What Is a Bankruptcy Trustee? Role, Duties & What to Expect

A bankruptcy trustee is a neutral party who manages your case. They don’t work for you or your creditors.

Their role is to review your paperwork and oversee the case. They also handle certain financial matters according to bankruptcy law.

In Chapter 7, the trustee may sell non-exempt property. But most cases don’t involve selling anything.

In Chapter 13, the trustee reviews your repayment plan. They distribute your monthly payments to creditors.

Understanding the Bankruptcy Trustee’s Role

A bankruptcy trustee is a neutral third party who helps manage your case.

They don’t represent you or any particular creditor. Instead, they oversee certain parts of the case.

Trustees ensure everything follows bankruptcy law. They make sure creditors are treated equally.

There are two main types: Chapter 7 trustees and Chapter 13 trustees. Their specific roles differ, but both review paperwork and oversee the process.

Many trustees have legal or financial backgrounds. Some were bankruptcy attorneys before taking on the role.

That background isn’t required, though. Experience with bankruptcy law is what matters most.

How Trustees Are Assigned to Your Case

Bankruptcy trustees are assigned by the local U.S. Trustee’s office. That office is part of the Department of Justice.

Once you file your bankruptcy case, the court uses a blind rotation system. Trustees are assigned randomly to ensure fairness.

You’ll find out who your trustee is after filing. You’ll receive Form 309A with the trustee’s name and contact information.

The form also includes other important case details. Keep it handy for reference throughout your case.

Chapter 7 Bankruptcy Trustee Responsibilities

The Chapter 7 trustee plays a key role in your case. Their main job is reviewing your paperwork.

They look for property that isn’t protected by an exemption. They also make sure the rules are followed.

In most personal Chapter 7 cases, there aren’t any assets to sell. These are called no-asset cases.

Even then, the trustee still reviews your forms. They lead the meeting of creditors and file a report.

Once that’s done, the case moves toward discharge and closure.

Key Tasks of a Chapter 7 Trustee

Here are the typical tasks a Chapter 7 trustee handles:

• Review bankruptcy forms and financial documents
• Examine your property and exemptions
• Lead the meeting of creditors
• Manage the bankruptcy estate
• Sell non-exempt property (rarely happens)
• Recover certain payments made before filing
• Reclaim property given away or sold for less than value
• File a report if there are no assets

Reviewing Your Bankruptcy Forms and Documents

The trustee reviews all paperwork filed in your case. That includes bankruptcy forms, pay stubs, and recent tax returns.

They check for accuracy and consistency between documents. If something seems incomplete, the trustee asks for more information.

If they believe you’re hiding assets or committing fraud, they can refer your case. The U.S. Attorney’s Office may investigate.

Fraud accusations aren’t very common. Most cases proceed without any issues.

Examining Your Property and Exemptions

Exemptions are laws that let you protect certain property. You can keep your car, personal belongings, and some bank account money.

The trustee checks your property list and claimed exemptions. They verify everything is properly protected under the law.

If they think an exemption is used incorrectly, they can file an objection. A bankruptcy judge will then decide the matter.

Trustees must file any objections within 30 days. That deadline starts after the meeting of creditors ends.

Leading the Meeting of Creditors

The meeting of creditors is required in every bankruptcy case. It’s also called the 341 meeting.

The trustee runs the meeting and asks you questions under oath. They confirm your identity using a photo ID.

You’ll also need to show proof of your Social Security number. Creditors can attend and ask questions too.

In most Chapter 7 cases, creditors don’t show up. The meeting usually takes 10 minutes or less.

Managing the Bankruptcy Estate

The bankruptcy estate includes everything you own when you file. The trustee is in charge of this estate.

They can take steps to recover property that should be included. That might include money, personal items, or other assets.

Though it’s a common concern, Chapter 7 filers rarely lose property. Most items are protected by exemptions.

Selling Non-Exempt Property

If you own anything not protected by an exemption, the trustee can take control. They can sell it and use the money to pay unsecured creditors.

That can include a tax refund, extra cash, or valuable property. The trustee files a detailed report explaining how money was handled.

In reality, most filers don’t have non-exempt property worth selling. The trustee’s time and effort must be worth it.

Recovering Payments Made Before Filing

If you paid a specific creditor in the 90 days before filing, the trustee may act. Especially if it was a large or unusual amount.

They may try to recover that money. That ensures all creditors are treated fairly.

If the payment went to family or a close friend, the lookback extends. The trustee can go back 12 months.

Reclaiming Property Given Away or Sold Too Cheaply

If you gave away valuable property before filing, the trustee may get it back. The same applies if you sold something for less than its worth.

These are called fraudulent transfers. The goal is stopping people from keeping property out of bankruptcy unfairly.

Normal gifts don’t apply here. Birthday presents or holiday donations are fine.

Filing a No Distribution Report

Most Chapter 7 cases are no-asset cases. All your property is protected by exemptions.

Even in these cases, the trustee completes a full review. They run the meeting of creditors.

If there’s nothing to distribute, they file a Report of No Distribution. That lets the court and creditors know the case can move forward.

Will the Trustee Take Your Property or Money?

One of the biggest worries for people filing Chapter 7 is losing property. But the good news is most filers don’t lose anything.

Exemption laws protect things you need to live. Your car (up to a certain value), household items, and clothes are protected.

Even some money in your bank account is safe. When you file, you’ll list your property and choose exemptions.

The trustee reviews this to see if anything isn’t fully protected. If they find non-exempt property, they may ask for it.

They might offer you the chance to buy it back. You’d pay the non-exempt value into your case.

