When one decides to file chapter 7 bankruptcy, very often what one thought was going to be a simple process can suddenly seem quite complicated. One of the main causes of confusion concerns the various departments and titleholders that one is probably never come across before. The purpose of this article is to define the role of the "case trustee" and the "US trustee." Two similar terms, but both have distinct roles to play.
The Case Trustee
This is usually a lawyer and is independently appointed at random from a panel of lawyers.
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In a chapter 7 bankruptcy you will first encounter your trustee at the meeting of creditors, otherwise known as a 341 meeting, which you have to attend by law and present details of your assets, income and expenses. Their job is to examine your financial position at this meeting and ask various relevant questions, depending on the case.
They also organise the sale (liquidation) of the debtor's non-exempt assets and distribute the proceeds amongst the creditors. It is not just physical assets that the case trustee may recover. If you have received property or money from a divorce, bequest or life insurance for example within six months of filing bankruptcy, these can be taken by the case trustee and distributed amongst your creditors.
There are also other types of payment the debtor may have made before filing for bankruptcy which may also be recovered by the case trustee. Given that the case trustee is paid a commission from the total sum of money raised, it is in his or her interest to recover as much as possible. However it should also be borne in mind those considering bankruptcy that over 93% of chapter 7 filing is are what are called "no asset" cases.
This is because all states have various exemptions which include basic home fittings for example, and the case trustee is not usually interested in trying to sell off low value items. It is therefore not usually the case that a debtor loses all their possessions. Whatever the trustee chooses not to sell it is yours to keep when the bankruptcy is discharged. However, as a side issue is worth noting that it is absolutely vital that you play straight with the case trustee and list all your assets exactly as they are, hiding nothing.
The US Trustee
The US Trustee is employed by the US Department of Justice. The head of the United States Trustee program is called the Executive Director and is appointed directly by the President.
One of the main duties of the US Trustee is to oversee the case trustees and ensure that all monies collected, and all property they receive from the debtor's estate is properly accounted for. They are also charged with dealing with fraud in a bankruptcy case by referring such matters to the US Attorney. The case is then generally dismissed and criminal proceedings taken against the debtor.
The US Trustee also plays an important role when it comes to the chapter 7 Means Test. Filing the means test prevents anyone from claiming bankruptcy under chapter 7. Their alternative is then either to drop the case, or claim bankruptcy under chapter 13. If the debtor feels they are able to commit to a chapter 13 repayment plan or they simply refuse, the US Trustee can decide whether or not to recommend that the court dismiss the bankruptcy.
In a sense, the difference between a case trustee and the US Trustee is that the US Trustee is perhaps a senior figure who oversees a great deal of the work carried out by the case trustee. When filing under chapter 7 bankruptcy, it is unlikely that you will actually meet a US Trustee.
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