One of the primary duties of the bankruptcy trustee—the official appointed to oversee your case—is to find money to repay creditors. The trustee will review your property list to determine whether you can keep the items you claim you’re entitled to, and look for signs of transferred or hidden assets. You can also anticipate that the trustee will inspect your Chapter 13 plan for indications that you could—or should—be paying creditors more than you’ve proposed.

(Find out more about trustee duties and obligations in Chapter 7 and Chapter 13 bankruptcy in The Bankruptcy Trustee section.)

The Trustee’s Review Process

Most trustees will compare the information provided in the bankruptcy petition and schedules (the paperwork you file with the court) to other financial documents you provide, such as paycheck stubs, tax returns, and bank statements. If anything appears unusual, the trustee might request additional items, or wait to ask questions at the 341 meeting of creditors—the hearing that all filers must attend (more below).

What Is the Meeting of Creditors?

Everyone who files for bankruptcy must go to the bankruptcy court at least once (more in some cases). The purpose is to attend the meeting of creditors.

At the meeting of creditors, the trustee will place you under oath and review your identification (usually a driver’s license and Social Security card) to ensure that you are the individual who filed the case. The trustee asks each filer the same set of standard questions. For instance, you can expect the trustee to ask whether you:

• reviewed the petition before signing it
• need to change (amend) your paperwork
• reported all of your income and assets, and
• expect to receive money from any source.

The trustee will also ask you specific questions about any unusual issues in your particular petition. Once complete, the trustee will invite any creditors in attendance to ask you questions about your financial situation; however, it’s rare for a creditor to appear.

In most cases, the questioning will last about five minutes, and the trustee will conclude the meeting. The trustee will continue the meeting to another date if further information is needed.

The trustee also has the power to inspect property, take inventory of the items in houses, businesses, storage facilities, safe deposit boxes, and more. In most cases, a bankruptcy attorney will be able to predict the questions that the trustee might have and prepare you for the same, or even handle the problem before the meeting of creditors takes place.

The Trustee Will Look for Assets

Here are some of the types of property that the bankruptcy trustee will look for:

Property the Trustee Can Sell

The trustee will be looking for these types of assets to use to pay creditors:

• income producing assets such as investment real estate, oil and gas leases, business interests
• pending claims or lawsuits filed by you
• nonexempt (unprotected) real estate
• personal property not claimed as exempt
• liens that may reduce value of assets to the estate
• tax refunds
• divorce settlements, and
• partially exempt assets.

You can find out more by reading What Is Nonexempt Property in Bankruptcy?)

Transactions the Trustee Can Undo

If you've repaid creditors or transferred money out of your name recently, the trustee may be able to get the money back in certain circumstances. These items might signal transfers that the trustee can reverse and bring back into the estate:

• excessive gifts (in value or number)
• transfers for less than full value
• transfers that prefer one creditor over others, and
• payments to relatives or others close to you.

(To learn when and how the trustee can get money back, see The Bankruptcy Trustee and Preference Claims.)

Red Flags in Your Bankruptcy Paperwork

Finding assets isn’t always straightforward. The trustee also looks for signs that something is amiss.

Hidden Assets

The following items in your schedules might lead the trustee to hidden assets:

• undervalued assets (you claim your property is worth less than its value)
• assets not in line with income levels (you own expensive artwork or multiple luxury cars yet are filing for bankruptcy)
• debts or expenses for assets not listed in the schedules
• a claim of a property loss from theft with no police report, or a casualty loss with no insurance claim
• medical bills (these could indicate personal injury or insurance claims)
• missing financial records
• closed financial accounts (how much was in the account and where did the money go)
• safe deposit boxes (indicates a need to safeguard small valuables, such as jewelry or property ownership records)
• property you claim that your keeping for someone else (it might be yours)
• money owed to you such as trust income, probate interests, insurance claims, or refunds due, and
• income from sources not listed.

To learn why you should never try to hide property in bankruptcy, see Hiding Assets in Bankruptcy.

Issues With the Property You Claim You Can Keep

The trustee will look at the following to help determine whether your claims of exemption (the law that allows you to protect property you’ll need to maintain a household and workplace) are proper:

• the value of the property
• prior addresses and moves (to determine which state’s exemptions apply), and
• marital status (the rules can get complicated if only one spouse files for bankruptcy).

To learn more about claiming exemptions in your bankruptcy, choosing the correct exemptions, and finding the exemption amounts in your state, see our Bankruptcy Exemptions area.)

Chapter 13 Plan Issues

In addition to the other items, the Chapter 13 trustee will consider some of the following things to determine whether the judge will confirm (approve) your plan:

• your marital status and your spouse’s income (your spouse’s income gets included)
• whether the value of your nonexempt assets exceeds your proposed payout in the plan (you must pay an amount equal to the value of any property you can’t protect with an exemption)
• debt that exceeds statutory limits (you won’t qualify for Chapter 13)
• excess income not included in your plan, and
• whether you transferred assets shortly before filing to try to avoid paying creditors what they’re owed.

(Learn more about the Chapter 13 Repayment Plan.)

Why You Filed for Bankruptcy

You don’t need to worry about your case being dismissed because you ran into an unexpected financial situation, or even mishandled your money. Instead, if the trustee finds a particular transaction suspicious, looking into what caused your financial problems overall might help the trustee understand your motivation for filing.

Here are a few common reasons that people find themselves filing for bankruptcy:

• job change or loss (change in income),
• medical bills (illness or injury)
• assets too small when compared to debt (which might indicate Ponzi schemes), and
• closed businesses or business debts (failed business).

(You can learn more about problems that can arise in bankruptcy by reading What Is Bankruptcy Fraud?)

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