Mokena Bankruptcy Attorney On The Role Of The Trustee

Many clients are confused by what the trustee does in a bankruptcy case.  Oftentimes, they refer to the trustee as the judge, which is incorrect.  The trustee is a court-appointed attorney or accountant whose responsibilities include verifying the debtor’s identity and administering the debtor’s bankruptcy estate.  The trustee is not a judge and must appear before the Bankruptcy Court for orders to carry out many tasks related to his job.

The trustee is vested with certain powers in the Bankruptcy Code.  Depending on whether the case is a chapter 7 or a chapter 13, the role of the trustee has different responsibilities.  In either case, the trustee is an integral part of the bankruptcy process.

In a chapter 7 case, it is said that the trustee steps into the debtor’s shoes.  This is what is known as a legal fiction, and it means that the trustee can do with the debtor’s property what the debtor can do – with certain limitations.  For example, if a debtor owns a house that has $50,000 after all costs of sale and exemptions are subtracted, the trustee could sell the home, pay the costs of sale and give the debtor her statutory homestead exemption.  The trustee then would pay the debtor’s unsecured creditors from the proceeds of the sale of the house.  The debtor could do the same thing, but by declaring bankruptcy and seeking the court’s protection, the debtor’s power to do this is transferred to the trustee by operation of law.

The role of a trustee in a chapter 13 case is more complicated.  Along with determining the debtor’s eligibility for relief, the chapter 13 trustee administers the debtor’s plan for her.  This involves receiving the debtor’s monthly payment, disbursing funds to creditors and ensuring that the debtor is complying with her obligations under the Bankruptcy Code while she is in her chapter 13 case.  The trustee monitors payments and disbursements throughout the pendency of the debtor’s case. 

In both chapters, the trustee must provide an accounting to the Bankruptcy Court of all funds received and disbursed.  The trustee is required to obtain a bond against any wrongdoing or errors he may commit in his role.  The trustee is entitled to payment for his services, but such compensation is reviewed by the Bankruptcy Court and is sometimes reduced.