Key roles played by a Chapter 7 Bankruptcy trustee

The decision of filing for bankruptcy is never an easy one, as there are many factors to consider when choosing between the different types of personal bankruptcy. Many residents of Mississippi choose Chapter 7 bankruptcy, often known as liquidation bankruptcy. This type of bankruptcy is particularly helpful to those struggling with massive debt because it discharges many of a debtor's financial obligations. This can put a filer in the position to move forward without overwhelming debt hanging over his or her life.

Still, while Chapter 7 for individuals offers many advantages to someone deeply in debt, anyone who wishes to file for Chapter 7 bankruptcy is likely to have a lot of questions about the process and its outcome. For instance, Chapter 7 and Chapter 13 bankruptcy, as well as Chapter 12, involve a private trustee. These trustees essentially administer the bankruptcy estates of consumers, although their roles are often not well-known to filers.

What is the role of a trustee in a Chapter 7 bankruptcy case? While every personal bankruptcy case is different, there are several key roles played by private trustees in Chapter 7 cases. First, these individuals collect those assets of a debtor which are not exempt per the U.S. bankruptcy code. Then, the trustees liquidate the assets according to the conditions of Chapter 7 bankruptcy. Finally, the trustees distribute the proceeds of liquidation to a Chapter 7 debtor's creditors.

Chapter 7 bankruptcy trustees are sometimes called panel trustees because the U.S. Trustee appoints them to a panel in a particular judicial district. After appointment to their panel, the trustees are assigned cases usually based on a process of blind rotation.

Source: The United States Department of Justice, "Private trustee information," accessed Nov. 8, 2015

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