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What is the role of the Trustee in a Chapter 7 Bankruptcy Case?

770-609-1247 | Cumming Georgia Bankruptcy Lawyers

Whey you file for bankruptcy, a bankruptcy “estate” is created and the estate becomes the temporary legal owner of all your property. The bankruptcy estate consists of your property or your interest in other’s property. It is a legal entity separate from you, the debtor. Because the bankruptcy estate is not a person, it must be represented by a third person. Thus, when a Chapter 7 (or Chapter 13) petition is filed, the court appoints a bankruptcy trustee who administers the bankruptcy estate / case and performs various duties.

Who are the Chapter 7 bankruptcy trustee’s for Cumming, Georgia Forsyth County cases?

At the time this articles is being written, the three (3) main Chapter 7 bankruptcy cases filed for clients in Cumming, Georgia / Forsyth Count are (in alphabetical order by last name):

  • Betty A. Nappier
  • Albert Nasuti
  • Bradley J. Patten

If you live in Cumming, Georgia / Forsyth County, one of the above bankruptcy trustee’s will likely be assigned to your case.

Primary role of the Chapter 7 Bankruptcy Trustee

The primary role of a Chapter 7 trustee is to collect of the property of the estate (including all of your non-exempt property and your interest other’s property) and to distribute the property to creditors who have valid claims. You should understand that the primary role of the trustee is to liquidate the debtor’s non-exempt property, maximizing the return to the creditors. Although the trustee must be fair to both you and your creditors, it does not represent you or the creditors. The bankruptcy trustee represents the interests of the bankruptcy estate. It is important to keep this in mind and to know the duties and powers of trustees. Below are some of the basic duties and powers of a trustee in a Chapter 7 bankruptcy case.

Review your bankruptcy petition

When you file for a Chapter 7 bankruptcy, you must provide the court with a petition and other types of bankruptcy paperwork. In these documents, you will disclose the following personal and financial information about: your debts (a list of all creditors and the amount and nature of their claims), property, income (the source, amount, and frequency of your income), and the state of your financial affairs (including a detailed list of your monthly living expenses such as food, clothing, shelter, utilities, taxes, transportation, medicine, etc.). You will also likely be required to provide the bankruptcy trustee with a copy of your paystubs, tax returns or information about your assets to substantiate the information you provided in the bankruptcy paperwork. It is one of the trustee’s duties to review your bankruptcy petition and make sure the information on your bankruptcy papers is accurate. The trustee will compare the numbers on your bankruptcy papers against, for instance, the numbers on your paystubs and tax returns.

Conduct the 341 hearing/ trustee hearing

Approximately a month after you filed a Chapter 7 case, the bankruptcy trustee will hold a first meeting of creditors (also referred to as the 341 meeting named after the corresponding section of the Bankruptcy Code). 11 U.S. Code § 341. You must attend the 341 meeting and answer questions “under oath” regarding the information contained in your bankruptcy documents. 11 U.S. Code § 343. You will receive notice of the location of the meeting.

If your Chapter 7 case is a “no asset” case, meaning that all of your assets are exempt and there is nothing to distribute to creditors, there will be no further meetings. However, if there are (or likely are) non-exempt assets, the trustee may continue the meeting to another date and ask you to submit additional necessary documents.

Collect and sell your non-exempt property

The Chapter 7 bankruptcy trustee is also responsible for selling your non-exempt property. The trustee is paid by a commission on the debtor’s non-exempt property sold, in addition to a fee for examining the bankruptcy paperwork. Accordingly, the trustee has an incentive to carefully search and collect all of the debtor’s non-exempt property.

You may exempt a certain amount of your property covered by the federal and state’s exemption law. The particular assets you can protect will depend on your state’s exemption statutes. If all of your assets are exempt, the trustee will file a “no asset” report with the court, and there will be no distribution to creditors. If, however, your bankruptcy case is or appears to be an “asset” case, you must cooperate with the trustee collecting your non-exempt assets for distribution. If not, the trustee can ask the court to issue an order and enforce you to cooperate.

The trustee can give you an opportunity to buy back your non-exempt property at a negotiated price or to substitute it for your exempt property. Also, the trustee can “abandon” your non-exempt property if the property has little monetary value and/or it would be cumbersome to sell the property. Abandonment of your non-exempt property means that you will be able to keep the property.

The trustee may also set aside any preferential transfers or improperly executed security interests using its “avoidance powers.” 11 U.S.C.A. § 544 (O.C.G.A. § 18–2–75 under the Georgia law). For example, if you transferred property to someone else or paid back certain creditors you prefer over others before filing bankruptcy petition, the trustee may avoid the transfers and recover the money or property to distribute it among all your creditors. This situation, however, is unusual and most likely to happen where the debtor owes money to a family member or friend.

If the debtor is a business, the bankruptcy court may authorize the bankruptcy trustee to operate the business for a limited period of time, if such operation will benefit creditors and enhance the liquidation of the estate. 11 U.S.C. § 721.

Distribute your non-exempt property

Under federal law, which also applies to all Cumming, Georgia, Forsyth County and other Georgia counties, 11 U.S. Code § 726 governs the distribution of the property of the bankruptcy estate. Under the Section 726, there are six classes of claims and each class must be paid in full before the next lower class is paid. The sixth and last class of claims is the debtor which means that the debtor is only paid if all other classes of claims have been paid in full.  However, the vast majority or cases filed in Cumming, Georgia and surrounding areas are classified as “no asset” cases, meaning that there is no actual distribution of property because most cases do not have enough

May object to a Chapter 7 bankruptcy discharge

While not very common, the trustee’s primary duties also include it’s duty to object to a bankruptcy discharge where grounds exist. The court may revoke a Chapter 7 discharge on the request of the trustee if the discharge was obtained through fraud by the debtor, or if the debtor acquired property that is property of the estate and knowingly and frequently failed to report the acquisition of such property or surrender the property to the trustee, or if the debtor makes a material misstatement or fails to provide documents or other information in connection with an audit of the debtor’s case. 11 U.S.C. § 727(d).

As the duties above suggest, the bankruptcy trustee plays a big part in Chapter 7 bankruptcy cases. Therefore, it will be helpful for you to know the trustee’s duties and power before you file for a bankruptcy. After you filed, it is important that you cooperate with the trustee, while keeping in mind that your interest and the trustee’s interest may not always align. You are primarily concerned about retaining exempt property and discharging as many of your debts as possible. On the other hand, the trustee’s primary concerns are collecting all of the debtor’s nonexempt property, selling the property, and distributing the proceeds to the creditors.

Retaining an experienced Cumming Georgia bankruptcy attorney

If you are facing the filing of a bankruptcy in Cumming, Georgia or the Forsyth County area, call us at 770-609-1247 to speak with one of our experienced bankruptcy attorneys.  We have filed hundreds of cases for clients in Cumming, Georgia and surrounding areas.

 

 

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