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What does a Bankruptcy Trustee do?

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  • Written By: Dee S.
  • Edited By: Jenn Walker
  • Last Modified Date: 18 November 2016
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Depending on the kind of bankruptcy, a bankruptcy trustee has many job duties. When a person files under Chapter 7 bankruptcy law in the United States, for example, the bankruptcy trustee will liquidate the assets of the debtor and give them to various creditors following the rules of the state where the debtor resides. Under Chapter 11 bankruptcy laws, a bankruptcy trustee may help create and enforce reorganization plans. If the debtor files under Chapters 12 or 13 of the Bankruptcy Code of the United States, the bankruptcy trustee will oversee the repayment of debt pursuant to statutes and make sure fraud and abuse do not occur when the estate is liquidated. In addition, the trustee may ensure that any costs related to the liquidation are reasonable and that creditors do not harass the debtor.

The United States is not the only country that appoints bankruptcy trustees to debtors. For example, Canada also has trustees in bankruptcy. In Canada, the trustee is someone who is licensed to hold and distribute assets to creditors according Canada’s Bankruptcy and Insolvency Act. A trustee is also used in the United Kingdom and in Australia. In those countries, the trustee may notify creditors of the debtor’s assets, answer creditor inquiries, investigate the debtor’s finances, and distribute liquidated assets according to laws in the Bankruptcy Acts of those countries.

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Under the Code of Bankruptcy in the United States, the bankruptcy trustee has specific duties. For example, if a debtor files under Chapter 7 of the Bankruptcy Code, the trustee will oversee the assets of the debtor. In addition, she may hold a meeting with the creditors and question the debtor about assets. Once the assets are assessed, the trustee may collect them from the debtor and convert those assets into cash by selling them. The trustee may then distribute the cash earned from the sale of assets to various creditors, following the order specified by the Bankruptcy Code.

If a person files under Chapter 13 of the Bankruptcy Code, the bankruptcy trustee’s duties are nearly the same as her duties under Chapter 7, except she may also be in charge of the reorganization plans as well. In those cases, she may appear and speak in court about the reorganization plan. She may also give legal advice to the debtor and help the debtor follow the reorganization plan. In addition, she may ensure that the debtor makes the scheduled payments according to the plan.

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