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What does the trustee do in a Chapter 7 bankruptcy?

When a Pennsylvanian has financial problems that he or she cannot get out from under and would like to clear them, personal bankruptcy is a viable and legal option to do so. For those with significant unsecured debt and little property, the most common alternative is Chapter 7. There are many terms and participants that are part of a Chapter 7 filing, but one of the most important is the Chapter 7 trustee. The trustee plays a vital role in the case and it is wise for the debtor to know what the trustee does before moving forward.

The U.S. trustee will appoint an impartial case trustee. This person will have no stake in the case one way or the other and will administer the case. If there are assets that are not exempt, the trustee will liquidate them. The trustee files a report stating the debtor has no assets when the debtor has assets that are exempt from liquidation and subject to valid liens. Unsecured creditors will not receive anything because there is nothing to liquidate. Most Chapter 7 cases are of this kind.

Filing for bankruptcy will necessitate the creating of an estate that will legally own the debtor's property. The Chapter 7 trustee will liquidate nonexempt property to maximize the amount the unsecured creditors will receive. Property that is free and clear of liens will be sold by the trustee. The trustee will also have what is known as avoiding powers. Within these powers is the ability to recover money or property from the debtor under various circumstances. In general, the debtor should not be concerned as to how the trustee disposes of assets from the estate to pay creditors. Retaining exempt property and to discharge debt are the main goals of a Chapter 7.

The debtor might see the trustee as someone to fear. However, the reality is that the trustee is there to expedite the process and be impartial in the proceeding to maximize the benefit for the debtor and the creditors. For people who are thinking about filing for Chapter 7 bankruptcy, the role of the trustee is just one part of the process. Having legal assistance can assuage any concerns and give guidance and help with Chapter 7. Debtors who are worried about issues such as what the trustee does should contact a lawyer immediately to alleviate concerns and begin the process of getting out of debt.

Source: uscourts.gov, "Chapter 7 -- Bankruptcy Basics -- Role of the Case Trustee," accessed on March 12, 2018

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