The Chapter 7 Trustee
| Jurisdiction | United States,Federal |
| Citation | Vol. 14 No. 7 Pg. 1199 |
| Pages | 1199 |
| Publication year | 1985 |
1985, July, Pg. 1199. The Chapter 7 Trustee
Within the bankruptcy system, practitioners may encounter the United States Trustee, a Chapter 11, Chapter 13 or Chapter 7 trustee, or some combination thereof.(fn1) Since the majority of bankruptcy cases filed are Chapter 7s, this article discusses the role of the Chapter 7 bankruptcy trustee. It also provides suggestions to attorneys for both debtors and creditors for handling common problems and situations which arise in Chapter 7 cases.
Under the now repealed Bankruptcy Act of 1898, bankruptcy judges appointed trustees and supervised their performance as part of their overall administrative and judicial functions. Debtors, creditors and third parties litigating against bankruptcy trustees were concerned that the court could not impartially adjudicate their rights as adversaries of these trustees. To meet such criticism, Congress created the Office of the United States Trustee,(fn2) a "pilot program" within the U.S. Justice Department, to supervise the administration of cases and trustees under the Bankruptcy Reform Act of 1978 ("Code"). The U.S. Trustee for the Districts of Colorado and Kansas, Dolores B. Kopel, appoints and supervises all trustees serving in bankruptcy cases filed in these districts.
The U.S. Trustee has established and maintains a panel of private practitioners who are eligible and available to serve as trustees in Chapter 7 cases. To be eligible, an individual must have an office within the jurisdiction district or an adjacent district and must possess all of the qualifications established by the U.S. Attorney General.(fn3) Each U.S. Trustee is authorized to increase or decrease panel membership and to institute a system of rotating membership to achieve diversification of experience, geographical distribution and equal opportunity among the members of the panel.
The commencement of a Chapter 7 case creates an estate consisting of virtually all legal or equitable interests of the debtor in property as of the date the bankruptcy petition is filed, whether it is begun as a voluntary or an involuntary case.(fn4) Administered by the Chapter 7 trustee, the estate exists for the benefit of all those parties having an interest in any distributions to be made from the estate.
As soon as is practicable after the filing of a Chapter 7 case, the U.S. Trustee appoints an interim trustee from the practitioner panel. Panel members generally are assigned cases on a rotation basis as Chapter 7 cases are filed with the court and processed for docketing in the U.S. Trustee's Office. The U.S. Trustee does not serve as trustee in a given Chapter 7 case unless specifically appointed.
Where proper schedules and documentation are filed timely, a trustee usually is assigned to a case within about a week of the bankruptcy filing. When a debtor's or creditor's attorney believes that the immediate appointment of an interim trustee is necessary to preserve assets or to represent the estate's interest in litigation, the attorney should make such emergency requests to the U.S. Trustee's Office.
To accommodate busy schedules and to avoid the necessity for continuing a Code § 341 meeting (and the additional time and paperwork burdens created), debtor's attorneys are encouraged to contact the U.S. Trustee's Office to preset cases for convenient docket dates. Given the high volume of case filings, continuances of § 341 meetings are rarely granted. Debtor's attorneys should advise clients of their duties to attend the § 341 meeting and to cooperate with the trustee.(fn5) Those requesting the continuance of a meeting should contact the U.S. Trustee's Office, not the panel trustee assigned to the case.
The interim trustee serves as the temporary representative of the estate between the time of appointment and the date of the Code § 341 (a) meeting of all creditors. The interim trustee's duties generally entail controlling and protecting property of the estate by measures reasonably necessary to safeguard assets, given available funds and debtor/creditor cooperation. The duties may involve changing locks, arranging for an inventory, obtaining insurance or hiring a guard to preserve assets and stabilize the estate. Where the sale of real property may produce money for the estate, the trustee will put potential purchasers on notice of the estate's interest in the property by filing a copy of the petition and trustee appointment with the appropriate county clerk and recorder. Basically, the interim trustee has all the duties and powers of the permanent trustee.
Although creditors may elect a permanent trustee at the § 341 (a) meeting pursuant to Code § 702, this rarely occurs, and the appointed interim trustee becomes
the permanent Chapter 7 trustee for the case. As the representative of the estate, the trustee is a...
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