The U. S. Trustee–The Behind-the-Scenes Bankruptcy Administrator and Hope-You-Never-Meet Enforcer

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The U. S. Trustee–The Behind-the-Scenes Bankruptcy Administrator and Hope-You-Never-Meet Enforcer

I know who my bankruptcy trustee is, but now who is the ”U. S. Trustee”?

You’re about to file a Chapter 7 or Chapter 13 case. You know in a Chapter 7 that your bankruptcy trustee is the person who looks over your paperwork and talks with you for a few minutes, mostly to decide whether or not everything you own is exempt so that you can keep it all.  In a Chapter 13 case you know that this trustee helps determine whether the Plan we submit meets legal requirements, and then gets my monthly Plan payments and distributes them to my creditors. The “Office of the United States Trustee” is a different player altogether.  It CAN cause major problems especially in a Chapter 7 case, so it helps to know its role, even though in most cases it mostly works in the background.

The U. S. Trustee is part of the United States Department of Justice, and does mostly two things: 1) helps the Bankruptcy Court administer bankruptcy cases, and 2) enforces bankruptcy law. These are reflected in this agency’s stated mission: “to promote integrity and efficiency in the nation’s bankruptcy system by enforcing bankruptcy laws, providing oversight of private trustees, and maintaining operational excellence.”

In its administrative role, the U. S. Trustee appoints and supervises the Chapter 7 and Chapter 13 trustees. It keeps an eye on bankruptcy cases so that they are administered efficiently. It reviews and can object to fees charged by attorneys and other professionals.

In its enforcement role, the U. S. Trustee can spell trouble in two ways. 1) In a Chapter 7 case, it can try to “convert” your case into a Chapter 13 one. And 2) it can accuse you of providing inaccurate information on your bankruptcy documents or while you are under oath during your hearing with the trustee.

In most cases it’s not all that hard to make sure that you don’t hear from the U. S. Trustee.

First, as for not having your Chapter 7 cases being challenged as belonging under Chapter 13, this is mostly a matter of your income and expenses—whether your case meets a complex set of rules called the “means test.” Avoid this kind of objection by the U. S. Trustee by working closely with your attorney before your case is filed to make sure you clearly meet this test.

And second, as far as avoiding allegations of misrepresentation, again it’s a matter of appropriate preparation. Diligently provide your attorney with the paperwork and information needed so that all of the documents prepared for the Bankruptcy Court and for the Chapter 7 or 13 trustee are accurate and consistent.

The fact is that a fair amount of the bankruptcy process operates under the honor system. The U. S. Trustee is there, looking over your shoulder, to keep it honest.

The rest of the time we hear from the UST usually involves some kind of alleged misrepresentation by the person filing bankruptcy. This can arise in many ways, but usually involves apparent contradictory information between the bankruptcy documents and other evidence, or between documents and your oral statements at the “meeting of creditors.” The UST may even receive information from outside parties, such as an ex-spouse or ex-business partner, or from public sources, such as real estate or vehicle ownership records.

Lots of times when we do hear from the UST about any of these things, the matter can be resolved favorably. Assuming that you have been completely honest with us, often we can anticipate and address these issues effectively if and when the UST contacts us. But especially if the challenge comes unexpectedly, it’s crucial to address it quickly, honestly, thoroughly.

Our goal is to have your bankruptcy case go as smoothly as possible, but when for whatever reason it does not, we are in your corner to advise and protect you.