Role of the Chapter 7 Bankruptcy Trustee
Author: David Romito
When a chapter 7 petition is filed, the U.S. trustee appoints a "disinterested" (that is, impartial) case trustee to administer the case and liquidate the debtor's nonexempt assets. Specifically, the trustee has the duty, under 11 U.S.C. §704(a)(1), to take possession of and sell all of the debtor’s property that is not exempt and use the sale proceeds to pay the unsecured creditors (that is, creditors who extended credit based only on an evaluation by the creditor of the debtor's ability to pay, as opposed to secured creditors, whose extension of credit was based additionally on the creditor’s right to seize collateral on default).
In most cases, however, the debtor has no assets above the statutory exemption limits (for example, the exemption limit for jewelry is ,350; for household goods, furnishings, and appliances it’s ,775), meaning that the debtor may "exempt", and therefore keep, all of his assets. If all the debtor's assets are exempt or subject to valid liens, the trustee will normally file a "no asset" report with the court, and there will be no distribution to unsecured creditors.
Most chapter 7 cases involving individual debtors are in fact "no asset" cases. But if the case appears to be an "asset" case at the outset, unsecured creditors must file their claims with the court within 90 days after the first date set for the meeting of creditors. A governmental unit, however, has 180 days from the date the case is filed to file a claim.
In the typical no asset chapter 7 case, there is no need for creditors to file proofs of claim because there will be no distribution. If the trustee later recovers assets for distribution to unsecured creditors, the Bankruptcy Court will provide notice to creditors and will allow additional time to file proofs of claim. Although a secured creditor does not need to file a proof of claim in a chapter 7 case to preserve its security interest or lien, there may be other reasons to file a claim.
The filing of a bankruptcy case creates a "bankruptcy estate." This bankruptcy estate technically becomes the temporary legal owner of all of the debtor's property. It consists of all legal or equitable interests of the debtor in property as of the commencement of the case, including property owned or held by another person if the debtor has an interest in the property. It is the trustee’s function to "administer" the estate by taking the debtor's nonexempt property, if there is any, and liquidating it, and then using the funds to make payments to all creditors who have properly filed their proof of claim.
The primary role of a chapter 7 trustee in an "asset" case is to liquidate the debtor's nonexempt assets in a manner that maximizes the return to the debtor's unsecured creditors. The trustee accomplishes this by selling the debtor's nonexempt property (along with any property having a value that exceeds the exemption claimed by the debtor on it) if it is free and clear of liens (or if it has a value that exceeds any security interest or lien attached to it).
The trustee may also attempt to recover money or property under the trustee's "avoiding powers." The trustee's avoiding powers include the power to "avoid" (that is, set aside) "preference" payments (that is, payments to creditors within 90 days before the petition or to "insiders" made within 1 year prior to filing), to undo security interests and other prepetition transfers of property that were not properly perfected under nonbankruptcy law at the time of the petition, and to pursue nonbankruptcy claims such as fraudulent conveyance and bulk transfer remedies available under state law. In addition, if the debtor is a business, the bankruptcy court may authorize the trustee to operate the business for a limited period of time, if such operation will benefit creditors and enhance the liquidation of the estate.
Understanding the role of the trustee, as well as the extent of his or her powers under bankruptcy law, is key to a successful Chapter 7 filing (that is, one that results in a discharge and with the debtor keeping all or as many of his assets as possible). It is vitally important to anticipate potential actions by the trustee and, wherever possible, to avoid the trouble those actions can precipitate for the debtor by proper planning before the Chapter 7 petition is filed.
Article Source: http://www.articlesbase.com/bankruptcy-articles/role-of-the-chapter-7-bankruptcy-trustee-734412.html
About the Author
David Romito is a Bankruptcy Attorney handling matters in Pittsburgh and the Western District of Pennsylvania. For more answers to your bankruptcy questions, please visit his website at Pittsburgh Bankruptcy Attorney .
Can someone explain me some of the things in BANKRUPTCY APPLICATION?
am filling Bankruptcy Forms for Chapter 7 and I do not understand some of the terms and what I should fill in them? For example:
OFFICIAL FORM 1 VOLUNTARY PETITION PAGE 2:
1) What is code 342(b) ?
