Is the Bankruptcy Trustee Friend or Foe?

When you file for bankruptcy protection, one of the first things the court does is appoint a Trustee. What’s his or her role? To gather any assets of the bankruptcy estate, liquidate them and distribute the proceeds to eligible creditors. Because the court is so full with cases, the court will rely heavily on the Trustee to administer the process and the Trustee has substantial influence on how things go with your case.
So whose side is the Trustee on? Generally, they’re on the creditor’s side but you can do a lot to secure the Trustee’s cooperation. The Trustee is responsible to see that creditors are equitably treated in the proceeding. Trustees also receive a percentage of any bankruptcy estate administered so they have an incentive to find and liquidate assets. But they also have to pay the costs of doing so. The more work they have to do with assets, the less likely they are to want to proceed because time is generally money and wrapping up the estate is their primary objective.

How do you secure the Trustee’s cooperation? The First, and most important thing you can do is be truthful and accurate in your petition. Trustee’s develop a strong dislike for misrepresentation and when they sense a debtor is trying to hide assets, they can become relentless in attempting to expose the issue. Second, make it easy for the Trustee to see what’s exempt and what’s not. You can be truthful but still be disorganized and that just makes the Trustee’s job harder. Third, pay attention to what creditors’ claims and dispute those that are not accurate. If an alleged creditor asserts a claim but is not truly entitled to inclusion, object to the claim and notify the Trustee.

And lastly, pick your battles. If the Trustee has decided that an asset is not exempt and wants to liquidate it, but the asset truly has very little actual value, think long and hard before you decide to resist. Focus your energies on those assets and issues that really matter in the bankruptcy proceeding. Taking a direct adversarial position to the Trustee is a big deal and sometimes it’s justified but make sure it’s worth it before you do.

Remember that the Trustee is NOT representing you but by cultivating a relationship of professionalism between you as the debtor (either directly, or even better, through your attorney) and the Trustee your case will likely see much smoother sailing.