Bankruptcy Trustee and The United States Trustee and Their Respective Roles

The United States Trustee appoints the banking court Trustee and also oversees his work. The United States Trustee is an official of the US government and appointed on the authority of the US Supreme court. A Trustee in a bankruptcy case has an important role in both chapter 7 and 13 of the banking code. No Bankruptcy proceedings can be completed without a trustee.

In US law a Trustee is a person who has the legal authority to manage money or property as directed by a court. In bankruptcy law a trustee is an important person and  has a specific role. It must be understood that no bankruptcy proceedings can be complete without a trustee.

The 2 most important chapters of the US bankruptcy code as amended in 2005 are Chapter 7 and 13. In both chapters the Trustee has a specific role.

a)   The trustee is the person who has to establish whether a debtor filing for bankruptcy under chapter 7 has any assets to sell or settle to pay off the debts.

b)    The bankruptcy Trustee will also review claims of exemption and the debtor's entitlement to a discharge.

c)    The trustee is generally represents the interests of the creditors and is essentially a representative for all the creditors.

 The powers of the Trustee emanate from the United States constitution. He is however not an officer of the United States department of justice.  He is appointed by the United States Trustee (UST) who also reviews his performance at periodical intervals. Any complaint against the bankruptcy Trustee is heard by the US trustee.  A Bankruptcy trustee is mostly an eminent person and is not an official of the US government.

The Bankruptcy Trustee under chapter 7 will chair the first meeting between the creditors and the debtor. He will hear the objections if any and pass them on to the Bankruptcy judge to decide. He will also examine if there is any evidence of fraud and perjury in the case.

Trustees are paid a percentage of the money paid as filing fee. He will also draw compensation as a percentage from the value of the estate. In case the estate has zero value he will receive $60 per case.

In a chapter 13 case the role of the Bankruptcy Trustee has a slightly different connotation. Under this chapter the trustee is also a private individual appointed by the UST.  He carries out all the functions as defined under chapter 7   but in addition he also disburses the payments made by the debtor as per the plan. He will review this plan of payment and comment whether it is feasible or not.

As a general rule a single Chapter 13 trustee services all cases that come under the purview of his/her division or district. 

The United States Trustee in contrast to the Banking Court Trustee is a paid government employee. He derives his authority from the United States Supreme court. He appoints the trustees under Chapter 7 and Chapter 13 cases and also supervises their work. He can appear before the court at any time during the hearing for which he has a standing brief.  The '05 amendments have given the US trustee a more active role. Lastly a bankruptcy trustee must not only seem to be fair but be actually fair in all his dealings with  both the creditors and the debtor.  

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Guimo Pantuhan
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Posted on May 27, 2012