New York consumers who are struggling with their financial obligations may be interested in learning more about the role of the trustee in a Chapter 7 bankruptcy. Once the petition for Chapter 7 bankruptcy is filed, an impartial case trustee is appointed by the U.S. trustee. The impartial case trustee is responsible for administering the case and liquidating the nonexempt assets owned by the debtor. There is no distribution made to unsecured creditors if all the assets owned by the debtor are exempt or secured by valid liens.
The majority of Chapter 7 bankruptcy cases involving individual debtors are typically filed as ‘no asset” reports by the trustee because the assets are exempt or they are subject to a valid lien. Otherwise, unsecured creditors are required to file a claim with the appropriate bankruptcy court within 90 days following their first meeting. Governmental entities have 180 days after the filing date to file their own claim. The trustee’s primary responsibility in a Chapter 7 asset case is liquidating any nonexempt asset owned by debtors, and maximizing the returns made available to the unsecured creditors.
Nonexempt assets without any liens are sold by the trustee. Assets worth more than any liens or security interests may also be sold by the trustee. Trustees are also granted avoiding powers, which provide them with several methods for recovering certain assets that were transferred before the petition was filed. Courts may also authorize trustees to operate a debtor’s business for a limited time in an attempt to improve profitability before liquidation.
Debtors who need more information about Chapter 7 bankruptcy may want to speak with an attorney who has experience with these matters. The attorney can outline the eligibility and other requirements while discussing other forms of debt relief that may be available.