The United States Trustee and bankruptcy: What is the trustee’s role?

Applying for bankruptcy via the Chapter 7 or Chapter 13 process presents both challenges and powerful opportunities for debt relief. The challenges include gaining an understanding of a range of financial factors as well as familiarity with a complex legal process.

Many potential bankruptcy applicants may be aware that the United States Trustee Program plays an important role in administration of bankruptcy cases. The Program is a part of the U.S. Department of Justice that promotes the efficiency and integrity of the Federal bankruptcy system, serving as an official "bankruptcy watchdog."

Trustees perform a variety of duties mandated by the Federal Bankruptcy Code with respect to oversight of the assets and property of the debtor, including:

  • Accounting for, collecting, liquidating and closing bankruptcy estates "as expeditiously as is compatible with the best interests of parties in interest"
  • Ensuring that debtors comply with their intentions regarding retention or surrender of property
  • Furnishing information about the bankruptcy estate and its administration to interested parties
  • Filing periodic reports on businesses of the debtor that are allowed to operate during the bankruptcy process
  • Providing notice regarding a debtor's domestic support obligations
  • Making final reports and filing final accounts with the U.S. Bankruptcy Court

The United States Trustee Program also has responsibilities regarding investigations of bankruptcy fraud or abuse, and works in conjunction with the FBI, U.S. Attorneys and other branches of law enforcement.

The U.S. Trustee typically appoints private trustees to handle specific duties in certain types of bankruptcies. For instance, in a Chapter 7 bankruptcy, a private trustee is appointed to administer a debtor's estate and distribute the liquidated proceeds to creditors. In the Chapter 13 bankruptcy process, the U.S. Trustee appoints a "standing trustee" to oversee fulfillment of the three-to-five-year repayment plan that has been confirmed by the U.S. Bankruptcy Court. Private trustees are also commonly appointed in Chapter 12 bankruptcies involving family farms.

While bankruptcy provides a path to financial freedom, potential applicants need to understand all of their rights and obligations. The challenges and rewards can be explained in a comprehensive discussion with a debt relief lawyer about consumer bankruptcy and other legal strategies. From the significance of the "means test" and the "automatic stay" to a full description of exempt assets under Minnesota bankruptcy law, gaining knowledge is the first step to a sound financial future.