The Role of a Bankruptcy Trustee in Chapter 7: What Maryland Residents Should Know

September 15, 2023

When you file for Chapter 7 bankruptcy, one of the first things that will happen is that a trustee will be appointed. In your case, the bankruptcy trustee’s role is to act as an administrator. While the judge has the court’s power behind them, the trustee is performing the day-to-day duties necessary to conclude your case so you can get a debt discharge.

A Chapter 7 bankruptcy is a liquidation of your assets. You can protect some of your assets based on Maryland’s bankruptcy exemptions. The rest of your assets may be sold or distributed among your creditors. Once the bankruptcy process is complete, you will receive a discharge from qualifying debts. Then, you will get the fresh start promised in the bankruptcy process.

The Trustee Handles Almost Every Aspect of Your Chapter 7 Case

Once you file for bankruptcy, the trustee will appoint a private trustee to serve in your case. Many things happen in the bankruptcy process, and the trustee will be involved in almost all of them. Here are the functions that the bankruptcy trustee will perform:

• They will collect the assets not subject to the property exemptions.
• The trustee then liquidates the assets.
• They will then distribute the proceeds to the creditors.

The first thing that the trustee will do is determine whether any assets are subject to liquidation. In many cases, the debtor does not have any assets that fall outside the bankruptcy exemptions. It is a common occurrence, especially for debtors who otherwise meet the means test in a Chapter 7 bankruptcy. Then, the trustee will write a “no asset” report, and the case will proceed toward discharge.

Early in the case, you would be required to attend a section 341 meeting with the bankruptcy trustee; your creditors may also be present at this meeting, although they rarely are included. Instead, the trustee asks you questions and learns more about your situation.

The Trustee Maximizes Returns for Creditors

There are other cases when the debtors do have some assets. Multiple unsecured creditors may be waiting in line to recover whatever they can. The creditors cannot take any action to collect the debts because of the automatic stay, so they rely entirely on the trustee to act.

The trustee’s role is to maximize the return for the creditors. Trustees are also incentivized to maximize the value of the assets because they receive a percentage of what is disbursed to creditors. In a bankruptcy case, the creditors are being paid pennies on the dollar for their debts. Once the bankruptcy process concludes, the creditors will have no further claims because your debts are discharged.

The Bankruptcy Trustee Oversees the Chapter 7 Process

The trustee also has some type of oversight role in the process. For example, the trustee may use their avoiding powers if they determine that a debtor has taken steps to evade bankruptcy laws through fraudulent or preferential transfers; if they find that the debtor has moved assets before filing for bankruptcy, the trustee could take action to nullify that transfer and bring the assets into the bankruptcy estate.

You can expect the bankruptcy trustee to look closely at you in a Chapter 7 case. First, they will be your primary point of contact throughout your case. If you have questions, they will likely be addressed to the trustee. Most bankruptcy filers will never see the inside of a courtroom during the bankruptcy process. However, you would likely speak with the trustee in an interview after they have reviewed your paperwork.

Get Help From a Baltimore Chapter 7 Bankruptcy Lawyer at LeViness, Tolzman & Hamilton

Our Baltimore Chapter 7 bankruptcy lawyers at LeViness, Tolzman & Hamilton can protect your rights. Call us at 800-547-4LAW (4529) or contact us online to schedule a free consultation to discuss your case.

We have offices in Baltimore, Glen Burnie, Lanham, and Owings Mills, allowing us to represent clients in Maryland, including those in Anne Arundel County, Baltimore County, Carroll County, Harford County, Howard County, Montgomery County, Maryland’s Western Counties, Prince George’s County, Queen Anne’s County, Southern Maryland, and the Eastern Shore, as well as the communities of Catonsville, Essex, Halethorpe, Middle River, Rosedale, Gwynn Oak, Brooklandville, Dundalk, Pikesville, Nottingham, Windsor Mill, Lutherville, Timonium, Sparrows Point, Ridgewood, and Elkridge.