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Trustees and Being a Trusted Member of the Bankruptcy System

According to the United States Bankruptcy Court of Maine, “The United States Trustee Office is a department within the U.S. Department of Justice which appoints, supervises, audits, and evaluates the performance of the case trustees, and appoints Creditors Committees in Chapter 11 cases. It is not part of the Bankruptcy Court and does not have the power to resolve disputes but handles the administrative aspects of bankruptcy estates.”

The Panel Trustee is usually the one who is appointed to administrating a bankruptcy estate in a Chapter 7. Private individuals are appointed by the U.S. Trustee as panel trustees. Most are lawyers but do not necessarily have to be one in order to be appointed.

In most Bankruptcy Court Districts, usually one case trustee is appointed to handle Chapter 13 and Chapter 12 cases. Most individuals file either a Chapter 7 or a Chapter 13.

All trustees are expected to be trusted members of the bankruptcy system. Panel or case trustees are not directly supervised by the bankruptcy court, but must abide by bankruptcy court rulings and bankruptcy law like any other citizen. They are supervised and held accountable by the U.S. Trustee Office.

The U.S. Trustees are also responsible for being trusted members of the bankruptcy system and like the panel trustees, they are not supervised by the bankruptcy court, but they also must abide by bankruptcy court rulings and bankruptcy laws like any other citizen. They are supervised and held accountable by the United States Department of Justice.

Having said all of this, all trustees are human beings. They can make mistakes, and there are good trustees and not so good trustees. Most all trustees know bankruptcy law and their responsibilities towards duties in relation to that law. Unfortunately, because the trustees are all human, sometimes they can show a disregard for the law like anyone else can.

Stories about panel trustees stretching their responsibilities sometimes arises on bankruptcy forums like this one: A bankruptcy case trustee converted a no asset case to an asset case after the bankruptcy was filed and discharged, but not yet closed. The reason for the change was to get a new appraisal on the home owned by the filing debtor who had already surrendered the home and vacated it. The trustee wanted to perform a short sale on the home. The debtor had already provided evidence the property was underwater, but the trustee’s realtor wanted new documents from the filing debtor to perform the short sale.

The action by the trustee caused one lawyer to respond on the forum with: “ If the Trustee insists you cooperate you should file an Application to Abandon the property and get the matter before the Judge. Let the Trustee explain why he wants to liquidate property that is of “inconsequential value and burdensome to the estate” just so that he and his good buddy, the realtor, can make some money.”

Other such similar incidences have been reported on the same forum. These types of stories are good reasons all trustees should be a trusted member of the bankruptcy system. They are also good reasons why filing debtors should acquired trusted bankruptcy lawyers to represent them.

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