Who is Chapter 7 Bankruptcy Trustee and Where Does Trustee Come From? | MN Bankruptcy Attorney

Chapter 7 bankruptcy cases are the most commonly filed form of bankruptcy in the United States. Both individuals and businesses may file a Chapter 7 bankruptcy, if they can meet the requirements. Discharge, however, is only available to individual debtors.

Qualifying for Chapter 7 Bankruptcy

Individuals who qualify under what is called the “means test” may file a Chapter 7 bankruptcy regardless of the amount of debt of the individual. However, if the individual debtor, in the past one hundred eighty days, had a bankruptcy petition that was dismissed because the individual didn’t appear before the court or act in accordance with other court orders, or if the debtor voluntarily dismissed the case under certain circumstances, the individual debtor will not qualify for filing a Chapter 7 bankruptcy.

Additionally, every person who files a Chapter 7 bankruptcy petition must first complete credit counseling within the one hundred eighty days prior to filing the bankruptcy petition, absent emergency circumstances.

The United States Trustee

In Chapter 7 cases, the United States Trustee litigates issues that affect the integrity of the bankruptcy system. For example, the United States Trustee might:

  • Argue that granting the debtor a bankruptcy discharge would constitute a “substantial abuse” of the bankruptcy process.
  • Object to excessive fees requested by the debtor’s attorney.
  • Take action against unlawful practices by bankruptcy petition preparers–generally, non-lawyers who receive a fee to prepare a consumer debtor’s bankruptcy papers.

The Chapter 7 Trustee

The United States Trustee also appoints and supervises the Chapter 7 trustees who administer consumer debtors’ bankruptcy estates.

In most Chapter 7 cases, no assets are available for distribution to creditors.

However, if a Chapter 7 debtor has property that is not exempt from creditors’ reach under state or federal law, the trustee may sell that property and distribute the money to creditors. This is called “liquidation.” The debtor’s non-exempt assets are liquidated in order to repay creditors.

Exempt assets are protected from liquidated and are kept by the bankruptcy trustee. Exempt assets include basic necessities such as clothing and a reasonable homestead, but they also include small amounts of furnishings, jewelry, etc.

Appointment of the Chapter 7 Trustee

The United States Trustee appoints each Chapter 7 trustee to a panel for up to one year, renewable at the United States Trustee’s discretion; these “panel trustees” are then assigned to Chapter 7 cases on a blind rotation basis.

The United States Trustee supervises the panel trustees’ administration of individual debtor estates; monitors the trustees’ financial record-keeping; and imposes other requirements to ensure that the trustees carry out their fiduciary duties.

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