Redwood City Bankruptcy: About the Trustee

The term “trustee” applies to two separate people in the same bankruptcy case due to the structure of the federal government and the United States Bankruptcy Court.
Specifically, The United States Trustee Program is the component of the Department of Justice responsible for overseeing the administration of bankruptcy cases and private trustees under 28 U.S.C. § 586 and 11 U.S.C. § 101. It consists of an Executive Office for U.S. Trustees (EOUST) in Washington, DC; 21 regional U.S. Trustees; and 95 field offices.

Therefore, whenever a bankruptcy is filed, the United States Trustee’s office is notified. A federal trustee is “appointed” and it is his responsibility to monitor the case. Of course, most cases operate without a hitch and the United States Trustee plays no role apart from doing one thing: appointing a local or “special” trustee.
The local trustee is the person that actually administers the case. She is an attorney from the community and not a federal employee. She gets paid between $50 and $100 out of the filing fee; additionally, if the trustee is able to marshal non-exempt assets as part of the Chapter 7 liquidation, she receives some portion of the proceeds. She is, therefore, motivated to find such items by asking the debtor about them at the 341(a) hearing. This local trustee also files objections, where appropriate, and litigates them as needed in bankruptcy court. In a Chapter 13, the local trustee serves as the distributing agent of the planned payments made to the court. Usually, it is this local/special trustee that people mean when they reference their “bankruptcy trustee,” but there are, in fact, two to whom the name applies.

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