What does the bankruptcy trustee do in Chapter 7 and 13 filings?

On Behalf of | Jul 20, 2021 | Bankruptcy Law |

Most people who file for bankruptcy will either file Chapter 7 bankruptcy or Chapter 13 bankruptcy. Although there are other forms of bankruptcy available, these two are generally the most common for individuals in need of financial relief. They can help those with assets and significant income, as well as those who own very little and have no income.

While there are some major differences between these two forms of bankruptcy, certain things are the same. You receive an automatic stay as soon as you file, and the successful completion of your filing will result in a discharge of most of your unsecured debts. In both kinds of bankruptcy, the courts will also appoint a trustee. How does the role of the trustee differ in these two forms of bankruptcy?

Chapter 7 or liquidation bankruptcy

People call Chapter 7 bankruptcy a liquidation but in actual practice assets are rarely sold because debtors are allowed exemptions to protect a lot of assets. In the rare case that a chapter 7 is filed and there are none exempt assets, your trustee can liquidate the nonexempt personal assets when you file for Chapter 7 bankruptcy and use the funds from the sale of that property to repay some of your debts.

The trustee overseeing your bankruptcy is the one who will look at your inventory of property, liquidate assets not protected by exemptions and distribute the money from those sales to the various creditors in order of priority.

Chapter 13 or wage earner’s bankruptcy

People call Chapter 13 filings wage earner’s bankruptcies because they involve a repayment plan and allow for higher income levels. The trustee once again plays a role in the review and verification of the assets and financial reports submitted by the person filing.

The trustee in a Chapter 13 filing will oversee the creditor meeting and inquire about information provided by the person filing. The trustee helps arrange a repayment plan that is affordable for the person filing but also fair to the creditors. When the person filing makes payments, it will be the trustee who receives those payments and distributes the money to the various creditors.

Regardless of what kind of bankruptcy you file, the trustee serves an important role in managing interactions with your creditors and assisting in any repayment efforts made. The better you understand the basics of bankruptcy, the easier it will be for you to maximize the benefits you receive from filing.


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