The U.S. bankruptcy system is designed to grant a fresh start to people who have fallen deep into debt through no fault of their own. Unfortunately, dishonest individuals and companies can and do abuse the system to gain a financial and/or material benefit.
One recent example is reality TV star Abby Lee Miller (of Dance Moms fame), who was sentenced to one year and one day in federal prison after concealing nearly $800,000 worth of income during her 2012 Chapter 11 bankruptcy.
Preventing such abuse and ensuring a fair outcome for all parties involved in a particular filing is the responsibility of the bankruptcy trustee.
The Bankruptcy Estate Explained
When you file for bankruptcy, all of your property becomes part of the bankruptcy estate, which is its own separate legal entity. Trustees are individuals who are appointed to oversee the estate and perform various legally-required functions connected to it. These duties vary greatly, depending on the circumstances of each case and whether the debtor filed for Chapter 7 or 13.
Chapter 7 Duties
Chapter 7 is a liquidation bankruptcy, so the trustee is required to take possession of your nonexempt property and do the following:
Negotiate with creditors
Oppose invalid creditor claims
Sell nonexempt assets
Distribute the sales proceeds to creditors
If your Chapter 7 trustee believes that you have failed to fulfill your duties, they are obligated to object to your discharge. They will also retain an attorney to represent the bankruptcy estate if litigation is ever necessary to obtain possession of assets or resolve a claim.
Chapter 13 Duties
In a Chapter 13 bankruptcy, you are allowed to keep the property in the bankruptcy estate in exchange for repaying your debts according to an approved plan. A Chapter 13 trustee will review your proposed repayment schedule first and, if necessary, file any objections with the court. After your plan is approved, the trustee receives your monthly payments and distributes them to your creditors.
To preserve the integrity of the bankruptcy process, your trustee will want to ensure that you are not hiding assets, spending money that should go to your creditors, or otherwise taking advantage of the system. They do this by:
Reviewing the contents of your petition for accuracy. This includes tax returns and other financial information.
Examining you under oath at a meeting of creditors, otherwise known as a 341 meeting. You are asked questions about assets, income, taxes, and other concerns.
Examining transactions. Those that technically violate bankruptcy law can be set aside to increase the amount available to creditors from the estate.
The bankruptcy trustee focuses on ensuring an orderly bankruptcy process for you, the court, and your creditors. If you have questions about the duties of a bankruptcy trustee or the bankruptcy process in Oklahoma, contact David Sisson today. He will help you deal with potential issues and provide the guidance and advice you need to fulfill your duties and get your discharge.