2)What is consumers Debt?
.
SCHEDULE C PROPERTY CLAIM AS EXEMPT
What is the difference between 11 U.S.C.$ 522(b)(2) and 11 U.S.C. $ 522(b)(3) ?
SCHEDULE E CREDITORS HOLDING
What is Consideration, Contingent, Priority Claims?
SCHEDULE F
What is Non Priority Claims?
SCHEDULE G
What are Executory Contracts and Unexpired Leases?
OFFICIAL FORM 7 STATEMENT OF FINANCIAL AFFAIRS:
ITEM 6: What is Assignments and Receiversships?
ITEM 13: What is Setoffs?
OFFICIAL FORM 8
What IS 11 U.S.C. $722 and 11 U.S.C.$524(c)?
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Can a legal accountant charge you for assisting in completing and filing a bankruptcy claim?
We are in the process of filing for a bankruptcy. We made the mistake of paying a legal accountant to assist us in preparing the forms and filing it. When we went to our first meeting of creditors there were many serious mistakes. Fortunately our trustee continued our case to allow us to make the correct amends and we are now consulting a lawyer to help us do it correctly. What happens to the person who charged us? The trustee asked for all the information on this person. A lawyer told us this person was practicing law without the law license. Does this person get charged with a crime or what happens, I’m just curious.
what are the stipulations for filing an amended tax form?
My fiance is filing bankruptcy and just got notice that one of the creditors was granted the money he owes them and now his taxes are in danger. He claimed..head of household me and our son. I will be filing and was wondering if he could file and amended tax form and claim just himself, and I claim the rest? Also can they take his taxes due to credit debt?
Is debt settled after dismissing Chapter 13 bankruptcy case, income tax exempt?
I filed a Chapter 13 bankruptcy, then dismissed it when I was not able to get a helpful deal from the creditors. I was able to get enough money together to settle with them after the case was dismissed. I have received the tax forms from them claiming that the debt might be considered income. Since this was debt settled after the case was dismissed, is it consider taxable income?
My apartments complex is filing bankruptcy. What does that mean for me?
I got a letter in the mail from an attorney office stating the complex I live in has filed chapter 11. Actually it’s a copy from the US Bankruptcy Court “Notice of chapter 11 Bankruptcy Case, Meeting of Creditors, & Deadlines” Has the case number, tax Id # and Attorney’s name in Irvine CA.
There is a Proof of Claim form for me to fill out. They want to know if I have a claim. I don’t understand.
Does this mean everyone has to move out? What about my lease?
Thanks.
Yes. Under the new statutes and the rules of court, a non-lawyer has to file a form with the court disclosing all fees you paid them to prepare your petition or assist you, and also may be liable for any losses you incur.
So…to screw the creditor, you want him to file single, no dependents so his refund would be smaller?
Hi,
I’m sorry to say that to give you that answer would constitute legal advice, for which any attorney can get in trouble for giving you (unless they are admitted to practice in the jurisdiction in which you reside). You can however, try googling some of those terms and see if you can come up with your own answers. Big warning though- the new bankruptcy code is somewhat complicated (purposefully). You should think about saving the money and hiring an attorney or get a bankruptcy preparation service to do the filling out of the forms. They can’t give you legal advice, or be there in court for you, but they may save you “some” money. If you need amendments done, you will probably need to pay more. In general, if you are single and make $35,000 per year or more, you should talk to an attorney -in case you don’t pass the means test.
A Proof of Claim is to be filed if your apartment complex owes you any money. Clearly they don’t. It’s just a formality the court sends out to creditors, you’re not a creditor, the court clerks just followed their rote instructions to send it out.
A Chapter 11 is not a full bankruptcy as an individual would do…Instead, a Chapter 11 is a “reorganization” and the court sets up a payment schedule for them to repay their debts and chops off the interest so they can make payment.
It does not have anything to do with your lease. Your lease will continue as before.
If the Chapter 13 was dismissed, it is as though it never happened.