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What is the role of a trustee in a bankruptcy case?

Many Colorado residents have little to no familiarity with the legal system until they encounter it firsthand. While this is perfectly understandable, it can also lead to misinformation about how the system functions and what rights individuals may exercise.

A key example of this is the bankruptcy process, which may be unfamiliar even for those individuals who have been involved in the court system before. For instance, one misunderstanding individuals may have deals with the role of a bankruptcy trustee.

In Chapter 7 bankruptcy, as well as Chapter 13 bankruptcy, a trustee is assigned once a person's petition is filed. However, there are differences in the trustee between these different chapters. In Chapter 7, a panel trustee is assigned, which is typically someone among a group who is assigned by rotation. In Chapter 13, on the other hand, a standing trustee is assigned who is the same between cases.

Individuals may not realize that the trustee is not there to serve as their attorney. Rather, the trustee's role is to administer the case by working on behalf of the bankruptcy estate. For example, the trustee has the power to collect and sell non-exempt property in Chapter 7 cases during the liquidation process. In Chapter 13 cases, the trustee can collect and pay money from the repayment plan that is established under that chapter.

Accordingly, much of a trustee's role is to work to pay off creditors. This is far different from a person's attorney, who advocates on behalf of the individual and works to make sure his or her rights are protected. Understanding differences like these are vital for those who file for bankruptcy.

Source: United States Bankruptcy Court, "Frequently asked questions," accessed on Dec. 5, 2014

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