By John Lee

I have seen more than one debtor, represented by counsel and Pro Se, which was confused by the Trustee’s role in bankruptcy.  The Bankruptcy Trustee is assigned by the bankruptcy Court to represent the best interest of the creditors.  The Trustee represents the opposing party in your bankruptcy, his job is to make sure that the creditors get as much or your stuff/money as they can.  The Chapter 7 Bankruptcy Trustee may be nice and polite at the 341 hearing, he may even tell a joke, but if he sees one of your assets that he thinks he can take, he will make every effort to take that asset and turn it over to your creditors.  The Chapter 7 Bankruptcy Trustee is paid a commission based on the value of the assets he can seize from a debtor.  The more he takes from you, the more money he makes for himself.

When you file bankruptcy the Bankruptcy Court assigns a Standing Trustee to your case.  The court also issues an order directing you, the debtor, to cooperate with the Bankruptcy Trustee and his mission to administer your case.  If you fail to cooperate, turn over documents or assets that he requests, he has the power to dismiss your bankruptcy.  When you fill out your petition and schedules you have a duty to disclose all of your assets, including assets you may be entitle to receive in the near future.  The Chapter 7 Bankruptcy Trustee reviews all of your assets to determine if any of them, including future tax refunds, are not exempted.  If they are not properly exempted, the Bankruptcy Trustee will direct the debtor to turn over the assets that are not exempt, including, but not limited to: future tax refunds, houses, cars, bank accounts, life insurance policies and much more.

Prior to the 341 hearing the debtor is required to turn over to the Chapter 7 Bankruptcy Trustee certain documents.  If these documents are not delivered to the Bankruptcy Trustee in a timely fashion the Bankruptcy Trustee may dismiss the debtor’s bankruptcy case.  Some of the documents that the debtor is required to turn over include: (1) tax refunds, (2) pay stubs, (3) bank statements, (4) deed and deed-of-trust, (5) DMV abstract of title, (6) pay off amounts on secured debts, (7) life insurance policies, and (8) valuations on property.  Some Bankruptcy Trustee’s require more or less documentation, but this list covers what most of them are looking for.

Prior to the 341 hearing the Bankruptcy Trustee will compare the debtor’s documents and assets to the what the debtor is permitted to exempt (keep) and at the 341 hearing inform the debtor as to the items the debtor must turn over to the Bankruptcy Trustee.  If the Trustee determines that the debtor omitted property or assets from the schedules then he may refer the case to the Department of Justice for criminal prosecution.  Bankruptcy crimes (omitting assets from bankruptcy schedules) are vigorously prosecuted.

Clients in the pre-filing stage of their bankruptcy case often ask me what to expect at a 341 hearing.  The 341 hearing is typically in an office building, not a court room.  There is no Judge present.  The Standing Bankruptcy Trustee will be conducting the hearing; he will not be wearing a robe or have a gavel.  Typically a Bankruptcy Trustee will be a lawyer and will wear a suit to the hearing.  The room will be one big open space with fifty or so chairs placed in the room where the debtors will wait to be called up to the front for their hearing.  The hearing will be scheduled on the hour throughout the day.  Normally if you are scheduled at 2 PM you will be done with the hearing by 3 or 4 PM.  When the Bankruptcy Trustee calls your name, you will go forward to the front of the room and show him your photo ID and socials security card.  After swearing you in, he will ask you a series of questions designed to help him determine if you have any assets he can take to raise money for your creditors.  All of your answers are under oath, so you have to tell the truth.

After the hearing is finished he will either conclude the hearing or adjourn it to another day.  Typically if you brought him all the documents that he needed to review your case he will conclude the hearing.  If there were any missing documents or if you are supposed to turn over an asset he may choose to adjourn the hearing to a future date to ensure that you fully cooperate.

If the Bankruptcy Trustee determines that there are no assets available for him to administer, then he will file a No Asset Report with the Court.  Shortly after the No Asset Report is filed with the Court the Court will close your file in the Court.  The discharge is sometimes entered by the Court prior to the Trustee filing the No Asset Report, when this happens the debtor still has an ongoing duty to cooperate with the Bankruptcy Trustee until the No Asset Report is filed.  If the debtor refuses to cooperate with the Trustee after the Discharge is granted then the Bankruptcy Trustee can have the Discharge revoked.

Chapter 7 Trustees can be difficult to deal with, especially if they are trying to seize your money or assets.  The attorneys at John W. Lee, PC have helped thousands of people navigate through the obstacles found in the bankruptcy process.  We offer a free consultation to help you decide whether bankruptcy is right for you.

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