When you file bankruptcy, the court does not manage your case directly. Instead, a trustee is appointed to administer it. The trustee's role depends on the chapter you file under, but in every case, the trustee has significant power over how your bankruptcy proceeds.
Chapter 7 Trustee vs. Chapter 13 Trustee
Chapter 7 Trustee
- Called a "panel trustee" -- assigned from a rotating panel
- Reviews your petition and schedules for accuracy
- Conducts the 341 meeting of creditors
- Identifies non-exempt assets
- Liquidates (sells) non-exempt property
- Distributes proceeds to creditors
- Paid a flat fee ($60) plus a percentage of assets liquidated
Chapter 13 Trustee
- Called a "standing trustee" -- handles all Chapter 13 cases in a district
- Reviews your proposed repayment plan
- Conducts the 341 meeting of creditors
- Collects your monthly plan payments
- Distributes payments to creditors per the plan
- Monitors compliance for 3 to 5 years
- Paid a percentage of plan payments (typically 4-10%)
The U.S. Trustee: A Different Role
The U.S. Trustee is not the same as the trustee assigned to your case. The U.S. Trustee is a Department of Justice official who oversees the bankruptcy system in a given region. The U.S. Trustee appoints panel trustees, monitors case administration, reviews fee applications, and takes enforcement action when attorneys or parties violate bankruptcy rules.
If you believe your bankruptcy attorney charged excessive fees or committed misconduct, the U.S. Trustee has authority to investigate and seek sanctions. You can report concerns to the U.S. Trustee Program directly.
The 341 Meeting of Creditors
Every bankruptcy case includes a 341 meeting (named after Section 341 of the Bankruptcy Code). The trustee runs this meeting, not the judge. You appear under oath and answer questions about your finances, your petition, and your property. Creditors are invited but rarely attend in consumer cases.
The meeting is usually short -- 5 to 15 minutes for a straightforward case. The trustee verifies your identity, confirms your schedules, and asks about anything that looks unusual. If everything checks out, the meeting concludes and the case proceeds toward discharge.
Can the Trustee Take My Property?
In Chapter 7, the trustee has the power to take and sell non-exempt property to pay your creditors. But in practice, most consumer Chapter 7 cases are "no-asset" cases. Federal and state exemptions protect most of what people own -- clothing, household goods, a reasonable car, tools of your trade, and some equity in your home. If all your property falls within exemption limits, the trustee reports a no-asset case and takes nothing.
In Chapter 13, you keep all your property. Instead of liquidation, you repay creditors through a 3-to-5-year payment plan. The trustee's job is to collect and distribute your payments, not to take your assets.
What About Chapter 11?
In most Chapter 11 cases, the debtor acts as a "debtor in possession" and performs many of the functions a trustee would handle. A separate trustee is appointed only if there is cause -- fraud, mismanagement, or other problems. In Subchapter V small business cases, a trustee is always appointed but plays a more limited role focused on facilitating plan confirmation.
How Trustees Are Paid
Trustees do not work for free, and they do not work for you. Chapter 7 panel trustees receive a $60 base fee per case plus a percentage of any assets they liquidate. Chapter 13 standing trustees are paid a percentage of the payments they disburse (typically 4-10%, set by the U.S. Trustee). This compensation structure creates incentives that you should understand: Chapter 7 trustees are motivated to find assets, and Chapter 13 trustees are motivated to see plans succeed (because they earn more from higher disbursements).