The Trustee and the Bankruptcy Estate in a Bankruptcy Case
A bankruptcy case is opened when a debtor files a bankruptcy petition with the Bankruptcy Court. Many things occur upon the filing of a bankruptcy petition.
The court assigns a bankruptcy case number to the petition to identify the case within the bankruptcy system. The First Meeting of Creditors is scheduled, and notices of the bankruptcy filing are mailed to creditors. In addition, the court appoints a bankruptcy trustee who will administer the bankruptcy estate.
Working with an experienced bankruptcy attorney who understands the preferences of the trustees who administer cases within a jurisdiction can be beneficial. The bankruptcy attorneys of Leinart Law Firm work with the bankruptcy trustees in the Dallas-Fort Worth area in numerous cases. We know what documents the trustees request in certain cases and what to provide to the trustees to avoid needless delays and extra work for you.
Call (469) 214-6276 or (817) 426-3328 for a free consultation to discuss how we can help you find debt relief through bankruptcy.
What is a Bankruptcy Trustee?
The trustee is a very important person in the bankruptcy process. Some districts may have more than one bankruptcy trustee, but debtors are not permitted to choose the trustee in bankruptcy cases. A trustee for bankruptcy has specific powers, duties, and responsibilities that he or she must execute as administrator of the bankruptcy estate.
The Bankruptcy Code governs the trustee’s powers and responsibilities. The Office of the United States Trustee is responsible for setting guidelines and overseeing trustee bankruptcy appointments. A trustee’s duties vary depending on the chapter of bankruptcy and the case. However, both a Chapter 7 trustee and a Chapter 13 trustee are charged with protecting and administering the bankruptcy estate.
What is an Estate Under Bankruptcy Code Section 541?
An “estate” is created that consists of the debtor’s assets and property rights upon the filing of a bankruptcy petition. The bankruptcy estate becomes the temporary owner of the rights and assets that the debtor owns under Bankruptcy Code 541. In a Chapter 7 and Chapter 13 case, the bankruptcy property within the estate is under the exclusive control of the court unless the court removes those assets from the estate, or the court closes the bankruptcy case. While under the control of the court, the trustee assigned to the case administers the bankruptcy property of the estate.
It is important to understand several key facts about the bankruptcy estate definition under Section 541 Bankruptcy Code:
- The estate is the temporary owner of the assets.
- The bankruptcy estate protects your assets from your creditors.
- Even though the assets are being administered by the estate, bankruptcy does not mean you will lose the property.
- A trustee in bankruptcy powers does not give the trustee the right to do anything with the property. He must have court approval before selling or transferring assets out of the estate.
- Some assets such as Social Security benefits, funds in qualified education savings accounts, property in your possession that belongs to another person, and ERISA-qualified pensions and not property of the estate.
In addition, bankruptcy exemptions that protect certain assets from the estate and your creditors are available. In most Chapter 7 cases filed in Texas, bankruptcy exemptions protect assets so that the debtor does not lose any property. Furthermore, Chapter 13 debtors almost always retain all property in a bankruptcy case unless they voluntarily surrender the assets.
The Bankruptcy Trustee Definition for Chapter 7 Case
In many ways, the powers and duties of trustees in Chapter 7 and Chapter 13 cases are similar. The distinctions relate to the chapter of bankruptcy filed by the debtor. For instance, Chapter 7 bankruptcy cases are referred to as “liquidation” bankruptcies because the trustee’s key role is to identify non-exempt estate property or assets to liquidate for the benefit of the unsecured creditors.
Therefore, some of the Chapter 7 Trustee duties include:
- Reviewing the debtor’s schedules to ensure all property is included and listed in the correct schedule or statement.
- Reviewing the debtor’s exemptions and objecting to improperly filed exemptions.
- Analyze the non-exempt equity in estate property to determine if an item has sufficient equity for the estate to liquidate.
- Sell any estate assets with sufficient non-exempt equity.
- Review creditors’ claims and file objections to claims if appropriate.
- Review the debtor’s financial history to determine if an objection is justified for a fraudulent transfer.
- Preparing a proposal for distribution to obtain court approval and distributing funds, according to an approved disbursement order.
- Objecting to the debtor’s discharge if grounds exist for fraud, hiding assets, failing to file tax returns, etc.
The above list is not an exhaustive list of the duties of a Chapter 7 trustee. Each case is unique; therefore, our Dallas Chapter 7 lawyers can discuss your case in detail during a free case evaluation.
The Bankruptcy Trustee Definition for Chapter 13 Case
The duties of a trustee in a Chapter 13 bankruptcy case are like those of a Chapter 7 trustee. A Chapter 13 trustee must review the debtor’s bankruptcy schedules to determine if all property is listed.
He or she must also object to any exemptions filed incorrectly or fraudulent transfers of property. However, a Chapter 13 trustee does not sell property of the estate. The debtor retains property while he or she is making payments to the Chapter 13 trustee according to the bankruptcy repayment plan.
The Chapter 13 trustee mainly deals with duties and responsibilities related to the repayment plan including:
- Reviewing the proposed repayment plan and objecting to the various terms within the plan when necessary.
- Review and object to the claims filed by creditors when appropriate.
- Receive monthly payments from the debtor and distribute funds, according to the terms of the confirmed plan.
- Review the debtor’s filed tax returns each year, if requested by the trustee.
- Respond to motions from the debtor related to the repayment plan.
Call a Dallas Bankruptcy Law Firm for a Free Consultation
Leinart Law Firm assists clients throughout the Fort Worth and Dallas areas. Call (469) 232-3328 or (817) 426-3328 to request a no-obligation case review with a Texas bankruptcy lawyer.