What is a Trustee in Chapter 13 Bankruptcy in New Jersey?

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Bankruptcy in New Jersey is a complex process that needs to be overseen by experienced professionals. This is especially true of Chapter 13 bankruptcy, which is more complicated and technical than Chapter 7 bankruptcy. In addition to your Cherry Hill bankruptcy lawyer, who will manage your paperwork, protect your legal rights, and help you make sound financial decisions, another person who will play an important role in your bankruptcy case is the Chapter 13 trustee. Continue reading to learn more about what a bankruptcy trustee does in Chapter 13 cases.

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What is a Bankruptcy Trustee in Chapter 13?

A trustee is simply a person who has been given the authority to manage another person’s assets and property. To provide a common example, parents often set up trust funds for their children. The person who oversees the trust fund for its beneficiaries is called the “trustee.”

A bankruptcy trustee’s authority comes from the bankruptcy court. If you live in Cherry Hill, Camden, Gloucester Township, Winslow Township, or any other part of Camden County, your bankruptcy court is the United States Bankruptcy Court for the District of New Jersey, which has a courthouse in downtown Camden. The court will assign a trustee to your case shortly after you file your petition for Chapter 13 bankruptcy, a task which your Cherry Hill Chapter 13 bankruptcy attorney will help you manage.

The trustee is supposed to function as a neutral, unbiased third party who can make financial decisions pertaining to your case. However, the trustee’s role is very different in Chapter 13 bankruptcy than it is in Chapter 7 bankruptcy.

In Chapter 7, the trustee’s primary job is to liquidate (sell) your nonexempt property. Proceeds from the sale pay back your creditors to the greatest extent possible. However, most people who file Chapter 7 can keep much (or all) of their property by using bankruptcy exemptions strategically. Additionally, there are many instances where trustees decline to sell property, which is called “abandoning” the property, because the property has minimal value.

In Chapter 13, property is not liquidated to pay back creditors. Instead, you keep your property, but must make monthly payments toward certain debts.

Since property isn’t liquidated in Chapter 13 like it is in Chapter 7, the trustee performs a different function. In Chapter 13 bankruptcy, the trustee’s main job is to disburse (distribute) your monthly payments to your creditors. You make payments to the trustee, and the trustee determines how funds should be allocated to each of your creditors based on the nature of their claims. For instance, creditors who have priority claims get paid first. An example of this might be an ex-wife or ex-husband to whom you owe alimony or child support.

In addition to handling payments to creditors, the Chapter 13 trustee also performs other functions. For example, the trustee will review your proposed Chapter 13 payment plan (“reorganization” plan) to make sure it is in compliance with the U.S. Bankruptcy Code.

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What Questions Will the Bankruptcy Trustee Ask Me?

Many debtors become nervous once they learn that they will be questioned by the bankruptcy trustee assigned to their case. While it’s normal to feel some jitters before any important interview, try not to worry too much. As long as you have complied with bankruptcy regulations and court rules – which your attorney will be there to help with at every stage of your case – you have little to fear.

You will be questioned by the bankruptcy trustee during a meeting called the “meeting of creditors” or “341 hearing,” a nickname that comes from Section 341 of the U.S. Bankruptcy Code. In a Chapter 13 bankruptcy case, the 341 hearing takes place between 21 days (three weeks) and 50 days (about seven weeks) after the date you file your petition for bankruptcy.

The purpose of the questioning is to make sure that you have filed the correct paperwork and are obeying federal bankruptcy laws. The trustee will ask you a series of questions which are designed to find out if you are hiding assets, which is a form of fraud. Be forewarned that concealing assets can lead to dismissal of your case. If you have obeyed bankruptcy laws, been honest about your debts and assets, and followed the bankruptcy court’s rules, answering the trustee’s questions should be simple. Moreover, your bankruptcy attorney will help you prepare in advance.

Cherry Hill Chapter 13 Bankruptcy Attorneys Can Help Eliminate Debt

Do you feel buried under bills that you can never seem to catch up with? Does it often seem like you are trapped by inescapable debts? If financial problems are affecting your life negatively, and you are a resident of New Jersey, personal bankruptcy may offer a solution.

Under the right set of circumstances, Chapter 13 bankruptcy can reduce or eliminate many of your debts, giving you the opportunity to start fresh while preserving valuable property. If Chapter 13 is not appropriate for your situation, Chapter 7 bankruptcy may be an alternative option. To learn more about Chapter 13 or Chapter 7 bankruptcy and how it could help erase your debts, call the Cherry Hill Chapter 7 bankruptcy lawyers of Sadek and Cooper Law Offices, LLC at (856) 354-3310 for a free legal consultation.

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