In all Chapter 7 bankruptcy cases, the court appoints a Trustee to administer the case. In many cases, the Trustee’s role is limited because the debtor has no assets and there is no reason for the Trustee to object to discharge or try to dismiss the case. The court also sets a meeting date at which time and place the debtor and Trustee must appear. Creditors are allowed to appear at the meeting to ask the debtor questions, but most creditors do not appear at the meetings.
In routine cases, the meeting with the Trustee often takes five minutes or less to complete as the Trustee will often ask a series of standard questions, and then conclude the meeting. Shortly thereafter, the Trustee will file a no-asset report indicating that they did not find any non-exempt assets to liquidate and distribute. The Trustee’s involvement in the case essentially ends at that point.
There are cases when a Trustee has a lot more to do. One example is when the debtor is unable to exempt (protect) all their assets. In those cases, if the value of the non-exempt assets is high enough to interest the Trustee, he/she can open an estate, collect the assets that are not protected, and then liquidate them to distribute any collected funds to creditors.
A Trustee can also challenge the discharge of some or all debts if they believe the debt was incurred through debtor fraud. Creditors can also make such challenges, but the Trustee retains the right to challenge the discharge regardless of whether the creditor takes action.
Trustees can also move to dismiss a bankruptcy based on abuse. The Trustee will look at several factors when assessing whether an abuse motion is appropriate. One factor is the debtor’s income/expense ratio. If the Trustee believes the debtor can afford to pay back a reasonable portion of the debt through a Chapter 13 plan, the Trustee can file a motion to dismiss the case or have it converted to Chapter 13. Another factor the Trustee may review is what type of debt the debtor has and when the debtor incurred the debt. Recent debts for higher amounts are more likely to be challenged.
It is usually best to consult with an attorney prior to filing a bankruptcy case to evaluate whether there are any issues that might cause complications with the bankruptcy trustee.
For more information or a consultation, please call 661-210-5657, or e-mail mjf4bk@ca.rr.com .