Bankruptcy Trustee  What They Do

Just the Facts

Insider Info

dotAssume somebody owes you money, but the person cannot pay you back. Worse, the person ends up declaring bankruptcy.

Under the law, you have the right to get paid and a bankruptcy trustee will try to get you your money. The trustee would find out how much money you are owed and make sure you get as much of it as possible, as quickly as possible.

dotBankruptcy trustees also spring into action when businesses fail. They may sell them off to recover money for creditors. Or they may arrange for businesses to stay open until they can be sold or restructured. Generally, it depends on the kind of bankruptcy that has been declared.

dotThe Federal Bankruptcy Codes identifies four different cases of bankruptcy.

  • Chapter 7 -- liquidation of assets
  • Chapter 11 -- reorganization of assets
  • Chapter 12 -- family farm reorganization
  • Chapter 13 -- repayment

dotChapter 7 bankruptcies are the most common.

dotSince there are four different kinds of bankruptcies, there are four different kinds of bankruptcy trustees. Chapter 7 bankruptcy trustees handle Chapter 7 bankruptcies, Chapter 11 bankruptcy trustees handle Chapter 11 bankruptcies, and so on.

dotThe U.S. Trustees Office appoints trustees who handle Chapter 7, 12 and 13 bankruptcies.

dotCourts, not the U.S. Trustees Office, appoint Chapter 11 trustees.

dotAll Chapter 7, 12 and 13 trustees must undergo a background check -- either by the FBI or the Office of Personnel Management.

dotThomas Miller is a lawyer and bankruptcy trustee. He says people in the field need to be trustworthy. "A trustee handles a great amount of money," he says.

dotBankruptcy trustees must also post bond. The bond is necessary in case debtors fail to meet their obligations.

Most bankruptcy trustees are lawyers. Some handle nothing but bankruptcies. Others do the trustee work as part of a general bankruptcy law practice.

At a Glance

Try to make sure debts get paid

  • Trustees must figure out who the creditors are and how much they can be paid
  • The U.S. Trustee Program operates in 21 regions
  • Almost all bankruptcy trustees are lawyers