Minnesota Bankruptcy Roles: The Court and the Trustee

The procedural aspects of the bankruptcy process are governed by the Federal Rules of Bankruptcy Procedure (often called the “Bankruptcy Rules”) and local rules of each bankruptcy court. The Bankruptcy Rules contain a set of official forms for use in bankruptcy cases. The Bankruptcy Code and Bankruptcy Rules (and local rules) set forth the formal legal procedures for dealing with the debt problems of individuals and businesses.

The Role of the Bankruptcy Trustee

A trustee may be appointed to a bankruptcy estate. The trustee is a representative of the estate. The trustee has powers pursuant to statute.

The authority of the trustee mainly benefits unsecured creditors.

The trustee is supervised generally by the court, although the trustee performs his or her duties under the direct supervision of the U.S. trustee or bankruptcy administrator. A trustee will be appointed in each bankruptcy under chapters 7, 12, and 13 of the Bankruptcy Code. A trustee may be appointed in some bankruptcies under chapter 11 of the Bankruptcy Code also.

The bankruptcy trustee will analyze documents filed by the debtor, including the debtor’s petition and schedules. The bankruptcy trustee is entrusted with the duties of bringing action against debtors or creditors to recover property of the bankruptcy estate.

Chapter 7

Bankruptcy trustees in bankruptcies filed under chapter 7 of the Bankruptcy Code liquidate the nonexempt assets of the debtor to pay off debt to creditors.

Chapters 12 and 13

Bankruptcy trustees in bankruptcies filed under chapters 12 and 13 are similar to those in chapter 7 cases, but in chapters 12 and 13 the bankruptcy trustee also oversees the repayment plan of the debtor, including accepting payments from debtors and turning those payments over to the appropriate creditors.

Bankruptcy Courts

There is a bankruptcy court for each judicial district in the country. Each state has one or more districts. There are 90 bankruptcy districts across the country.

The bankruptcy courts generally have their own clerk’s offices. The court official with decision-making power over federal bankruptcy cases is the United States bankruptcy judge, a judicial officer of the United States district court.

The bankruptcy judge may decide any matter connected with a bankruptcy case, such as eligibility to file or whether a debtor should receive a discharge of debts.

Much of the bankruptcy process is administrative, however, and is conducted away from the courthouse. In cases under chapters 7, 12, or 13, and sometimes in chapter 11 cases, this administrative process is carried out by a trustee who is appointed to oversee the case.

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