That’s fairly rare. It usually only happens if the item is worth enough to justify selling.

If you’re unsure whether something is protected, look at Schedule C. That form lists your claimed exemptions.

Property Received After You File

Some property you receive after filing may still be part of your estate. For example:

• Inheritances
• Life insurance payouts
• Divorce settlements
• Certain tax refunds

If you receive any of these within 180 days of filing, report them. You’re required to tell the trustee.

If they aren’t exempt, the trustee may collect that money. They’ll use it to help repay your creditors.

You haven’t done anything wrong. The trustee is just doing their job under bankruptcy law.

When the Trustee Wants to Take Something

If the trustee wants to collect or sell non-exempt property, they’ll usually:

• Ask for more documents after your 341 meeting
• Offer you the option to buy back the property
• Send a formal letter asking you to turn it over

If the item is sold, you may receive any exempt portion. For example, if your car is worth $6,000 and you have a $4,000 exemption, the trustee might sell it.

You’d receive the exempt $4,000 back. The rest goes to pay creditors.

It’s important to respond to any trustee requests promptly. Ignoring them can cause serious problems.

Chapter 13 Bankruptcy Trustee Responsibilities

Chapter 13 trustees have many of the same responsibilities as Chapter 7 trustees. They review your paperwork and ensure the case follows rules.

But there’s one major difference: Chapter 13 involves a repayment plan. The plan lasts three to five years.

The trustee plays a key role in managing that plan. They review the plan you propose to ensure it meets legal requirements.

Unsecured creditors must receive at least as much as they would in Chapter 7. Once the court approves the plan, the trustee acts as middleman.

You’ll send your monthly payments to the trustee’s office. They divide and distribute those funds to creditors.

The trustee also keeps track of your payments. They monitor whether you’re staying on track.

They may raise concerns if anything changes. Missed payments or major income changes require attention.

If you’re considering Chapter 13 bankruptcy to stop foreclosure or catch up on bills, speak with a bankruptcy attorney for free to review your options.

Understanding the Report of No Distribution

In most Chapter 7 bankruptcy cases, the trustee doesn’t find sellable property. These are called no-asset cases.

If your case falls into this category, the trustee files a Report of No Distribution. Most cases do fall into this category.

The report tells the court and your creditors there are no non-exempt assets. The trustee has completed their review.

Once the trustee files this report, there’s usually nothing more for you to do. If your discharge hasn’t been entered, it typically follows soon after.

The court will then close your case. You’ll receive a discharge notice in the mail.

Reading the No Distribution Report

The trustee’s report is a routine part of the process. It doesn’t affect which debts are discharged.

If you check your case docket, you might see a document titled Trustee’s Report of No Distribution. That appears a few weeks after your 341 meeting.

Don’t worry if some fields show “$0” or blank numbers. That’s normal.

It just means the trustee didn’t find any unprotected property to sell.

When the Trustee Doesn’t File an NDR

If the trustee does find non-exempt property, they won’t file a Report of No Distribution. Instead, they file a notice to let creditors know.

Creditors can submit a proof of claim if they want payment from the bankruptcy estate. That turns a no-asset case into an asset case.

Asset cases typically stay open a bit longer. The trustee needs time to sell property and distribute funds.

Why Trustees Ask Creditors to File Proof of Claim

In some bankruptcy cases, you might get a notice about creditors filing a proof of claim. That usually happens when the trustee finds non-exempt property.

A proof of claim is a form a creditor files with the court. It states they’re owed money and want to be paid.

The form includes the amount you owe and the type of debt. It also includes documents that back up the claim.

The trustee uses these forms to decide how to divide any available money.

Proof of Claim in Chapter 7

In most Chapter 7 cases, there aren’t any non-exempt assets. The trustee won’t ask creditors to file a claim.

But if the trustee discovers unprotected property, they may sell it. That includes cash, a second vehicle, or valuable collectibles.

They use the proceeds to pay your creditors. Creditors must file a proof of claim by the deadline to receive money.

Proof of Claim in Chapter 13

In Chapter 13 cases, proofs of claim are more common. The trustee is distributing money from your monthly repayment plan.

If a creditor doesn’t file a claim, they typically won’t get paid. That’s true even if you listed them in your bankruptcy paperwork.

How Bankruptcy Trustees Get Paid

If you’re filing bankruptcy, you don’t pay the trustee directly. But trustee fees can still affect your case.

They affect how much money goes to your creditors. In Chapter 13, they affect your monthly payment amount.

In Chapter 7, the trustee is paid a small flat fee. Currently that’s $60 for each case.

That fee is built into the court filing fee. You’re not paying it separately.

In most cases, that’s the only payment the trustee receives. If the trustee finds non-exempt assets that can be sold, they earn a percentage.

That percentage is based on money collected and paid to creditors.

In Chapter 13, the trustee is paid a percentage of your monthly plan payments. That fee covers the cost of managing your case.

It also covers operating the trustee’s office. You don’t pay this fee separately.

It’s built into the payments you make each month. There’s a cap on how much a trustee can earn from these fees.

Any amount beyond that goes toward operating expenses.

Filing a Complaint About Your Trustee

If you believe your bankruptcy trustee is acting unprofessionally, you can take action. You can contact your local U.S. Trustee’s office.

That’s the agency responsible for overseeing bankruptcy trustees. They handle complaints about trustee conduct.

Keep in mind that not every disagreement is misconduct. If the trustee is selling unprotected property, they’re doing their job.

That may be frustrating, but it’s not misconduct. The U.S. Trustee’s office steps in for serious concerns.

That includes unethical behavior, discrimination, or failure to follow procedures. Document your concerns before contacting the office.