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The trustee's role in bankruptcy proceedings

When a person files for bankruptcy protection, it is not likely that they will face their creditors in court. They may not actually appear before a judge as well. However, they will certainly sit down with a bankruptcy trustee. This post will briefly highlight the trustee’s role in the bankruptcy process and explain some of the questions debtors may be asked during their meeting.

Trustees in Chapter 7 Bankruptcies

Bankruptcy trustees are afforded their powers through federal law (11 U.S.C. §704). Essentially, they are responsible for administering the bankruptcy estate by collecting, liquidating and distributing non-exempt assets. They are also charged with maintaining the integrity of the bankruptcy system. They ensure that the process is completed in an expeditious manner so that creditors receive what they are owed without any undue delay. They also investigate the debtor’s financial status and report any abuses or instances of fraud to the proper authorities. Most importantly, they decide whether a discharge would be proper depending on the circumstances.

The trustee’s role differs depending on the type of bankruptcy involved. After a debtor files a Chapter 7 petition, they will be assigned a date for their “Meeting of Creditors”, also dubbed the “341 hearing”. During the meeting of creditors, the trustee will ask debtors a series of questions under oath relating to their petition.

What questions should you expect at the hearing?

Most are simply procedural inquiries to ensure the debtor understands their rights and obligations under the bankruptcy code. For example, the trustee will ask if the debtor included all debts in his or petition, or how they reached the values included for property they claim is exempt. Trustees may also probe further to root out any false information or intent to engage in bankruptcy fraud.

Most meetings take between 15 and 25 minutes. In some instances, the trustee may need additional information from the debtor (or the attorney) to complete the meeting. In these instances, the meeting may be continued.

For more questions about the trustee’s role and what to expect over the course of a bankruptcy, contact an experienced attorney.

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