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Chapter 7 Bankruptcy Trustee

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What Is a Chapter 7 Bankruptcy Trustee?

In a Chapter 7 bankruptcy filing, the court may appoint a trustee to handle certain matters for the debtor and the creditors. The trustee will often act as a mediator or a "go-between" for the parties when it comes to certain financial matters. In some cases the creditors themselves may appoint a trustee as needed.

What Actions Do Chapter 7 Trustees Perform?

Chapter 7 bankruptcy involves a discharge of some, but not all of the person’s debts. A chapter 7 trustee must:

  • Review the bankruptcy petition and filing claims
  • Question the filing person under oath
  • Liquidate certain assets (proceeds will go to the creditors)
  • Monitor transfers and security interests

Overall, the Chapter 7 trustee’s main role is to help with the liquidation of the person’s assets. This means that they will help to oversee the classification, cataloguing, and sale of the assets earmarked for liquidation. The trustee will then manage the incoming profits from the sale and reorganize them for distribution to the creditors.

Can Bankruptcy Trustees Be Held Liable for Violations?

Yes- bankruptcy trustees are subject to strict guidelines and laws. For instance, they must make all sales and transactions according to sound, reasonable business judgment. They must also be mindful when it comes to the handling of finances related to such sales. For instance, they aren’t allowed to keep the profits in their own personal bank accounts. Instead, they are to keep all of the funds in a separate account devoted solely for that purpose.

If the trustee is found to be in violation, they can be held liable for any losses. This includes losses caused to either the creditors or to the lender. A common example of a violation is where the trustee uses the funds for their own purposes and claims the amounts as their own. Criminal consequences can sometimes result from such violations.

Do I Need a Lawyer for Help with Chapter 7 Trustee Issues?

Chapter 7 bankruptcy claims can often be complex and can involve many different legal concepts. You may need to hire a lawyer if you need help filing for bankruptcy. Your attorney can explain how the laws work, and can also explain the role of the trustee in a Chapter 7 claim. Your lawyer can also be on hand if you need help filing a claim that involves a trustee issue.

Photo of page author Jose Rivera

, LegalMatch Legal Writer

Last Modified: 02-20-2014 12:54 PM PST

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