Bankruptcy Trustee Terms
If you’ve done any research on bankruptcy, you probably have seen the word Bankruptcy Trustee brought up at one time or another. A Bankruptcy Trustee is often thought of as someone handling the bankruptcy case. You have probably also heard the words Trustee Meeting or Bankruptcy Trustee Meeting. This meeting can also be referred to as the Creditor’s Meeting or Meeting of Creditors. All of these terms are related and will be explained here.
What Is a Bankruptcy Trustee
A Bankruptcy Trustee is someone who was hired by the court to represent the court in a bankruptcy negotiation. A bankruptcy can be a former judge, a bankruptcy attorney, an accountant, a former bankruptcy court staff member, or all of the above. It can be anyone that the court feels has the knowledge to be able to act on behalf of the bankruptcy court in bankruptcy filings. The best way to view the Bankruptcy Trustee is as an employee of the bankruptcy court.
How The Bankruptcy Trustee Gets Paid
During a bankruptcy filing, it is important to know how the Bankruptcy Trustee is motivated to work and how he/she is compensated. The Bankruptcy Trustee can make money in a few ways. The first most obvious way is by administrative fees. The court will pay a Bankruptcy Trustee to handle cases. The other way a Bankruptcy Trustee can get paid is through commissions from funds that are disbursed to creditors within the bankruptcy. The Bankruptcy Trustee will look through your assets to make sure that you don’t have anything of value that is above the exemption limits set by the bankruptcy court. The reason they are motivated to find these assets is because they will be paid a commission on whatever they find and determine to be unable to exempt in bankruptcy court.
If you file for Chapter 7 bankruptcy and you own a home which has $200,000 above the exemption limit for home equity, the home would ordered to be sold by the court and the Bankruptcy Trustee would receive a commission from the $200,000 that was recovered from the sale of the property. The amount after the commission would be disbursed to creditors of the party who filed for bankruptcy. This is an extreme example since most people filing for bankruptcy are unlikely to have $200,000 in equity in a home. Hopefully, if you have $200,000 in equity in a home, you would probably utilize the equity to help solve your debts before heading to a bankruptcy court.
What Is A Bankruptcy Trustee Meeting, Meeting of Creditors, or 341(a) Hearing?
The Meeting of Creditors or 341(a) Hearing is also sometimes called the Bankruptcy Trustee Meeting. These are all referring to the same exact meeting. It is a hearing where the debtor is required to attend during the process of a bankruptcy filing. The 341(a) Hearing is where creditors can appear to make a claim against the debtor. It is also called the Bankruptcy Trustee Meeting because, in some cases, no creditors will appear and the only one asking some questions will be the Bankruptcy Trustee. The Bankruptcy Trustee can ask a number of basic questions to the debtor about their situation, the debts they are dealing with, or anything else related to the bankruptcy. If you are filing for bankruptcy, you will be required to attend this meeting. You can be exempted from appearing at this meeting for very specific medical reasons that have to be approved by the court.
Dealing with a Bankruptcy Trustee can be an intimidating event. Bankruptcy Law Professionals recommends having your attorney attend the 341(a) Hearing with you so that you have someone on your side who can guide you through the meeting. Fortunately, we always have our attorney attend the 341(a) Hearing with you in all of our bankruptcy filings.