When a debtor files for Chapter 7 bankruptcy in Kansas City, a trustee is appointed to the case. The trustee is a neutral party whose role is to be the administrator for the case and liquidate any of the assets belonging to the debtor that are not subject to exemptions.
If an estate has assets subject to liquidation, the Chapter 7 trustee must do so in a way that maximizes the amount of money that can be distributed to any unsecured creditors of the debtor. The trustee has the ability to sell off assets that do not have liens attached to them and are not exempt.
The trustee also has what are known as “avoiding powers.” This means the trustee is able to, within the span of 90 days prior to filing the petition, allocate transfers to be made to preferred creditors. The trustee’s avoiding powers also allow him or her to negate prepetition transfers of assets that failed to be legally perfected per laws other than bankruptcy laws when the petition was made.
When it comes to distributing the assets of the estate per the U.S. Bankruptcy Code, there are six different classes of claims. The highest priority ones must be fully paid off before payments can be made to the next one in line. For this reason, sometimes debtors may not be interested in how the trustee disposes of the property of the estate, except for debts that cannot be discharged through bankruptcy. A debtor’s main concern is usually to keep as much of their property that is exempt from liquidation and to discharge through bankruptcy as many debts as possible.
The role of the bankruptcy trustee is an important one. Those with more questions about the role of the bankruptcy trustee and Chapter 7 bankruptcy in general should do their research so they can make an informed decision.
Source: United States Courts, “Liquidation Under the Bankruptcy Code,” accessed Jan. 5, 2015