Who Is That U.S. Trustee Lurking in the Bankruptcy Shadows?
Jan. 7, 2014
The United States Trustee is the other trustee—not the Chapter 7 or 13 one you see but rather one who works in the background of your case.
Who the U.S. Trustee is Not
If you are about thinking about filing, or have already filed, a Chapter 7 “straight bankruptcy” case, or a Chapter 13 “adjustment of debts” one, you’ve likely heard who your bankruptcy trustee is what he or she does. In a Chapter 7 case, your trustee reviews your documents filed at the bankruptcy court, and talks with you for a few minutes at the “meeting of creditors.” This trustee’s primary role is to determine if you own anything that is not “exempt” that you have to turn over to your creditors. In a Chapter 13 case, your trustee determines whether the payment plan we propose meets legal requirements, works with us to make any changes, and when necessary formally objects to the plan. Once a plan is approved by the bankruptcy judge, you send your monthly plan payments to this trustee, who then distributes them to your creditors as laid out in the plan.
Part of the U.S. Dept. of Justice
But the United States Trustee has an altogether different role. This special kind of trustee works mostly in the background, although occasionally can cause you problems. So it’s important knowing his or her role.
The U. S. Trustee (UST) is part of the United States Department of Justice, and has two primary roles. It:
helps the Bankruptcy Court administer bankruptcy cases, and
enforces bankruptcy law.
In its administrative role, the UST appoints and supervises the Chapter 7 “panel trustees” (usually a number of them in each jurisdiction) and the Chapter 13 trustees (usually one or two “standing trustees). The UST oversees bankruptcy cases for administrative efficiency, and reviews and can object to fees charged by attorneys and other professionals. In Chapter 11 business reorganizations the UST has a much more active administrative role.
In its enforcement role, in the relatively few cases that the UST gets noticeably involved, he or she tends to do so in one of two ways:
In a Chapter 7 case, object to you being eligible based on your income and allowed expenses, and potentially other factors; the UST could try to either “dismiss” (throw out) or “convert” your case into a Chapter 13 one.
In any kind of case, accuse you of presenting inaccurate information on your bankruptcy documents or while under oath during your hearing with the Chapter 7 or 13 trustee.
Avoid Running Afoul of the U.S. Trustee
Most of the time steering clear of the UST’s enforcement arm is not difficult. Just do the following:
As for preventing your Chapter 7 case from being challenged as not being eligible for Chapter 7, this is mostly a matter of meeting the “means test,” a potentially complex set of income and expense disclosures. Avoid this kind of challenge by working closely with your attorney before your case is filed to make sure the detailed means test information is presented accurately, and that you clearly meet this test.
As for avoiding allegations of inaccuracy or incompleteness, again it’s mostly a matter of appropriate preparation. Be sure you understand the questions asked of you by your attorney and/or his or her staff, or that are on any forms you fill out. When in doubt, always ask for clarification. Diligently provide your attorney with the paperwork and information needed so that all of the documents filed at the Bankruptcy Court are accurate and complete.
If You Hear from the U.S. Trustee
If after all this you and your attorney still hear from the UST, most of the time the issue raised can be resolved favorably. It’s crucial to address and respond quickly to any contact from the UST. Besides simply being courteous, you gain credibility by being cooperative. Be aware also that the UST must do his or her work within the constraints of some quick legal deadlines, and so will be compelled to get aggressive quickly if you and your attorney don’t respond right away
You and your attorney both want your bankruptcy case to go as smoothly as possible. The best way to do that is to be honest and thorough with your attorney as your bankruptcy papers are prepared. And then in the unusual event that you hear from the UST during your case, don’t panic and avoid the matter, but rather immediately contact your attorney so that it can be addressed and resolved quickly.