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What is the role of a bankruptcy trustee?

When a Tennessean gets too far into debt, one option is to file for bankruptcy under Chapter 7. Filing can put an immediate halt to a creditor's debt-collection efforts while starting the process towards a fresh financial future. One player in that process is a bankruptcy trustee. What is the trustee's role?

To understand the trustee's role, it helps to understand what happens when a person files for bankruptcy. Filing creates an "estate." This estate temporarily owns the filer's property. Someone has to administer that estate, which is where the trustee comes into play.

A trustee is an independent third party appointed by the court. A trustee's primary role is to identify assets that can be sold off, and then to maximize the return on those assets. In other words, the trustee's goal is to help creditors get as much of their money back as possible.

The trustee has several ways to help creditors. The first, as discussed, is to identify non-exempt assets to sell off. But those powers go further. The trustee also has what are known as avoiding powers. In essence, these powers allow the trustee to undo a debtor's actions if the act or acts look suspicious. For example, if the debtor made a preferential deal with a creditor shortly before filing for bankruptcy, the transfer can be undone. Similarly, if a debtor made what appeared-to-be fraudulent sales of property, the trustee can unwind those too.

Understanding the trustee's role is just one of the many things that Tennesseans should explore before they file for bankruptcy. To learn more about what they need to know before they file, Tennessee residents may benefit from speaking with an experienced bankruptcy attorney.

Source: uscourts.gov, "Chapter 7 - Bankruptcy Basics," Accessed Nov. 22, 2016

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Mark T. Young & Associates
2895 Northpoint Blvd.
Hixson, TN 37343

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