11 U.S.C. Section 704 - Duties of Chapter 7 Trustee

What Is Section 704?

Section 704 is the duty-charter of the Chapter 7 panel trustee. It tells the trustee what to do once the United States Trustee appoints him or her to a case. Section 704(a) lists twelve enumerated duties; Section 704(b) imposes a BAPCPA-added duty to review the debtor's means-test calculation and to file a statement of presumed abuse where appropriate; Section 704(c) imposes duties relating to domestic-support obligations.

Core Duties: Section 704(a)

The twelve duties in Section 704(a) span the full life of a Chapter 7 case:

• (a)(1): Collect and reduce to money the property of the estate for which the trustee serves, and close the estate as expeditiously as is compatible with the best interests of parties in interest.
• (a)(2): Be accountable for all property received.
• (a)(3): Ensure that the debtor performs the intention specified in Section 521(a)(2)(B) regarding secured consumer debts (reaffirmation, redemption, or surrender).
• (a)(4): Investigate the financial affairs of the debtor.
• (a)(5): If a purpose would be served, examine proofs of claim and object to the allowance of any claim that is improper.
• (a)(6): If advisable, oppose the discharge of the debtor.
• (a)(7): Unless the court orders otherwise, furnish information concerning the estate to a party in interest.
• (a)(8): If the business of the debtor is authorized to be operated, file periodic reports.
• (a)(9): Make a final report and file a final account of the administration of the estate.
• (a)(10): Provide information to holders of domestic-support obligations.
• (a)(11): Continue to perform obligations as a representative of the estate with respect to certain employee benefit plans.
• (a)(12): Use reasonable and best efforts to transfer patients from a health-care business closed during the case to an appropriate alternative.

Means-Test Review: Section 704(b)

Section 704(b) requires the trustee, no later than 10 days after the first scheduled Section 341 meeting, to review the debtor's income and means-test calculation and to file with the court a statement as to whether the case would be presumed an abuse under Section 707(b). If the trustee determines that the presumption arises and the debtor's income exceeds the median, the trustee must then either file a motion to dismiss or convert under Section 707(b) or file a statement explaining why such a motion would not be appropriate.

This duty made the Chapter 7 trustee a front-line gatekeeper for abuse policing after BAPCPA. Most trustees rely on the U.S. Trustee Program's analytical tools and templates to perform this review.

Domestic-Support Obligations: Section 704(c)

Section 704(c) requires the trustee to provide written notice to holders of domestic-support claims about (1) the right to use state-agency child-support enforcement services, (2) the existence of the claim in the bankruptcy case, and (3) the granting of the discharge. This duty supports the BAPCPA policy of elevating domestic-support obligations to first-priority status under Section 507(a)(1)(A).

Standard of Conduct and Fiduciary Duties

The Chapter 7 trustee is a fiduciary to the estate and its creditors. Courts have consistently held the trustee to a standard of due care comparable to that of a corporate director or other professional fiduciary. The trustee is personally liable for negligence in administering the estate, subject to the limited protections of the qualified immunity doctrine for actions taken within the scope of court-approved orders.

The U.S. Trustee Program supervises panel trustees, conducts performance reviews, and may remove trustees from the panel for cause. Bonding requirements under Section 322 protect the estate against trustee misconduct.

Major Doctrinal Cases

• In re Rigden, 795 F.2d 727 (9th Cir. 1986) - Discussed the scope of the trustee's investigatory duty under Section 704(a)(4).
• In re Halverson, 581 F.3d 671 (8th Cir. 2009) - Addressed the trustee's duty of inquiry into asset disclosure and valuation.
• Mosser v. Darrow, 341 U.S. 267 (1951) - Supreme Court foundational discussion of the trustee's fiduciary obligations.
• Commodity Futures Trading Comm'n v. Weintraub, 471 U.S. 343 (1985) - Addressed the trustee's authority to waive the corporate debtor's attorney-client privilege as part of investigation duties.
• In re Marshall, 721 F.3d 1032 (9th Cir. 2013) - Discussed the limits of trustee personal liability for actions in the course of estate administration.
• In re Smyth, 207 F.3d 758 (5th Cir. 2000) - Discussed the trustee's good-faith standard in Section 707(b) review duties under Section 704(b).

Related Bankruptcy Code Sections

• Section 701 - Interim trustee
• Section 702 - Election of trustee
• Section 321 - Eligibility to serve as trustee
• Section 322 - Qualification of trustee
• Section 326 - Limitation on compensation of trustee
• Section 707 - Dismissal of Chapter 7 case
• Section 521 - Debtor's duties