At a certain point, your debts and obligations may become overwhelming, and bankruptcy may be the best option to get your financial life back on track. If you find yourself in this position, it’s crucial to understand the details of the bankruptcy process.
The bankruptcy process can seem daunting at first, but learning a few key concepts will go a long way to helping you intelligently assess your options. One such key concept is the role of a bankruptcy trustee in a consumer bankruptcy.
What is a bankruptcy trustee?
A bankruptcy trustee is an official who is appointed by the Department of Justice in a bankruptcy proceeding. The trustee’s role is to represent the estate of the debtor during the proceedings.
In practice, this means the trustee evaluates the debtor’s assets and recommends how those assets can be used to service the debtor’s outstanding debts. A bankruptcy trustee makes recommendations, but the final authority belongs to the bankruptcy judge.
The US government allows for three major types of bankruptcy. Chapter 7 and Chapter 13 are consumer bankruptcies, while Chapter 11 is commercial bankruptcy. The trustee’s exact role depends on the type of bankruptcy proceeding.
Chapter 7 bankruptcy
In a Chapter 7 bankruptcy proceeding, the trustee is responsible for disposing of any assets belonging to the debtor and using the proceeds to pay off their creditors.
Chapter 13 bankruptcy
In a Chapter 13 bankruptcy proceeding, the trustee assists the debtor in figuring out a payment plan while attempting to preserve some of their assets.
Chapter 11 bankruptcy
In a Chapter 11 bankruptcy proceeding, the trustee is usually helping a corporation to restructure its debts, assets and obligations.
In all cases, the bankruptcy trustee acts as an agent of the court to help resolve a bankruptcy case. While less powerful than the bankruptcy judge, the trustee is a significant figure in any bankruptcy proceeding.