What is the Role of the Chapter 7 Trustee?

Once a Chapter 7 bankruptcy case is filed, an impartial
case trustee is appointed by the office of the United
States Trustee. (In Alabama and North Carolina, the
trustee is appointed by the court). The primary function
of the Chapter 7 trustee is to administer the case and
liquidate your non-exempt assets. In most cases, your
assets are completely exempt and there is no property for
the trustee to administer. The trustee will liquidate your
non-exempt assets in a manner that maximizes the return to
your unsecured creditors. The trustee can also pursue
causes of action that you may have at the time your
bankruptcy case is filed. A common cause of action is one
to recover money or property that is owed to you.

The trustee also has strong avoiding powers. This allows a
trustee to set aside preferential transfers made to
creditors prior to your bankruptcy filing. This avoiding
power may result in proceeds being distributed to unsecured
creditors.

In addition to liquidating any non-exempt assets, the
trustee has the duty of making sure that you have complied
with the numerous bankruptcy laws that are enumerated
throughout the Bankruptcy Code.

The trustee is often a local bankruptcy attorney; however,
a trustee is not required to be an attorney. You can rest
assured that the trustee will be a person who is very
knowledgeable about Chapter 7, the court process and all of
the necessary procedures to administer a case.

The trustee is mostly interested in what property you own,
whether it can be exempted under the Federal or State laws
and whether or not it can be administered for the benefit
of creditors. The trustee has a vested interest in the
property because he is partially paid on commission.
That's right; the trustee may receive 25% of the first
$5,000.00 administered, 10% of any amount between $5,000.00
and $50,000.00, and 5% of any additional amounts
administered.

Many debtors wonder whether or not the trustee will want to
search their homes for property. Although this is
possible, it is highly unlikely. The trustee would have to
believe that the debtor was not being truthful in his
schedules or otherwise not complying with the trustee's
requests.

The Chapter 7 Trustee's Work

The trustee will review the petition and schedules that you
filed. He will review the exemptions to see if there is
any property that can be administered. He will check your
statement of intentions with regard to secured property and
to leases. At the meeting of creditors, the trustee will
investigate your financial affairs.

He will review your attorney's fees to see if they are in
compliance with local standards for fees. If the fee paid
by you was excessive, the trustee may bring a motion to
have those fees reviewed by the court. To the extent that
the fee is determined to be excessive, the court may order
cancellation of the fee agreement or order that a portion
of the fees be refunded to you.

He will check your state issued I.D. as well as your social
security card. If there is a problem regarding those
items, the trustee will report same to the United States
Trustee.

If you miss your required meeting of creditors, the trustee
may set a continued date or he may move to have your case
dismissed.

Don't be alarmed by what the trustee does and what the
trustee can do. In the majority of cases, the debtor's
dealings with the trustee are limited to the relatively
short meeting of creditors.


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David M. Siegel is the author of Chapter 7 Success: The
Complete Guide to Surviving Personal Bankruptcy. He is a
member of the American Bankruptcy Institute and currently
practices bankruptcy law in Chicago and its surrounding
suburbs. Additional information is available at
http://www.bankruptcy-lawyers-losangeles.com .