The Role of the Judge and the Trustee in a Bankruptcy Hearing

July 31, 2014 9:56 am Published by Leave your thoughts

While many people are familiar with criminal trials and the like, a growing number of Americans are becoming more familiar with bankruptcy court. However, there is still a misconception about what exactly happens there. There is a judge in bankruptcy court, but they are seldom seen, especially by Chapter 7 filers. There is a trustee, but they do far more than trustees in other positions. It is important to understand who does what.

The Bankruptcy Judge
Bankruptcy judgeships came into being in 1978, after a period of reform of the bankruptcy system. Previously, bankruptcies were handled by referees, who were appointed by district judges in a given area. However, the duties of these referees were increased steadily over time, until they were performing a function that basically amounted to a part of the judiciary. In 1973, the Supreme Court issued an updated set of rules for bankruptcy which conferred the title of bankruptcy judge on these referees. From there, Congress formalized the title and the court system itself.

Because of the active nature of judges in so many other courts, many debtors think that most of the proceedings in bankruptcy court will be conducted by the judge. This is in fact incorrect – in fact, most Chapter 7 debtors will never appear in court and will likely never even see a bankruptcy judge. The judge’s function in bankruptcy court is to rule on final questions, such as whether someone is eligible to file in the first place, or if the debtor has made sufficient steps to be allowed a discharge of debts. The rest of the proceedings are administrative, which means that no definitive judicial decision is required at that point. The administrative part of a bankruptcy – the lion’s share – is handled by the trustee.

The Bankruptcy Trustee
Most people have heard the word trustee in the context of a Board of Trustees, and think that it is someone who oversees a public institution. That is not quite correct – in its broadest sense, a trustee is anyone who looks after property on behalf of someone else. This is the sense in which it is applied in bankruptcy court. A bankruptcy trustee is appointed by the United States Trustee Program to oversee each filing. Their primary objective is to ensure the bankruptcy case is conducted fairly and accurately, which means they will not be on anyone’s side.

The trustee has three main duties. First, they must review and analyze your petition and documents. This is to make certain that you are not hiding any assets, but also to make certain that you have not made mistakes which might harm you. Second, they will administer the creditors’ meeting, at which they will question you under oath. The creditors’ meeting (also sometimes called a 341a meeting) is when you make yourself available to creditors to answer questions or refute any charges they may have. The trustee will question you under oath about your petition and any issues your creditors bring up, if creditors show up (many times, creditors do not bother, especially in no-asset cases).

Third, and perhaps most importantly, the bankruptcy trustee must review and liquidate any non-exempt assets you have. A debtor is allowed to retain some of their property under state exemptions. Any assets they have above those exemptions will be appraised by the trustee and sold so that some or all of your creditors can be repaid. It is the trustee’s main job to get the fairest price for these assets, or if there are no non-exempt assets, they will prepare a memorandum to the court which details this fact. Fairness is the trustee’s main objective, toward both you and your creditors.

If you have questions or concerns about your recent bankruptcy filing, we can help. Contact the Dowe Law Firm for a consultation today. We serve Contra Costa, Solano and Alameda counties.

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