KY Bankruptcy Trustee
If you’ve considered bankruptcy, you’ve likely heard about the “trustee.” Just about every Chapter 7 and Chapter 13 consumer bankruptcy case involves a bankruptcy trustee who has various obligations that are specific to the circumstances. Because bankruptcy cases are handled in federal courts, it’s the government that appoints a trustee to represent the debtor’s estate in bankruptcy proceedings. Debtors have very little direct involvement with the bankruptcy judge. Rather, the case is a largely administrative process overseen by the trustee in accordance with the U.S. Bankruptcy Code.
The job of the trustee involves stepping in to manage the bankruptcy estate, which consists of all the debtor’s property from the moment the bankruptcy petition is filed. At that point, the property and the debtor become separate entities, and therefore the property needs a person in the form of a court-appointed official to handle the specific duties associated with it. One of the first things the trustee does is review the bankruptcy petition to make sure the information and calculations match up to the financial documents. The trustee then conducts a 341(a) meeting of the creditors, during which the debtor is asked questions under oath.
An important trustee duty in bankruptcies filed under Chapter 7 is to collect and sell the estate’s property. If a person has significant nonexempt equity, a major part of the trustee’s job in a liquidation bankruptcy is to sell the home and use the proceeds toward repaying creditors. While it can seem a little strange to have someone come in and take over the sale of something so personal, some debtors find it’s a huge relief to have another party swoop in and take care of it all.
The actual sale process is very similar to what it would be if a debtor were to sell the house himself, only in this scenario, every step needs to be acknowledged and approved by the court, including hiring the real estate broker and authorizing the sale once a buyer is found. The trustee is also responsible for notifying all parties of the intended sale and giving them an opportunity to object.
Often a house has liens against it, but in Chapter 7 bankruptcies, a court order allows the liens to attach to the proceeds of the sale, making it possible for the trustee to sell the home cleanly. The buyer gets a clear title, and any disputes among the lien holders, the validity of interest amounts, etc., can be sorted out in court afterward without delaying the sale. If there are no disputes, the lien holders are simply paid, previously claimed exemptions are disbursed, and what’s left is distributed by the trustee to other creditors. In the event that the bankruptcy estate includes vacant lots or some other piece of property with little value, the trustee will sell it at auction. In these instances, the buyer typically gets the property with any mortgages and liens still attached.
Additionally, the bankruptcy trustee has the power to dodge preferential transfers or improperly executed security interests. If property was transferred prior to filing, or if the debtor grew accustomed to paying back some creditors over others before actually filing for bankruptcy, the trustee may be able to get everything back in the interest of distribution among the creditors.
Different from liquidation bankruptcy, Chapter 13 is known as reorganization bankruptcy. Unlike in Chapter 7 where the sale of property is involved, debtors in reorganization cases keep their property while the bankruptcy is underway. In a Chapter 13 bankruptcy case, the trustee is mostly in charge of payments. He or she is tasked with reviewing the debtor’s proposed repayment plan and raising any necessary objections. Pursuant to the creation of the repayment plan, the trustee also is responsible for receiving and collecting payments from the debtor and then properly distributing them to the creditors.
Bankruptcy is a complex process in which trustees typically play a large role. Know what to expect and protect your rights. With over 35 years of experience in our community, the Fayette County bankruptcy lawyers at Bunch & Brock are committed to providing each of our clients with a high level of personal service and real solutions to financial troubles. If you are considering filing for bankruptcy or want to know more about the process, contact us today to schedule a free consultation. We will assess your situation, explain the rules and help you determine whether bankruptcy is right for your circumstances. Let us work with you to make the best plan for eliminating or repaying your debts. We encourage you to contact our office by calling 859-254-5522 or filling out this online form.