much property as possible to be sold and the proceeds distributed  equitably to your your unsecured creditors, according to "priority" rules — determining who gets paid first — under federal and state law.

Almost all of your dealings with the bankruptcy court will be with the trustee assigned to your administering your case, not the bankruptcy judge.

The bankruptcy judge is only there to rule on disputed legal issues and issue your "discharge" order — the piece of paper that officially cancels your debts upon completion of a successful filing — which is the ultimate goal of bankruptcy.

What does the Trustee do in a Chapter 7 case?

Bankruptcy Code § 323 states that the trustee is the representative of the "bankruptcy estate", with the capacity to sue and be sued.

The trustee's duties and obligations are defined by the Bankruptcy Code imposes upon a trustee:

  • Section 704 defines the statutory duties of the trustee in a Chapter 7 bankruptcy case and, under § 704, the primary duty of the trustee is to "reduce to money the property of the estate for which such trustee serves" that is: to "liquidate" the assets and distribute the proceeds to your creditors. (Note this the job in a Chapter 7 ("liquidation") bankruptcy is different than it is in a Chapter 13 ("pay over 5 years") bankruptcy. 
  • Other relevant duties include insuring that the debtor performs his or her intention (regarding secured debts) as specified in § 521(a)(2)(B) (See, debtor's "statement of intention" as provided in Form ____),
  • investigate the financial affairs of the debtor (see, "What is a 341 meeting?"),
  • and "if advisable, oppose the discharge of the debtor." (see "What kinds of debts can be discharged in bankruptcy?" and "Things that might make your bankruptcy case fail.")

How Are Trustees Paid?

Bankruptcy Code § 326 says that a trustee’s compensation is based upon a percentage of the property of the estate that is administered by the trustee. As a result, there is a financial incentive for a trustee to maximize the property of the estate. Consequently, discussions or disputes with a Chapter 7 trustee will mostly focus on what is property of the estate.

How Trustees Can Increase the size of the "Bankruptcy Estate"

The whole point of bankruptcy is to make sure that everyone gets their rightful share of the "pie" when there's not enough pie to go around. Or to put it an more legal way: to provide an orderly distribution of available assets ("the pie") to all creditors, based on the priority outlined in federal bankruptcy law. 

The job of the trustee is to make that "pie" as large as legally possible. What follows is a list of ways they can try to do that.

Undoing "Preferential Transfers" That You Made Before Filing

One tool the trustee has is the authority to undo what are called "preferential transfers" -- that is, money you transferred to someone else just before (generally up to 180 days before) filing bankruptcy.

Under this power, the trustee will be very interested in undoing any recent repayments of debts you made to your relatives or friends just before bankruptcy, as these are called a "preference."

The trustee can reverse these transactions (i.e. claw the money back) and reclaim it for the "bankruptcy estate" because, by repaying these people, you have "preferred" some people you owe money to over others -- and bankruptcy does not allow this.

Wiping out invalid liens on your property, to increase equity to be distributed to creditors

If you own a house with a second mortgage, or have several liens on your property, the trustee may look to "void" some of those liens, if possible, if it could increase the amount of your equity to the point that it is no longer fully protected by applicable homestead exemption laws. 

To find private trustees by State and chapter, follow the links below:

State-by-State List of Private Trustees by Chapter
State Private Trustees
Alabama (Note) Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Alaska Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Arizona Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Arkansas Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
California Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Colorado Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Connecticut Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Delaware Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
District of Columbia Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Florida Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Georgia Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Guam Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Hawaii Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Idaho Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Illinois Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Indiana Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Iowa Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Kansas Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Kentucky Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Louisiana Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Maine Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Maryland Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Massachusetts Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Michigan Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Minnesota Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Mississippi Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Missouri Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Montana Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Nebraska Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Nevada Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
New Hampshire Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
New Jersey Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
New Mexico Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
New York Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
North Carolina (Note) Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
North Dakota Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Northern Mariana Islands Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Ohio Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Oklahoma Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Oregon Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Pennsylvania Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Puerto Rico Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Rhode Island Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
South Carolina Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
South Dakota Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Tennessee Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Texas Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Utah Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Vermont Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Virgin Islands (U.S.) Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Virginia Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Washington Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
West Virginia Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Wisconsin Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V
Wyoming Chapter 7 Chapter 12 Chapter 13 Chapter 11/
Subchapter V

 

NOTE: Bankruptcy cases in Alabama and North Carolina are not under the jurisdiction of the United States Trustee Program. Questions regarding bankruptcy cases filed in the six judicial districts in those states should be directed to the Bankruptcy Administrator for the district where the case is pending. Contact information for the Bankruptcy Administrators is available on the federal judiciary's Web site at http://www.uscourts.gov/services-forms/bankruptcy/trustees-and-administrators.

Jurisdictional relevance: There are versions of this article for each State.
Select Your State:

You may also be interested in:

  • What is a 341 hearing (creditors meeting)?

    Everyone who files for bankruptcy must attend a 341 hearing, which is also called a "creditors meeting." The meeting is conducted by the bankruptcy trustee assigned to your case. During the Coronavirus, it. can be done by phone.

  • How Chapter 7 Bankruptcy Works in your state

    How Chapter 7 bankruptcy can help you cancel your debts, protect your exempt property, and stop bill collectors.

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