HandshakesFiling for bankruptcy protection can be a big help when you're overwhelmed with bills you can't pay, but someone has to make sure the process runs smoothly for both you and those you owe money to - your creditors. The trustee assigned to your case makes sure everyone follows the law correctly.

Bankruptcy Trustees are Appointed by the Federal Government

Two kinds of trustees are involved in every bankruptcy case. U.S. Trustees work for the Department of Justice, and they supervise the many Chapter 7 and Chapter 13 trustees who oversee individual bankruptcy cases. These are the ones you'll usually work with.

A Chapter 7 Trustee Oversees Liquidation

Chapter 7 makes your debts go away if you don't have enough income to pay them. Most people who file for Chapter 7 bankruptcy don't own much property free and clear of liens, such as mortgages or auto loans. If they do, however, the trustee is in charge of selling that property and using the proceeds to pay their creditors some of the money owed. If you still have debts after the trustee sells your property and gives the money to your creditors, you're generally not responsible for paying these debts.

A Chapter 13 Trustee Supervises Payment Plans

Chapter 13 bankruptcies are a little more complicated. When you file for Chapter 13 protection, instead of erasing your debts, you agree to a repayment plan. While you're paying your debts through the plan, your creditors can't harass you for payment, even though the amount of money they receive is usually less than they would have gotten if you had not filed for bankruptcy.

A Chapter 13 trustee is responsible for making sure your repayment plan is reasonable and that you're using all of your extra income to fund it. You make a payment each month to the trustee assigned to your case, and, in turn, the trustee divides that money among your creditors.

Bankruptcy Trustee Powers

Trustees have a lot of power, but they need the approval of the bankruptcy court before they can take certain actions. If you make any payments to your creditors during the month's right before you file for bankruptcy, the trustee can demand that those creditors give the money back so the trustee can make sure your other creditors get a share of it. This is part of any trustee's job.

If you make other more serious mistakes, the personal bankruptcy trustee can completely dismiss your bankruptcy case. To do something like this, however, the trustee must file a motion with the bankruptcy court and receive a judge's permission.

A Personal Bankruptcy Lawyer Can Help

The law surrounding the role of the trustee in personal bankruptcy is complicated. Plus, the facts of each case are unique. This article provides a brief, general introduction to the topic. For more detailed, specific information, please contact a bankruptcy lawyer.

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