In Chapter 7 bankruptcy, a court-appointed trustee plays a crucial role in overseeing your case and maximizing what your creditors receive. While you might picture a judge presiding over your affairs, the trustee will actually be your primary point of contact and handle various tasks. The trustee is an attorney that has been appointed by the US Department of Justice to oversee your case and your assets. In my years as a bankruptcy attorney, I have found most trustees to be reasonable, respectful individuals. Some of their duties include:
- Scrutinizing Your Paperwork: The trustee reviews your bankruptcy petition and supporting documents, verifying financial information and ensuring everything’s accurate. Think of it as a thorough audit to safeguard the integrity of the process.
- Examining You at the Creditor Meeting: Roughly a month after filing, you’ll attend a meeting where the trustee questions you about your bankruptcy documents under oath. While creditors can also ask questions, they rarely attend unless they suspect hidden assets or want to challenge debt dischargeability.
- Managing Your Assets: The most significant job of the trustee is to identify and potentially sell non-exempt assets to generate funds for your creditors. However, there are safeguards. You get to keep “exempt” assets protected by state laws, and if you disagree with the trustee’s assessment, the bankruptcy judge will decide.
- Uncovering Hidden Payments: The trustee has the power to examine pre-bankruptcy transactions and recover preferential payments made to certain creditors within specific timeframes. This ensures fairness and prevents attempts to shortchange creditors before filing.
- Dealing with Liens: If you have secured debts with collateral like a car loan, expect the trustee to investigate. While the lien survives bankruptcy, improper documentation by friends or family lenders could lead the trustee to disregard it, potentially affecting their claim.
- Addressing Special Circumstances: Expect the trustee to inquire about unusual expenses or income discrepancies. They may contact you about these issues directly. If you have other unique aspects of your case that could raise questions, address them proactively before the creditor meeting to avoid potential complications.
Remember, the trustee prioritizes creditors’ interests, so consulting a bankruptcy lawyer is crucial to protect yourself. Understanding this dynamic and working cooperatively with the trustee can help navigate the Chapter 7 process smoothly.
