You filed for Chapter 11 bankruptcy in order to keep your creditors at bay while you reorganize your business and straighten out your finances. Now, you feel as though the trustee overseeing your case treats you as though he or she does not trust you. Understanding the duties of the trustee might make it easier to bear the scrutiny.
The trustee not only monitors your progress through reorganization and protects your rights, but also protects your creditors' rights as well. He or she serves as a sort of "mediator" between you and your creditors.
The duties of a trustee
After you file your Chapter 11 petition, the U.S. Bankruptcy Court assigns a trustee to your case. Throughout your case, the trustee performs some or all of the following functions:
1. First day orders: If you requested certain emergency relief with your petition, the trustee reviews those needs and determines whether it is appropriate. For instance, if you require the products from certain suppliers in order to continue operating your business, the trustee would authorize you to continue paying those suppliers.
2. Disclosure statements and reorganization plans: The trustee reviews these documents to ensure the accuracy and adequacy of the information provided.
3. Professional employment: During the course of your case, certain professionals, such as attorneys, accountants and others, need payment for their services. The trustee reviews the necessity of such professionals, reviews their bills and either approves payment or objects to it.
4. Official committees: The trustee determines the necessity of any committees to represent the interests of your creditors. He or she also oversees such committees and supervises any professionals hired by them.
5. Ensure compliance: Throughout your bankruptcy, the trustee requires you to provide certain information on a regular basis, such as fees, schedules and reports. Furthermore, the trustee ensures that you properly manage the money and assets of the business. Examples of the reports your trustee might request are tax returns, operating reports, and income and expense reports, along with proofs of insurance.
6. Prevent delay: The trustee takes the necessary actions to keep the case moving forward, including motions to dismiss or convert your case to a Chapter 7.
7. Investigate accusations of fraud: If there are allegations of fraud, abuse or crimes, the trustee pursues civil penalties and refers criminal allegations to the U.S. Department of Justice.
An attorney will work with the trustee to ensure that he or she is confident that your business dealings comply with the requirements of the court and in accordance with your reorganization plan. At the same time, he or she negotiates with your creditors if required.
Filing for Chapter 11 bankruptcy gives you and your company the chance to start again. With the trustee's assistance, that could happen. Many people view the trustee as an opposing party, and it could feel that way at times since you built your business without such intervention. However, working with the trustee provides you with the opportunity to make the most of the process and emerge with the chance of a successful future.