The Role of a Bankruptcy Trustee in Chapter 7 Cases

Also known as liquidation bankruptcy, Chapter 7 is a type of bankruptcy that allows you to sell or liquidate nonexempt possessions to pay back creditors. If you qualify for Chapter 7, the court will appoint a bankruptcy trustee to oversee and administer the case.

A bankruptcy trustee has a range of responsibilities, from reviewing the bankruptcy petition and supporting documents to selling property and acting as your primary contact throughout the entire case.

If you are in a position where you are unable to meet your financial obligations and have accumulated significant debt that you are unable to pay, it is highly recommended that you contact an experienced bankruptcy lawyer who can address all of your questions and concerns about filing for Chapter 7 and the role of a bankruptcy trustee.

How Do I Know If I Am Eligible for Chapter 7 Bankruptcy?

Filing for Chapter 7 bankruptcy is the simplest, quickest, and most common type of bankruptcy. Chapter 7 allows you to regain control of your finances by having credit card debt, medical bills, personal loans, and other unsecured debt legally discharged by a bankruptcy court. However, to be eligible for Chapter 7 bankruptcy, you must meet a range of qualifications, including the following:

• You must complete a debt counseling course with an approved credit counseling agency within 180 days of filing.
• You cannot have filed for Chapter 7 bankruptcy within the past eight years.
• You cannot have filed for Chapter 13 bankruptcy within the past six years.
• Your average monthly income for the previous six months must be less than the median income for a household of a comparable size in your state, or you must pass a “means test.” This test examines your financial records, including income, expenses, and secured and unsecured debts, to determine whether you have enough disposable income to make partial payments to unsecured creditors.
• If the court finds that you are attempting to defraud creditors, the court may dismiss your case.

What Is a Bankruptcy Trustee?

Whether you are filing for Chapter 7 or any other type of bankruptcy, the role of a bankruptcy trustee is essentially the same: to hold and administer your assets in a particular way. While a bankruptcy trustee will sell non-exempt assets and distribute sales proceeds to creditors, a bankruptcy trustee has a range of other responsibilities during a Chapter 7 case, including the following:

• Review your bankruptcy petition and other documents. Once you file for Chapter 7, your bankruptcy trustee will thoroughly review the petition, the schedule, and all supporting documents that tell the court about your debts, assets, income, and intentions regarding property, contracts, and finances. You must provide the trustee with income verification, two years’ worth of tax returns, and any documents your trustee requests. Your trustee will ensure that your documents are accurate and that there are no signs of fraud or abuse.
• Handle the meeting of creditors. Also called the 341 hearing, this mandatory meeting occurs every four to six weeks, and you file for Chapter 7. The bankruptcy trustee will ask questions about your income and assets at this meeting. If your trustee determines that you do not have enough assets to sell to repay your creditors, they will likely state that you have a “no asset” case, and your trustee will file a report saying there will be no distribution to creditors. It is highly recommended that you and your bankruptcy lawyer contact the Chapter 7 trustee prior to the 341 meeting. This will allow asking questions and resolving issues before the meeting.
• A bankruptcy trustee will handle the sale of your nonexempt assets so that you can pay back your unsecured creditors. Exemption laws do not protect nonexempt assets.
• Reverse certain pre-bankruptcy property transfers. In some circumstances, a Chapter 7 trustee may have the authority to get property back that you transferred to someone before filing for bankruptcy. You are legally prohibited from hiding assets or favoring one creditor over another before filing for bankruptcy. However, if you do, your bankruptcy trustee will ensure the property is returned and fairly distributed among your creditors.
• Challenge defective security interests or liens. If a trustee believes that a lender’s security interest or lien is defective, they may be able to eliminate the lender’s interest in the property and sell it to help pay the rest of the creditors.

Who Appoints a Chapter 7 Trustee?

The United States Trustees appoint Chapter 7 trustees. While private trustees are not government employees, they work with the United States Trustee to ensure the efficiency and integrity of the bankruptcy system. Once a trustee has been appointed to the panel, Chapter 7 cases are generally assigned through a blind rotation process. The Chapter 7 trustee then collects nonexempt assets, liquidates those assets, and distributes the proceeds to creditors.

Our Tolland County Bankruptcy Lawyers at the Law Offices of Jason L. McCoy, LLC Assist Clients With Every Aspect of the Chapter 7 Bankruptcy Process

If you are filing for Chapter 7 bankruptcy and have questions or concerns about the process and the role of a bankruptcy trustee, do not hesitate to contact our Tolland County bankruptcy lawyers at the Law Offices of Jason L. McCoy, LLC. We will guide you through every step of the bankruptcy process and ensure your legal and financial rights are protected. To schedule a free consultation, call us today at 860-872-7741 or contact us online. Located in Vernon, New Haven, and Waterbury, Connecticut, we serve clients in Tolland County, New Haven County, and Hartford County.