Whether you file Chapter 7 or Chapter 13, your New York bankruptcy case will come with a court-appointed administrator known as a “trustee.”

Many of our clients are a little afraid of the trustee and don’t fully understand the role that person will play in their bankruptcy case. By understanding, you can put your mind at ease and will know exactly what the trustee does and does not do in your case.

What are the basic duties of a bankruptcy trustee?

In a Chapter 7 bankruptcy, the trustee:

• Interviews the borrower at the 341 meeting of creditors.
• Manages the sale of any non-exempt property, using it to pay off lenders.
• Reviews and compares your filing to your tax returns and bank statements to discover if there are any discrepancies.
• Ensures you meet the means test for a Chapter 7 bankruptcy. 
• Discovers any improper payments to family members or friends and claws them back.

In a Chapter 13 bankruptcy, the trustee:

• Reviews and compares your filing to your tax returns and bank statements to discover if there are any discrepancies.
• Ensures you meet the means test for a Chapter 13 bankruptcy.
• Discovers any improper payments to family members or friends and claws them back.
• Reviews your proposed payment plan and recommends to the court whether the payment plan meets statutory requirements. 
• Receives your monthly payments and distributes them to creditors. 

In both cases, the trustee is responsible for looking for signs of fraud and will investigate and report fraud. 

The trustee does not take everything you own.

Bankruptcy exemptions already cover your personal property. Unless you own extremely valuable antique furniture, the trustee is rarely interested in selling off your belongings, and even then, you’re allowed to keep most of it. 

You may also consent to allow the trustee to take some property to sell off, if you choose.

If you’re concerned about protecting specific property, our law office can help. 

The trustee may review the state of your finances at any time but does not monitor day-to-day spending habits. 

During a Chapter 13 bankruptcy, the trustee must ensure that you act in good faith throughout the three to five-year process. If the trustee has reason to believe your income has changed or you’ve come into a windfall, they will check your finances and act accordingly. In most cases, you will have informed the trustee of those changes yourself. They may also review your finances if you miss a plan payment for any reason. 

The trustee will not notice you bought a $7.99 pair of socks at Target and then call you to scold you about it. For the most part, if you make your plan payments, the trustee isn’t watching your day-to-day purchases. 

Sometimes, a bankruptcy trustee may come to your home. 

If a bankruptcy trustee comes to your home, they’re looking for signs that you either have undervalued or overvalued property in your filing or didn’t list your property. 

Home visits are rare. If you’ve been transparent with your lawyer and the courts, it probably won’t happen. If it does, be sure to consult with your attorney. 

In a Chapter 13 bankruptcy, it’s your duty to keep the trustee informed.

You must tell the trustee about it whenever you experience a financial change, either for good or ill. It is your duty to be transparent with your finances throughout the Chapter 13 process. 

Working with a trustee is relatively routine in most bankruptcy cases.

Most of the time, you’ll have one meeting with your trustee: at the 341 meeting of creditors. After that, you may communicate with them, but you won’t usually be face-to-face with them. If you’re in Chapter 13, you’ll pay them, and that’s about it.

A trustee is nothing to fear so long as you’re working closely with a qualified bankruptcy attorney who can help you stay out of trouble with the courts.

Thinking about filing? Contact our offices today. 

See also: 

4 Mistakes to Avoid at Your 341 Meeting of Creditors

What Will Your Chapter 13 Payment Be?

How to Prepare for Bankruptcy