If you have already or are thinking about filing for bankruptcy, you may have heard of a bankruptcy trustee. Many people don’t know or understand who a trustee is or what there purpose is in a bankruptcy.
The simplest answer, is a bankruptcy trustee manages your bankruptcy estate. Once you have filed for bankruptcy, the Court assumes control of your debts and property not protected by your Kentucky or Federal exemptions. A trustee is appointed to your case by the Court. The job of the trustee is to see that your creditors are paid as much as possible. This person will thoroughly review your paperwork, particularly the assets you have in your possession and the exemptions you wish to claim. The trustee can challenge any element of your case.
When a Chapter 7 Bankruptcy petition is filed, the U.S. trustee appoints an impartial case trustee to administer the case and liquidate the debtor’s nonexempt assets. If all the debtor’s assets are exempt or subject to valid liens. Then the trustee will normally file a “no asset” report with the court, and there will be no distribution to unsecured creditors.
Most Chapter 7 cases involving individual debtors are no asset cases. If the case appears form the onset to be an “asset” case, creditor have a certain amount of time to file proof of claim. In the typical no asset Chapter 7 case, there is no need for creditors to file proofs of claim because there will be no distribution. If the trustee later recovers assets for distribution to unsecured creditors. Then the Bankruptcy Court will provide notice to creditors and will allow additional time to file proofs of claim.
Commencement of a bankruptcy case creates an “estate.” The estate technically becomes the temporary legal owner of all the debtor’s property. It consists of all legal or equitable interests of the debtor in property as of the commencement of the case. Including property owned or held by another person if the debtor has an interest in the property. Generally speaking, the debtor’s creditors are paid from nonexempt property of the estate.
The primary role of a Chapter 7 trustee in an asset case is to liquidate the debtor’s nonexempt assets in a manner that maximizes the return to the debtor’s unsecured creditors. The trustee accomplishes this by selling the debtor’s property if it is free and clear of liens (as long as the property is not exempt). Or if it is worth more than any security interest or lien attached to the property and any exemption that the debtor holds in the property.
If you have questions about a Chapter 7 Bankruptcy you should contact a bankruptcy attorney to help you explore your options. If you are interested in filing for bankruptcy contact Rebecca Hurst of Hurst & Hurst Law at (859) 209-2101.