Each Chapter has a trustee with particular duties and there is also a U.S. Trustee who is called the “watchdog” of the bankruptcy process. Click here to go to the US Trustee’s website.
Chapter 7 & Chapter 13 Trustees
In a Chapter 7 and in a Chapter 13, the trustee is required to ensure that the creditors are paid to the full extent required under the bankruptcy law. The standard is called the “best interest of the creditors.” In a Chapter 7 the trustee is due possession of your property at the moment of filing the bankruptcy petition. Property is gathered into an “estate” and the non-exempt property is sold to pay creditors. In a Chapter 13 this process is mostly a “what if” process. What if this were a Chapter 7? What would creditors be paid? The trustee must determine this and must determine if you can earn enough income to pay that amount under your plan.
Chapter 11 Trustee: “the debtor in possession”
In a Chapter 11, you are the trustee. However, the creditors get to vote on your plan! So, being the trustee doesn’t mean that you do not have to ensure the creditors the amount required by law.
The U.S. Trustee
The U.S. Trustee monitors cases for abuse of the bankruptcy process especially with businesses. Discharge will be denied; although, the estate may be liquidated! The government may also bring criminal charges for certain abuses that the U.S. Trustee monitors. Actions that may result in U.S. Trustee intervention include the following: transfers of property with the intent to hinder, delay or defraud; concealing, destroying, or falsifying information related to the filing; perjury; and violating a court order. For a complete list see 11 US 727.