Chapter II Debtors, Trustees and Counsel
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II. Debtors, Trustees and Counsel
A. Debtor's Duties
The following is a summary of the duties of consumer debtors that arise in almost every bankruptcy case. Many are discussed in greater detail throughout this handbook.
1. Required Filings
Unless otherwise ordered by the court, the debtor must file the following:134
• list of all creditors;135
• schedule of assets and liabilities;136
• schedule of current income and expenditures;137
• schedule of executory contracts and unexpired leases;138
• statement of financial affairs;139
• copies of all payment advices received from any employer within 60 days of the filing date;
• statement of monthly net income (the excess of current monthly income over allowable expenses), itemized to show how the amount is calculated;140
• record of any interest the debtor may have in an educational individual retirement account or under a qualified state tuition program;141
• certificate of receipt of 11 U.S.C. § 342(b) notice;
• statement of compliance with credit counseling requirement;
• in a chapter 7, a statement of intention regarding retention or surrender of property securing debt;142
• statement of current monthly income with all calculations and information as required by the appropriate Official Form; 143 and
• statement disclosing any reasonably anticipated increase in income or expenditures over the 12 months following the filing of the petition.144
2. Intentions Regarding Secured Debts
If the schedules of assets and liabilities show debts secured by property of the estate, the debtor must:
• before the earlier of within 30 days of filing the petition or the date of the first meeting of creditors, file a statement of whether the debtor intends to retain or surrender the property, and whether he or she intends to redeem the property or reaffirm the debt; and
• unless extended by the court, for cause, within 30 days after the first meeting of creditors, perform the intention specified in the notice.145
3. Purchase Money Security Interests
An individual chapter 7 debtor may not retain possession of personal property securing, in whole or in part, a purchase money security interest unless, within 45 days after the first meeting of creditors, the debtor enters into a reaffirmation agreement with the creditor or redeems the property.146
4. Cooperation with the Trustee
A debtor must cooperate with the trustee in assisting the trustee in carrying out the trustee's duties,147 and turn over to the trustee all property of the estate, including books, records and papers, relating to the property of the estate.148
5. Tax Returns
a. Pre-Petition Returns
No later than seven days before the date first set for the meeting of creditors, the debtor must furnish to the trustee and any creditor who has submitted a timely request a copy of the federal income tax return or, at the debtor's election, a transcript of the return for the most recent tax year ending before the petition was filed and for which a return was filed.149 If the debtor fails to provide the required tax return or transcript of such return, the court must dismiss the case unless the debtor demonstrates that the failure was beyond the debtor's control.
b. Post-Petition Returns
At the request of the court, the U.S. Trustee or any party in interest, the debtor must file a copy of each federal income tax return (or, at the election of the debtor, a transcript of such return) at the same time as it is filed with the taxing authority:150
• with respect to each tax year ending while the case is pending;
• with respect to each tax year that ended in the three-year period preceding the date the petition was filed, that had not been filed as of the date of commencement of the case and is subsequently filed; and
• any amendment to a tax return filed with the court.151
• Any information filed in the case must comply with Fed. R. Bankr. P. 9037, Privacy Protection for Filings Made with the Court.152
6. Chapter 13 Annual Financial Disclosures
At the request of the court, U.S. Trustee or any party in interest, a chapter 13 debtor must file a statement, under penalty of perjury, of the debtor's income, expenditures and monthly income, with calculations, for the just-ended tax year. If the chapter 13 plan is not already confirmed, this requirement begins either 90 days after the end of the tax year or one year after commencement of the case, whichever is later, and annually after confirmation until the case is closed, not later than 45 days before the anniversary of confirmation.153
7. Residential Eviction Actions
Where a judgment for possession of residential property in which the debtor resides as a tenant has been obtained by the lessor, the debtor must:
• indicate that fact on the petition, providing the name and address of the lessor who obtained the pre-petition judgment; and
• certify whether the debtor is claiming that under otherwise-applicable nonbankruptcy law, there are circumstances under which the debtor would be permitted to cure the monetary defaults underlying the judgment "and has deposited with the clerk of the court, any rent that would become due during the 30-day period after the filing of the bankruptcy petition."154
8. Proof of Identification
If requested by the U.S. Trustee or trustee, the debtor must provide a document that establishes the debtor's identity, e.g., a passport, driver's license or other photographic identification.155
B. The Trustee's Role in Bankruptcy Case Management
1. The Case Trustee
Case trustees are individuals appointed under 11 U.S.C. § 701 or § 1302 by the U.S. Trustee or Bankruptcy Administrator, or elected under § 702. Trustees are appointed when a voluntary petition is filed in chapter 7 and 13 cases, or when the court enters an order for relief in involuntary cases. A trustee must be eligible to serve and must qualify in the case.156 Once appointed as permanent trustee, court approval is required to remove a trustee from a case.157 Conversion to another chapter starts the process of appointment anew.
