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What is the trustee's role in a personal bankruptcy?

When a Massachusetts resident files for Chapter 7 or Chapter 13 bankruptcy, a bankruptcy court judge will be in charge of the case. But, the person who makes many decisions on a day-to-day basis will be the court-appointed bankruptcy trustee. What exactly is a bankruptcy trustee, and what is their role in a personal bankruptcy?

The trustee's role will differ depending on whether the case is proceeding under Chapter 7 or Chapter 13 of the Bankruptcy Code. In a Chapter 7 case, the debtor's non-exempt assets are liquidated to pay creditors. The trustee has the responsibilities of identifying and gathering all the non-exempt assets, deciding which will be sold, and overseeing the sales. The trustee will also evaluate creditors' claims and either allow or disallow them. After selling or liquidating assets, the trustee distributes the proceeds to creditors. Finally, the trustee can object to the debtor's discharge if there is a legal basis for doing so.

In a Chapter 13 bankruptcy the debtor repays all or a portion of their debts pursuant to a payment plan. The trustee in a Chapter 13 case reviews the proposed payment plan and can object to it if it is unfair to creditors. Once the plan is approved by the court, the debtor makes payments to the trustee, who then distributes them to the creditors.

The debtor's bankruptcy lawyer will communicate with the trustee throughout the bankruptcy case. Issues that arise during the case are often resolved through discussions among the trustee, the debtor's attorney and the creditors' representatives.

Source: Findlaw.com, "What is a Trustee in Bankruptcy?," accessed June 26, 2016

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