When a judge approves a bankruptcy, they typically appoint someone to serve as a trustee. Generally, this individual has experience working as an accountant or a bankruptcy lawyer. You may wonder, however, what the trustee's job is. Here are four things petitioners should know about the role of the bankruptcy trustee.
Administering the Process
Suppose a petitioner has obtained approval to start a Chapter 7 bankruptcy. This means the court wants to see the petitioner's disposable and non-exempt assets sold. The proceeds of those sales will go into a trust, and the trustee will subsequently conduct a proportionate distribution of the money to the creditors.
A trustee must arrange the sale of the assets. Using their best judgment, the trustee will determine if an auction or a brokered sale is likely to fetch the most money for each asset. They will also post notice of asset sales to encourage buyers to compete and maximize value.
In Chapter 11, 12, or 13 proceedings, the debtor makes payments on a restructured schedule. The trustee is responsible for transferring money from the debtor to the creditors.
Protecting the Creditors' Rights
The trustee has a legal duty to protect the rights of the creditors. If a debtor tries to hide assets during the bankruptcy process, for example, it's the trustee's job to catch the issue and intervene. From a debtor's perspective, this is one of the main reasons to hire a bankruptcy attorney. In extreme cases, not disclosing assets might be seen as fraud.
Making Adjustments on the Fly
In Chapter 7 cases, a trustee makes judgment calls about the disposition of the assets. If a debtor was living a lavish lifestyle on a small budget, they might only have one car that just happens to be a sports car. The trustee is authorized to sell the car and then give the debtor part of the proceeds to purchase a vehicle that's more practical.
Reporting to the Court
While a trustee is making all of these decisions, they also are recording them. Sometimes there is extreme misconduct, and the trustee will immediately report it to the judge.
However, most of the time, the trustee will simply keep a record of all the transactions. Once the process is done, they will inform the judge of what went down. The notification from the trustee also alerts the judge that it is time to consider the final discharge of the remaining debts.
For more information about appointing a bankruptcy attorney as a trustee, or working with a lawyer on your bankruptcy claim, contact a local law firm, like Martinez Law Firm.