1. Ensures co-operation
The Bankruptcy Trustee manages the case, and so the Debtor needs to co-operate with the Trustee, to ensure that the case goes smoothly, and that there are no hold-ups, or issues.
2. Liquidates assets
The Trustee liquidates (sells) the Debtor’s non-exempt assets to pay Creditors. However, there are many exemptions, which means that some valuable assets such as the home or car may not need to be sold.
In our experience, most Chapter 7 bankruptcy cases are “no assets” cases, which means that there are no assets to sell. We always make sure that our clients know whether or not all of their assets are exempt long before filing the case and getting a Bankruptcy Trustee involved. It is very rare that a person who needs to file bankruptcy has non-exempt assets.
3. Manages unsecured Creditors
If there is any property to be sold or payments recovered for the benefit of creditors, then the trustee must manage the creditors.
The creditors must file a document called a proof of claim with the court. The document says how much the debtor owes to the creditor, why the debtor owes the debt, and should include the contract which gave rise to the debt.
Unsecured Creditors must file their claims within 90 days after the first date set for the creditors meeting. Governmental creditors have 180 days to file.
The Trustee will make sure that these claims are valid and truthful.
4. Checks to see if there are assets
If there are no assets to dispose off, then there is no need for creditors to file proofs of claim.
If, like in most bankruptcies, the debtor doesn’t have any non-exempt assets, then there will be no money for creditors and they need not file a proof of claim.
5. Encourages Creditors to seek legal advice
Creditors will need to speak to their own bankruptcy attorneys to see what to do next if there are no assets to sell, and so no money to be distributed to them.
6. Raises additional funds
The Bankruptcy Trustee will also use their “avoiding powers” to try and raise additional funds through clawback lawsuits.
This will include investigating whether potential offences have been committed. These can be sales and property transfers made to others within 90 days before the petition.
A Debtor might sell their car and not inform their bankruptcy attorney, or sign their home over to a friend or family member to avoid it becoming part of their estate. The Trustee will find out, and this type of behaviour could lead to the Debtor being charged with Bankruptcy Fraud.
In some cases, the Trustee may allow a business to continue operating to generate revenue which can be used to pay Creditors.
7. Informs Creditors if additional funds have been raised
If additional funds are raised or assets found, then the Bankruptcy Trustee will let the creditors know and provide additional time for them to file their claims where necessary.
8. Determine the priority of each claim
Perhaps surprisingly, in a bankruptcy case the money raised from selling off the assets of the estate is not divided equally or proportionately between creditors.
Under Section 507 of the Bankruptcy Code, there are 6 classes of claims, and each class must be paid in full before the next lower class is paid. The Debtor’s bankruptcy attorney will explain more.
For example, child support and taxes get paid before credit card debts. This means that if there are $500 of non-exempt assets, $1,000 of child support debt, and $5,000 of credit card debt, then the child support gets all $500 and the credit cards get nothing.
It is possible that some creditors who are owed a lot of money will not get paid at all, which is why certain creditors lose out when a person or company goes bankrupt.
9. Pays Creditors
The Trustee makes sure that Creditors are paid their fair share, but no more, of the non-exempt assets.
10. Acts as negotiator
If there are any discrepancies or disagreements between the Debtor and Creditors, the then the Trustee will act as a negotiator to ensure that both parties are happy.
11. Ensures the case complies with bankruptcy rules and regulations
With so many bankruptcy rules and regulations, as well as exemptions and reasons for bankruptcy, it can be hard for everyone concerned to keep up with the rules and regulations involved.
Trustees, as well as Bankruptcy Attorneys for both the Debtor and Creditors, ensure that the case doesn’t fall foul of any rules or regulations.
Now you know what sort of things the Bankruptcy Trustee does in a Bankruptcy Case, you can be confident that our Bankruptcy Attorneys will help prepare your case, to do everything they can to eliminate you debts, so you can get on with your life.
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