The Role of the Trustee
In Vermont, people who are interested in either restructuring the repayments of loans and other obligations, as well as those who want to discharge their debts, often consider bankruptcy procedures. Two of the most common types of bankruptcy we see are Chapter 7 and Chapter 13.
Regardless of whether you file Chapter 7 or Chapter 13 the court will assign an impartial trustee to review and administer your case. In general, trustees act as a representative to the creditors throughout the bankruptcy. The level of their involvement depends upon the type of bankruptcy a debtor files. No matter what type of bankruptcy is filed, the trustee will conduct a creditors’ meeting, also referred to as a 341 meeting. Every person who files bankruptcy is required to attend one of these meetings before moving forward. Afterward, the type of bankruptcy you file will determine the role of the trustee.
What is a 341 Meeting?
Before discussing the specific details of trustees, it is important for debtors to realize what a 341 meeting is, what goes on, and how it can impact their bankruptcy. These meetings are called 341 meetings because they are guided by Section 341 of the Bankruptcy Code. These meetings are generally held about three to four weeks after a bankruptcy case is filed.
These meetings are not judicial hearings. In fact, the judge overseeing your bankruptcy case is not able to attend the meeting. Instead, these meetings are conducted in conference rooms at local federal buildings and conducted by the trustee.
341 meetings are designed to provide trustees and creditors the opportunity to discuss information surrounding the debts and assets of a debtor. Creditors have the opportunity to question the debtor regarding what assets and liabilities they have, as well as, other matters related to their legal right to discharge their debts. These meetings generally last between five and ten minutes and they are typically audio-recorded.
Trustees in Chapter 7 Bankruptcies
When debtors file Chapter 7 bankruptcies, a trustee is appointed by the court to examine their assets. These people will review the types of property, debts, and other belongings that debtors have to determine if they are exempt from the proceedings.
Prior to meeting the trustee, we provide the trustee with various financial documents required under the local rules. The trustee reviews these documents, your bankruptcy filings and will meet with you and your counsel. At the meeting, the trustee administers the oath to debtors, verifies their identities by I.D. and verifies the debtors’ social security numbers. The trustee then asks about twenty routine questions and the meeting is often concluded within five minutes. The trustee can keep the meeting “open” and recall debtors to testify another day of there are outstanding questions or information to be verified.
In cases where all of a debtor’s assets are exempt, the case is referred to as a no-asset case. In no-asset cases your case is typically closed within 75 days of the first meeting of creditors. When debtors have nonexempt assets, their cases are referred to as “asset cases”. The Trustee will determine if it is worthwhile to liquidate the assets and if he or she does so, the case will be held open to administer the asset. The trustee will have to report to the court what assets he or she collected and how the money will be disbursed. Even though your case remains open for the administration of an asset, the discharge will still issue in a timely manner.
Trustees in Chapter 13 Bankruptcies
Trustees tend to play a far greater role in Chapter 13 bankruptcies than they do in Chapter 7 bankruptcies. In Chapter 13 bankruptcy cases, trustees are required to play a similar role to trustees in Chapter 7 bankruptcy cases. In addition to the services provided in Chapter 7 cases, Chapter 13 trustees can either recommend or oppose confirmation of the plans and the administration of payments under Chapter 13 repayment plans. Debtors are allowed to maintain communication with the office of the Chapter 13 trustee throughout the bankruptcy process. Typically, these trustees will continue their involvement on claims for the full length of the case, which can last up to five years. The Chapter 13 Trustee will collect plan payments made by the debtor and disburse those payments to the creditors according to the terms of the plan.
United States Trustees
The third type of trustee surrounding bankruptcy claims is the United States trustee. Although most debtors will never have an encounter with one of these trustees, it is important to recognize who they are and the roles they play in the bankruptcy court proceedings. United States trustees are often considered the watchdogs of bankruptcies.
United States trustees are appointed to monitor both Chapter 7 and Chapter 13 trustees. These trustees are able to recommend to the United States Federal Bureau of Investigation and the United States Attorneys as to whether an investigation should be conducted or whether any legal action should be taken against those suspected of bankruptcy fraud and/or abuse.
Help with Your Bankruptcy
If you are considering a bankruptcy to help create some financial stability in your life, it is crucial that you contact a skilled and knowledgeable legal team to discuss options available for you. Contact Kohn Rath Danon Lynch & Scharf, LLP today at (802) 482-2905 to schedule a case evaluation at your earliest convenience.
Kohn Rath Danon Lynch & Scharf, LLP is a Vermont law firm located in the Town of Hinesburg, providing a broad and comprehensive array of legal services to our clients. Our attorneys have experience in many practice areas of the law.
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