Trustees are appointed to their position by the United States Department of Justice. They are charged with administering the bankruptcy estate which means different things depending on whether the debtor files under Chapter 7 or Chapter 13 of the Bankruptcy Code.
In Chapter 7 bankruptcy the trustee’s goal is to acquire assets on behalf of the bankruptcy estate so that the property can be liquidated and the proceeds disbursed to the unsecured creditors listed in the bankruptcy schedules. These assets usually take the form of nonexempt property. The term nonexempt property describes property that the debtor is not able to protect using exemptions available to them. When property is nonexempt the trustee can seize the property for the benefit of the creditors. In these types of cases the trustee is involved in the bankruptcy until the bankruptcy estate has been administered, usually three to five months after the case is filed but sometimes longer if the trustee determines there are assets to be liquidated for the benefit of the creditors.
In Chapter 13 bankruptcy cases the trustee is responsible for collecting the funds paid into the reorganization plan. The trustee takes the money paid by the debtor and distributes the funds to the creditors according to the terms of the confirmed plan. The trustee also reviews the plan and ensures that it meets the requirements of the Bankruptcy Code regarding how much money is available to unsecured creditors. In these types of cases the trustee is involved in the bankruptcy until the case is dismissed or until the debtor receives a discharge, usually three to five years after the case is filed.