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The Bankruptcy Judge, U.S. Trustee, and Chapter 7 and 13 Trustees

January 16th, 2017 at 8:00 am

Your bankruptcy case makes more sense if you know the roles of the people involved, including the judge and the various trustees. 


The Bankruptcy Judge

A judge is assigned to each bankruptcy case. However, in both Chapter 7 and Chapter 13 cases you will not likely ever see him or her.

In a very straightforward Chapter 7 case, the judge actually has very little to do. He or she tends to get actively involved only if a dispute needs resolution.

In a Chapter 13 case, the judge is much more directly involved. The judge oversees the approval of your payment plan and resolves any disagreements about it. There are often other developments during the course of your case that the judge would need to adjudicate.

Bankruptcy judges are appointed to terms of 14 years. This is unlike regular federal district court judges who are appointed for life. Bankruptcy judges are technically just “judicial officers of the United States district court.” 

The U.S. Trustee

This is someone else who generally flies under the radar in most bankruptcy cases. This office is the mostly behind-the-scene enforcer within the bankruptcy system. Its website describes its role:

The United States Trustee Program is a component of the Department of Justice that seeks to promote the efficiency and protect the integrity of the Federal bankruptcy system.  To further the public interest in the just, speedy and economical resolution of cases filed under the Bankruptcy Code, the Program monitors the conduct of bankruptcy parties and private estate trustees, oversees related administrative functions, and acts to ensure compliance with applicable laws and procedures.  It also identifies and helps investigate bankruptcy fraud and abuse in coordination with United States Attorneys, the Federal Bureau of Investigation, and other law enforcement agencies.

Accordingly, an important job of your bankruptcy lawyer is to avoid you ever needing to hear from the U.S. Trustee!

The Chapter 7 Trustee

You will personally meet your trustee if you are filing a Chapter 7 case. That meeting—at the so-called “meeting of creditors”–will usually not last for more than 5 or 10 minutes.

The Chapter 7 trustee’s job is mostly to determine if you have any assets which are not “exempt”. This means not protected from your creditors. The trustee does this partly by presiding at your “meeting of creditors” about a month after you file your case. In most cases, everything you own IS “exempt.” So the trustee usually makes that determination, which largely ends his or her role in the case.

In the minority of cases in which some of your assets are not “exempt,” your Chapter 7 trustee will have a right to take possession of them, sell them, and distribute the sale proceeds to the creditors. This distribution is based on a schedule of payment priorities among the different legal categories of your creditors.

A Chapter 7 trustee is assigned to your case by the U.S. Trustee from a “panel” of local Chapter 7 trustees. Some trustees in that panel may be more aggressive about pursuing debtors’ assets than others. Your lawyer theoretically cannot influence which trustee you get, but there sometimes are tricks of the trade that can help.

The Chapter 13 Trustee

This trustee is closely involved in your case from its beginning to its end. Because there is usually only one “standing” Chapter 13 trustee assigned to any particular geographic area, your attorney will know in advance who it will be (unlike with Chapter 7 trustees).

The Chapter 13 trustee is usually assisted by a staff lawyer or two and a number of other employees. These people review the Chapter 13 payment plan you and your lawyer propose. The trustee or his or her attorney presides at your “meeting of creditors.” The trustee may raise objections to your payment plan with the bankruptcy judge.

Then once the judge approves a plan, the trustee receives your plan payments and distributes them to the creditors as designated under your plan. The trustee can also file motions at court if you do not make payments as required by your plan. He or she can raise other concerns with the court.

The trustee also tells the court when you have successfully completed all your plan requirements. Then the court can discharge (write off) your remaining debts and close your case.

The Chapter 13 trustee has a number of different roles, some of which are partly inconsistent. His or her task is to maximize how much you pay your creditors but at the same time genuinely wants you to complete your case successfully and to some degree may work with you to that end. Different Chapter 13 trustees juggle these conflicting roles differently. So talk with your lawyer about when you should treat your own trustee as a friend or as a foe.

 

Written by Staff Writer

January 16th, 2017 at 8:00 am

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