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United States Trustees/Private Trustees


The United States Trustee Program is a branch of the Department of Justice that oversees bankruptcy proceedings to ensure efficiency and compliance. In this capacity the Program generally enforces the US Bankruptcy Code through oversight and legal action where necessary. Also, the US Trustee appoints trustees to oversee individual bankruptcy proceedings for Chapter 7, 12 and 13 bankruptcy cases.

Chapter 7

The trustee first makes sure that there is no missing or false information in the petition. The trustee has the power to object or deny a discharge if he/she finds any evidence of fraud, perjury, or ineligibility. The trustee also presides over the initial meeting of creditors. Then, the trustee must file an “Asset Report” with the court. In most chapter 7 cases involving individuals, all of a debtor’s property is exempt. Thus, the trustee will file a “No Asset Report” for the vast majority of chapter 7 cases. The trustee is responsible for selling all the non-exempt property. Finally, the trustee pays out the money to the creditors according to six classes of claims. Each class must be paid in full before the next class is paid. If there is a remainder after repaying all objecting creditors, this amount will be refunded to the debtor.

A trustee may also set aside or cancel “preferential transfers.” A preferential transfer refers to payments or transfers of property made to a creditor before the debtor’s bankruptcy filing. The payment or transfer is preferential if made within ninety days before filing, or within one year if the transfer was to an “insider.” An insider is someone that the debtor knows, such as a family member. For example, paying off a large credit card balance ninety days prior to filing a chapter 7 is probably a preferential transfer. Also, paying off a personal loan from a friend within one year of filing a chapter 7 would probably constitute preferential transfer.

Chapter 13

In Chapter 13, the trustee evaluates the debtor’s repayment plan, provides feedback to the bankruptcy court and supervises the debtor’s fulfillment of the repayment plan by accepting payments and distributing money to creditors. The individually appointed trustee is supervised by the US Trustee to ensure the trustee properly carries out their duties.

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