Investor's wiki

Bankruptcy Trustee

Bankruptcy Trustee

What Is a Bankruptcy Trustee?

A bankruptcy trustee is a person designated by the United States Trustee, an officer of the Department of Justice, to address a debtor's estate in a bankruptcy continuing. Bankruptcy trustees assess and set proposals about different debtor expectations as per the U.S. Bankruptcy Code.

Nonetheless, a bankruptcy judge has the ultimate authority on the distribution of assets. A bankruptcy trustee works with the bankruptcy court to make any move. The trustee can't act without endorsement by the court.

Figuring out Bankruptcy Trustee Responsibilities

A trustee's liabilities contrast in light of the type of bankruptcy continuing they are joining in. In a Chapter 7 bankruptcy continuing, the action is basically a liquidation. The trustee will deal with the sale of the assets and afterward regulate the distribution of the proceeds to creditors.

With a Chapter 11 continuing, the debtor, generally a business owner, desires to rise out of bankruptcy and proceed with operation.

One more type of bankruptcy is Chapter 13. Individuals who go through this bankruptcy wish to keep a portion of their assets in return for repaying certain debts.


The total number of bankruptcy filings in 2019, which addresses a slight increase more than 2018, as per the American Bankruptcy Institute.

What Is Chapter 7?

Chapter 7 of Title 11 of the U.S. bankruptcy code controls the course of asset liquidation. A named trustee will liquidate nonexempt assets to pay creditors. After the exhaustion of proceeds from the liquidation, the trustee and court discharge the excess debt.

There are qualification requirements to file a Chapter 7 bankruptcy. A debtor must not have had a Chapter 7 bankruptcy discharged in the first eight years, for instance, and the candidate must pass a means test. The Chapter 7 cycle is otherwise called a straight or liquidation bankruptcy.

Characterizing Chapter 11

Chapter 11 is a form of bankruptcy which includes a reorganization of a debtor's business affairs, debts, and assets. Named after the U.S. bankruptcy code 11, corporations generally are the elements that file for Chapter 11 since this continuing takes into consideration additional time (corporations call for investment for debt restructuring). Chapter 11 gives a debtor a new beginning, subject to the satisfaction of their obligations under the reorganization plan.

As Chapter 11 is the most complex of all bankruptcy cases and generally the most costly, a company would think about reorganization solely after careful analysis and exploration of any remaining alternatives.

Chapter 13 and Restructuring Debts

Chapter 13 bankruptcy empowers individuals with an ordinary income to rebuild their obligations to repay their debt after some time. In such a plan, the debtor doesn't look to earn general forgiveness of their outstanding debts. Rather, the debtor offers up a repayment plan that utilizes fixed installment payments.

Chapter 13 bankruptcy formerly was called a wage earner's plan since relief under it was simply accessible to individuals who earned a normal wage. Subsequent statute changes expanded it to incorporate any individual, including the self-employed and those operating a unincorporated business.

Consumer bankruptcy filings are expected to rise over the long run due to the effects of the 2020 economic crisis.

Real World Example of a Chapter 7 Bankruptcy Trustee

During the 2019 bankruptcy procedures of Billy McFarland's Fyre Festival, the bankruptcy trustee asked the managing judge to issue summons to several ability agencies. The 2017 Fyre Festival was to have been an elegant event on the island of Great Exuma in the Bahamas. Notwithstanding, when ticket-holders showed up, they found a site still under construction.

The celebration went into involuntary Chapter 7 bankruptcy for more than $14 million. The trustee planned to look at more than $1.7 million in wire transfers to secure the advertised ability.

A bankruptcy trustee in a Chapter 7 case might be responsible for overseeing payments made by the debtor for a specific period. The trustee will forward payments to the creditor for a predefined period, generally three to five years.


  • With Chapter 7, the trustee regulates the liquidation of assets and the paying back of creditors.
  • With Chapter 11 bankruptcy, a trustee redesigns a debtor's business obligations, debts, and assets; this normally applies to a corporation.
  • There are three primary types of bankruptcy: Chapter 7, Chapter 11, and Chapter 13; the trustee's liabilities shift contingent upon which type has been filed.
  • With Chapter 13 bankruptcy, a trustee assists an individual looking with keeping a few assets by repaying their debt over the long run on a payment plan.
  • A bankruptcy trustee is an administrator who is assigned to your case by the United States Trustee on the off chance that you file for bankruptcy.