The Basics: Who’s Who and What They Do in Your Bankruptcy Case

What are the roles of the debtor, the creditor, the bankruptcy clerk, the judge, the Chapter 7 and 13 trustees, and the U. S. Trustee?

 

It’s a lot easier to make sense of what’s going on in your case if you know who everybody is and what jobs they do.

The debtor is the person or business entity (corporation, partnership, limited liability company, etc.) filing the bankruptcy case. The debtor has to be qualified to file bankruptcy, and has a variety of duties, mostly involving completing and filing a number of documents with the bankruptcy court, attending a so-called “meeting of creditors,” and cooperating with the bankruptcy trustee and the U. S. Trustee. The debtor’s most important job is to be honest, first with his or her attorney, and then, through the attorney’s guidance, with the bankruptcy court and the other players in the process.

The creditors are the businesses or individuals to whom the debtor is obligated in some way on a claim. Most often that claim is in the form of a specific amount of money owed, a debt. But it can also take other forms, such as the unspecified amount of compensation for a personal injury from an automobile accident. Creditors’ claims can be secured by collateral or unsecured. They can be “priority” debts—ones that are legally favored in various ways, or just “general unsecured” debts that are not favored in any way. Creditors can be involved in the bankruptcy process in many ways, but often decide that doing so is not worth their cost or effort. However, creditors secured by collateral tend to get involved to find out how you intend to treat the collateral securing their claim. And those creditors who may feel like they have an emotional stake in your financial life (such as ex-spouses and ex-business partners) occasionally get involved in your bankruptcy case, whether it would financially benefit them or not.

The bankruptcy clerk is the person, together with his or her employees, who does the clerical tasks for the bankruptcy court. The clerk processes the papers that we file (electronically) to start your case and thereafter, maintains your bankruptcy file at court, mails out the official notices, and deals with most (but not all) of your case’s paperwork.  Your attorney interacts with the clerk and his or her employees, but you will not likely have anything directly to do with them. 

The bankruptcy judge is the person who ultimately has authority over your case, although you are not likely to meet him or her in any straightforward Chapter 7 or 13 case. They are part of the federal court system, but not full federal judges. Technically they are “judicial officers of the United States district court.” Unlike regular federal judges who are appointed for life, bankruptcy judges are appointed to terms of 14 years. If there is any significant dispute in your case, the judge resolves such disputes.

The Chapter 7 trustee is the private person (not a federal employee) assigned to determine if you have assets that are not protected (“exempt”) under applicable federal or state law. In the minority of cases in which there are some non-exempt assets, the Chapter 7 trustee would have the right to take possession of them, sell (“liquidate”) them, and distribute the sale proceeds to the creditors in the order specified by law. He or she presides at the so-called “meeting of creditors,” where he or she asks you questions about the documents filed on your behalf at the bankruptcy court and/or sent to the trustee, and about your financial life more broadly. Since the trustee is assigned to your case by the U.S. Trustee from a set (a “panel”) of pre-screened trustees by some secret manner, you and your attorney cannot predict or influence who will be your trustee. 

The Chapter 13 Trustee is the person assigned to oversee your Chapter 13 case. Unlike the Chapter 7 trustees chosen out of a “panel” of them, there is usually a single “standing Chapter 13 trustee,” or at most two of them, each with a staff of assistants, assigned to all the Chapter 13 cases filed in any particular area. This trustee has a number of roles, the primary one of which is to look out for the rights of your creditors, by trying to maximize how much they receive from you under the law. He or she, often through the assistants, reviews your proposed payment plan and other court-filed documents, presides at your so-called “meeting of creditors,” and can raise objections to your plan with the bankruptcy court if appropriate. Then once the plan is approved by the bankruptcy judge, the trustee receives your plan payments and distributes them to the creditors as specified under the terms of the plan, files motions with the bankruptcy court if you are not complying with the plan, and at the end of your case tells the court when you have successfully completed your plan obligations.

The United States Trustee is the enforcer within the bankruptcy system, someone you would generally not be hearing from (hopefully). As described on its website:

The United States Trustee Program is a component of the Department of Justice that seeks to promote the efficiency and protect the integrity of the Federal bankruptcy system.  To further the public interest in the just, speedy and economical resolution of cases filed under the Bankruptcy Code, the Program monitors the conduct of bankruptcy parties and private estate trustees, oversees related administrative functions, and acts to ensure compliance with applicable laws and procedures.  It also identifies and helps investigate bankruptcy fraud and abuse in coordination with United States Attorneys, the Federal Bureau of Investigation, and other law enforcement agencies.

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