Who are the Players in a Bankruptcy and What are Their Roles?

A client and attorney can cover only so much ground during an initial consultation, and attorney’s, because they work in the bankruptcy system day to day, tend to throw out terms like, trustee, U.S. trustee, etc., but the client is usually unaware of how the bankruptcy system is organized or that it is adversarial in nature; the word “trustee” sounds so safe and innocuous that the would-be client may be unaware that the various trustees in bankruptcy are the client’s adversary in the case. 

Bankruptcy Judge: The judge is the objective arbitrator of the bankruptcy system. Whenever there is a dispute or legal issue that cannot be resolved through negotiation, the parties will present their case to the bankruptcy judge for decision. In the vast majority of cases, the client will never meet the bankruptcy judge. 

Chapter 7 Panel Trustee: (Also, generally referred to as the Bankruptcy Trustee). Panel Trustee’s are appointed to represent your unsecured creditors collectively; although many Panel Trustees are lawyers, being a lawyer is not required. The chapter 7 trustee is not the client’s friend; the trustees’ job is to determine if the client owns any non-exempt assets that can be sold or used to pay back something to creditors. The chapter 7 trustee is the client’s adversary and is simply looking for a way to collect some money to pay over to unsecured creditors.   

Chapter 13 Panel Trustee: These trustees are appointed to oversee chapter 13 bankruptcies. A chapter 13 bankruptcy involves a monthly payment plan; as with the chapter 7 trustee, the chapter 13 trustee is appointed to represent your creditors collectively. The chapter 13 trustee’s job is to make sure your chapter 13 plan payments are as high as legally possible. The chapter 13 trustee is the client’s adversary. 

United States Trustee: The U.S. Trustees are attorneys that work for the Department of Justice and are appointed by the Attorney General of the United States. US Trustee’s enforce the bankruptcy code and over see the Panel Trustees. For example, the U.S. Trustee is charged with determining whether a chapter 7 case should be a chapter 13. Whereas Panel Trustees are appointed to oversee individual bankruptcies, the U.S. Trustees oversee the bankruptcy system, but the Bankruptcy Judge is the final arbiter. (Note, there are appeal rights beyond the bankruptcy judge).