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March 7, 2010

Who is the Chapter 7 Trustee and the Chapter 13 Trustee?

Filed under: — Barry @ 7:37 pm

The Trustee (usually Chapter 7 or Chapter 13 Trustee) is a professional (often an attorney or accountant) appointed by the United States Trustee’s Office.  The United States Trustee’s Office is a part of the United States Department of Justice… those people who prosecute criminals.  The Chapter 7 Trustee and the Chapter 13 Trustee is the Debtor’s adversary; they are not the Debtor’s friend.

The Chapter 7 Trustee’s job is to:

  • Collect the Debtor’s non-exempt assets;
  • Distribute those assets to the Debtor’s creditors according the priorities provided by the Bankruptcy Code;
  • Determine whether there are preferences or fraudulent transfers that can be recovered and returned to creditors;
  • Determine whether the Debtor is being totally honest or attempting to hide something;
  • The Trustee may bring a motion to dismiss a case for an abuse of the system, or deny a debtor a discharge, if that Trustee finds that there has not been total honesty, there is fraud, perjury, or that the Debtor is trying to hide something.  The trustee may refer the Debtor to the United State’s Attorney’s office for prosecution if believed warranted.

The Chapter 13 Trustee’s job is to:

  • In addition to the duties of the Chapter 7 Trustee, the Chapter 13 Trustee gathers the non-exempt property (that the Debtor does not intend to retain) and distributes it to the creditors;
  • Review the Plan for abuse and compliance with the Bankruptcy Code;
  • Collect the Plan payments; and
  • Pay the Plan payments according to the Plan.

How is the Trustee paid?

The Chapter 7 Trustee is paid either a flat fee ($60/Chapter 7 case in the Central District of California) plus a commission based on the value of assets non-exempt assets recovered.

In addition to the duties of the Chapter 7 Trustee and a small administrative payment, the Chapter 13 Trustee receives a percentage of every Plan Payment received and paid out.  In the Central District of California the Chapter 13 Trustee receives approximately 11% of every Plan Payment dollar.

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