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Bankruptcy Trustees

Bankruptcy Trustees and Administrators

If you are an individual consumer seeking debt relief through bankruptcy, you will be assigned either a trustee or bankruptcy administrator depending on the state in which you live. This individual will be in charge of handling your estate throughout the bankruptcy and has certain powers over your estate to make sure you are not committing fraud and that your creditors are treated fairly. Because of this it is important to be aware of any of these powers that could affect you.

United States Trustee Program

In every state but North Carolina and Alabama, the United States Trustee Program oversees the administration of bankruptcy cases. The program is an agency of the Department of Justice and headed by the United States Trustee, a federal official who enforces our bankruptcy laws. The main Trustee generally appoints separate trustees for the country’s different geographic districts who will handle the bankruptcy cases of that region.

United States Bankruptcy Administrator Program

North Carolina and Alabama have not adapted the U.S. Trustee Program and instead use the Bankruptcy Administrator Program. Unlike the Trustee Program that operates out of the Department of Justice, the administrator program is part of the judicial branch in these two states. However, the functions performed by the two groups are very similar.

Bankruptcy administrators generally establish and supervise a panel of private trustees who act as trustee in Chapter 11 bankruptcies and supervise other chapters of bankruptcy. It is somewhat confusing because these trustees are distinct from the U.S. Trustee, but their functions are much like the lesser trustees the U.S. Trustee appoints in the other 48 states.

General Role Of The Trustee/Administrator

Once you file for bankruptcy, your property becomes known as your bankruptcy “estate.” This estate is its own legal entity separate from you as the debtor. The trustee or administrator is a neutral third party who makes sure all assets are accounted for, oversees the payout of remaining debts, challenges any inappropriate or fraudulent claims by the debtor or creditors, and makes sure that creditors are treated fairly.

Trustees and administrators act in the public interest to prevent abuses in the bankruptcy system.

The major duties of a bankruptcy trustee and administrator include:

  • Recommending suspected criminal activity to the U.S. attorney and FBI for investigation
  • Appearing in district and circuit bankruptcy court on matters associated with bankruptcy cases
  • Reviewing and responding to statements regarding professional employment and compensation in bankruptcy applications
  • Reviewing and moving for dismissal of any case of abuse of the bankruptcy system
  • Pre-approving course programs for the required credit counseling and debtor education certifications all bankruptcy filers (with a very few exceptions) must complete
  • The Trustee and Administrator Programs work in coordination with government agencies such as the Internal Revenue Service, Federal Bureau of Investigation, and Department of Justice to detect fraud in bankruptcy cases.
Chapter 7 Trustee/Administrator Rights and Duties

In a Chapter 7, or “liquidation” bankruptcy, your assets that are not exempt from creditors are gathered and liquidated (sold or otherwise reduced to money). Your trustee or administrator will help hold the initial meeting of creditors and will investigate your assets, right to discharge any debts, and your claimed exemptions. They can challenge claims by you or your creditors that seem fraudulent. The trustee or administrator is also in charge of rounding up your non-exempt property, selling it to convert it to cash, and distributing it accordingly to creditors.

Chapter 13 Trustee/Administrator Rights and Duties

In a Chapter 13 “reorganization” or “payment plan” bankruptcy, your trustee or administrator maintains possession of your property throughout the course of the bankruptcy proceedings and primarily handles the payments to creditors. The trustee or administrator will appear at hearings related to your payment plan, advise you on non-legal matters related to the plan, and make objections to the plan as necessary. Your Chapter 13 trustee or administrator is also in charge of collecting payments from you pursuant to that repayment plan and distributing those payments to your creditors.

If you are considering filing for bankruptcy or are being accused of fraud by your trustee, it is important that you have the assistance of a skilled attorney experienced in that area of law. Bankruptcy can be an extremely complicated process, and fraud charges can be very serious and have a lasting impact on your life. The holistic nature of our practice at Arnold & Smith, PLLC lets us provide dedicated attorneys who protect clients’ rights in a wide range of bankruptcy, criminal and family law matters. Contact us today for a consultation.