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The Trustee

Like all your creditors rolled into one, the Trustee is looking for money to satisfy your debts, even if there is none. The Trustee needs your documents in order to do the job right

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The Bankruptcy Trustee is a player sent in by the Federal Government (specifically, by the United States Department of Justice in Washington, D.C.) to act on behalf of your creditors (specifically, your unsecured creditors like credit cards and medical bills). The Bankruptcy Trustee also pays close attention to the bankruptcy rules, to make sure everyone in the game (including your creditors) complies and plays fair. If the Trustee thinks someone is violating the bankruptcy rules, the Trustee can cry foul and ask the Court (the judge) for a ruling.

Each of your creditors can represent itself in bankruptcy court and get its own lawyer. There are some that regularly have their own lawyers when they decide to take the field, like your mortgage company, your car loan creditor and the IRS, but in most cases they stay on the sidelines. Unless your play is against the rules or hurts them in some objectionable way, they typically don’t need to get actively involved and the Trustee makes sure nobody takes advantage of them with moves that break the bankruptcy rules.

In Chapter 7 bankruptcy, the Chapter 7 Trustee has the same three basic moves in every case:
  • Verify your identity
  • Make sure you answered all the questions in your papers
  • Verify your basic qualifications to file bankruptcy

In most cases, after the Ch 7 Trustee is done making these basic plays, the Trustee exits the field and you won’t go up against the Trustee again after that. If you have property that is not protected (exempt property is protected from the Trustee), the Trustee can take it from you, sell it and turn the money over to your creditors. Sometimes, the Trustee can make a play for property you transferred to someone else before filing or take money back from people you paid before filing. When the Trustee pays that money to creditors, the Trustee keeps a commission. If the Ch 7 Trustee doesn’t take anything from you or take anything back from anyone you dealt with before filing, the Trustee gets $60 and it’s game-over (that will be the extent of the Trustee's involvement).

Chapter 13

In Chapter 13 bankruptcy, the Chapter 13 Trustee has the same three basic plays as the Ch 7 Trustee, but in Chapter 13 you make a payment to the Trustee each month over three to five years and the Chapter 13 Trustee distributes your payment to your creditors according to your Chapter 13 plan. And the Chapter 13 Trustee also gets to keep a commission on payments to creditors.

The Trustee's Basic Moves

The bankruptcy Trustee verifies your identity by looking at your driver’s license or other government issued photo identification and your social security card. If you don’t have them, the Trustee will notify the Bankruptcy Clerk to dismiss your case. And it’s game over for you.

The bankruptcy Trustee reviews your papers and your answers and if anything is incomplete the Trustee calls you on it. You have a chance to correct it, but if you don’t, the Trustee will notify the Clerk and again you will lose by default.

The bankruptcy Trustee also reviews your basic financial documents, like paystubs, tax returns, bank statements, deeds and car titles, retirement account statements, divorce decrees and pending lawsuits you have against others, trying to find money that can be turned over to creditors.

You might think all your property is protected, the Trustee might disagree. You might think you can only afford $200 per month for your creditors, the Trustee might think you could pay $300. In general, the Trustee is looking for ways to get money to your creditors. The only money available will either come from selling your property that’s not protected, getting money back from people you’ve paid or transferred property to, or from your future earnings. The Trustee has only two reasons for making any plays beyond the basics: 1) to get money to creditors 2) to collect a commission. Nothing personal, it’s just a business decision.



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