The trustee represents the estate.158 As such, the trustee has a fiduciary responsibility to the estate and its beneficiaries, the creditors and the debtor.
a. Chapter 7 Trustee
i. In most districts, the U.S. Trustee has established a panel of trustees eligible and available to serve as trustees in chapter 7 cases. Initially, an interim trustee having the powers and duties of a permanent trustee is appointed from the panel.159 The service of an interim trustee terminates when a permanent trustee is elected or designated under 11 U.S.C. § 702 and becomes qualified pursuant to 11 U.S.C. § 322.160 If a trustee dies, resigns, fails to qualify or is removed, an interim trustee is appointed until an election can be held.161 If creditors do not elect a successor or if the case is reopened and the court so directs, the U.S. Trustee appoints a panel trustee to the case.162 As a practical matter, in most cases the panel trustee is the person who is appointed the permanent trustee.
ii. The trustee:
• liquidates estate property;
• is accountable for all property received;
• ensures that the debtor surrenders or redeems property or reaffirms obligations as intended;
• investigates the financial affairs of the debtor;
• if it serves a purpose, examines proofs of claim and objects to improper proofs of claim;
• opposes the discharge of the debtor, if advisable;
• furnishes information about the bankruptcy estate and its administration upon request;
• files required reports with governmental agencies, the U.S. Trustee or as required by the court when the trustee operates the debtor's business;
• makes a final report; andiii. The trustee is nearly always authorized to conduct the meeting of creditors, during which the debtor is examined under oath.164 In most chapter 7 cases, there are no assets to administer for the benefit of creditors, and the trustee files a notice of this determination at the conclusion of the meeting of creditors. After the debtor's discharge order is entered, the case is closed.
• files a final accounting of the trustee's administration with the court and the U.S. Trustee.163
iv. If the trustee determines there are assets to liquidate for the benefit of creditors, the trustee will convert the nonexempt property of the estate to cash through various methods, including sale of property,165 avoidance actions166 and turnover demands.167 After review by the U.S. Trustee, notice to creditors and court approval, the trustee is required to invest safely the resulting funds of the estate168 and distribute the funds according to the priorities established by 11 U.S.C. §§ 507 and 726.
b. Chapter 13 Trustee
i. All chapter 13 cases are administered by a trustee who is either a standing trustee, a disinterested person appointed by the U.S. Trustee or the U.S. Trustee.169 The U.S. Trustee appoints one or more individuals as chapter 13 standing trustee(s) in a district if the number of chapter 13 cases warrants the appointment....
ii. The chapter 13 trustee's duties are similar to those of the chapter 7 trustee and include:170
• accounts for all property received;
• ensures that the debtor surrenders or redeems property or reaffirms obligations as intended;
• investigates the financial affairs of the debtor;
• if it serves a purpose, examines and objects to improper proofs of claim;
• opposes the discharge of the debtor, if advisable;
• disburses plan payments to creditors as provided for in the confirmed plan;
• furnishes information about the case and the administration of the estate upon request of a party in interest;
• makes a final report; and
• files a final account of the estate's administration with the court and the U.S. Trustee.171
iii. In addition, the chapter 13 trustee must appear and be heard at any hearing that concerns the value of property subject to a lien, the confirmation of a plan, or the modification of a plan after confirmation; assists the debtor in performance of
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