When a client and his or her lawyer file for bankruptcy, it is not always assumed that everything on the petition is true. Usually, an attorney won't file a claim if they know it's not true, but the attorney also depends on the client's honesty to make sure they have all the right information.
Most of the time, the lawyer who files the petition for bankruptcy has already looked over the paperwork to see if any of the claims made are false. After the case is filed, the trustee will look over all of the information the client gave, looking for mistakes or signs that fraud might be going on.
In bankruptcy, it is the trustee's job to make sure that all creditors are treated fairly and that any non-exempt assets are sold for as much money as possible. This money is then split among the creditors based on their claims.
Trustees are chosen by the United States Trustee, who works for the Department of Justice. In a bankruptcy case, nothing has to do with a state agency because everything is handled by the federal bankruptcy courts.
They will also attend meetings with creditors and have the power to get rid of debt if the creditor finds proof of fraud or ineligibility. The trustee will also check to make sure that the client is taking all the steps that new bankruptcy laws require in terms of managing money and making a budget. Most of the time, bankruptcy lawyers work with the same trustees on multiple cases and know how to file the paperwork to meet each trustee's needs. If you have questions about how the trustee handles a case, you should ask your lawyer.
Depending on the type of bankruptcy filed, the trustee's job changes. Whether a business is filing under Chapter 7, Chapter 13, or Chapter 11, his job is to figure out the real value of any assets claimed and protect creditors from false claims, making sure they get a fair price for any assets. Even though a Chapter 13 trustee's main job is to keep an eye on things, they stay close to the case and represent their clients to make sure payments are made and given out according to the court's plan.
Trustees who work on Chapter 7 filings usually have a one-year term. Trustees who work on Chapter 13 filings, on the other hand, may be permanent trustees who serve a certain area or court region. Some clients might not understand what a bankruptcy trustee does and might think that they care more about helping creditors than making sure the client gets a fair chance. The Most Chapter 7 bankruptcies involve few assets, but if there are, it is the trustee's job to sell them and split the money.
When a Chapter 13 bankruptcy is filed, there are no assets to sell, so the trustee's job is more administrative. They will make sure that the client really owes the money they say they do, and they will have the final say on the payment plan. Most lawyers won't file for Chapter 13 for a client if they don't have enough money to make the payments.
The client's payments will be taken by the trustee, who will then give them to the creditors according to the plan approved by the court.
