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What role does the trustee play in bankruptcy cases?

“All the world’s a stage,” said one of Shakespeare’s characters in “As You Like It.”

The bard went on to say that we are all “merely players,” each with our “exits and entrances.”

Of course, a rich quotation like this can be applied in many different contexts. In this post, we will apply it to the role of the trustee in consumer bankruptcy cases.

 

The role of the trustee in such cases is a large one. After all, it is private trustees appointed under the U.S. Justice Department’s Trustee Program that administer both Chapter 7 and Chapter 13 bankruptcy cases.

Federal statutes authorize such appointments.

Private trustees are not classified as government employees. But they collaborate with the U.S. Trustee to implement the bankruptcy system put in place by Congress.

In Chapter 7 cases, the U.S. trustee appoints private trustees to a panel in each federal judicial district. In Wisconsin, there are two districts: the eastern district and the western district.

Once a private trustee is assigned to a Chapter 7 panel, individual cases are typically assigned on a rotating basis. The trustee will be responsible for such actions as:
• Collecting non-exempt assets of the debtor’s
• Liquidating non-exempt assets
• Distributing the proceeds from asset liquidation to creditors

The process for trustees in Chapter 13 cases is only slightly different. In Chapter 13 cases, the private trustees are sometimes referred to as “standing trustees.” This is because they have a standing appointment from the U.S. Trustee to administer Chapter 13 bankruptcy cases in a given geographic area.

The administrative actions taken by standing trustees include:
• Evaluating a debtor’s financial condition
• Making recommendations to the bankruptcy judge regarding approval of a debt repayment plan
• Collecting payments from debtors under such plans and distributing the funds to appropriate creditors

In short, bankruptcy trustees are significant players in the administration of the bankruptcy system.

Source: United States Department of Justice, "Private Trustee Information," Accessed July 7, 2014

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