The U. S. Trustee--Administrator and Enforcer

 Posted on May 22, 2017 in Bankruptcy

You hear in bankruptcy about the “trustee,” and maybe about the “U.S. Trustee.” They’re clearly easy to confuse. Who’s the U.S. Trustee? 

In most consumer bankruptcy cases you hardly hear about the United States Trustee. But when you do, it can mean trouble. So it’s important to understand who the U.S. Trustee is and what that office does in your Chapter 7 case.

U.S. Trustee Mission

The mission of the United States Trustee Program is “to promote the integrity and efficiency of the bankruptcy system for the benefit of all stakeholders – debtors, creditors, and the public.”

The key words are “integrity” and “efficiency.” The U.S. Trustee’s job is to keep the system honest, and make it run smoothly.

That sounds innocuous.

The Administrator

Starting briefly on the efficiency side, the U.S. Trustee appoints and supervises the Chapter 7 trustees. In effect the U.S. Trustee is the boss of the trustees. (Those are the individuals assigned, one to each case, to determine if there are any available assets to liquate and pay creditors, among other responsibilities.)

Overall, the U.S. Trustee monitors cases so that they are “administered promptly and efficiently.”

See 28 United States Code Section 586(a).

The Enforcer

The enforcement role is the one we care most about in Chapter 7.

You’d most likely hear from the U.S. Trustee when there is a question about whether a person in a Chapter 7 case should instead be in Chapter 13 “adjustment of debts” case. This is usually mostly a matter of your income and allowed expenses. Whether you can stay in a Chapter 7 case turns on whether your case meets a sometimes complex set of rules called the “means test.” The U.S. Trustee may assert that your case doesn’t pass that test. As a result the case is considered an “abuse” of Chapter 7 law. It should either be “dismissed” (thrown out) or “converted” to Chapter 13, according to the U.S. Trustee.

The U.S. Trustee also gets involved  when there is evidence of lying or other  kinds of misrepresentation by a debtor regarding their bankruptcy documents or statements made under oath. These can arise in many ways, but usually involves apparent contradictory or confusing information in the bankruptcy documents and other sources.”

If You and Your Lawyer Hear from the U.S. Trustee

Getting contacted by the U.S. Trustee does not necessarily mean you have a big problem. Much of the time when a concern is raised it can be resolved favorably. Sometimes we are actually expecting to hear from the U.S. Trustee and are prepared with the appropriate response. This assumes you have been honest and thorough with us as we prepare your case.

If a challenge from the U.S. Trustee comes unexpectedly, all the more reason to contact your lawyer immediately. The faster a situation like this is addressed, the faster it can be nipped in the bud.