One of the primary duties of the bankruptcy trustee—the official appointed to oversee your case—is to find money to repay creditors.
In Chapter 7, the trustee looks for property to sell or additional income to justify converting the case to Chapter 13. In Chapter 13, the trustee checks whether you could—or should—be paying more to creditors than what you've proposed.
In both cases, the bankruptcy trustee will:
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 turn over, 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).
Here's what the bankruptcy trustee wants to find in your schedules.
You're allowed to exempt (keep) a certain amount of property in bankruptcy. In Chapter 7, the trustee sells nonexempt property for the benefit of your creditors. In Chapter 13, you'll have to pay the value of nonexempt assets in your plan.
The trustee will likely be particularly on the lookout for these things:
You can find out more by reading What Is Nonexempt Property in Bankruptcy?
If you've repaid creditors or transferred money out of your name recently, the trustee might be able to get the money back. These items might signal transfers that the trustee can reverse and bring back into the estate:
Find out more about what the trustee will look for by reading The Bankruptcy Trustee and Preference Claims.
Finding assets isn't always straightforward. The trustee also looks for signs that something is amiss. Here are a few examples.
The following items in your schedules might lead the trustee to hidden assets:
Learn why you should never try to hide property in bankruptcy.
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:
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:
Learn more about your obligations under the Chapter 13 repayment plan.
If the trustee questions something in your paperwork, you'll likely be asked about it in the meeting of creditors. But the trustee has other investigative tools available, too.
Everyone who files for bankruptcy must go to the bankruptcy court at least once to attend a creditors' meeting. You'll be placed under oath, and the trustee will confirm your identity.
Then the trustee asks each filer the same set of standard questions, such as whether you:
The trustee will also ask you specific questions about any unusual issues in your particular petition. Once complete, creditors in attendance can ask questions about your financial situation; however, it's rare for a creditor to appear.
If the trustee isn't satisfied, recourse exists. For instance, a trustee who needs more time to question you can do so by setting a 2004 examination. It's much like a deposition—but they're rare, so it's unlikely that you'll need to go to one.
The trustee isn't limited to asking questions. The trustee can also:
You're expected to comply with any reasonable request.
You don't need to worry about your case being dismissed because you ran into an unexpected financial situation or even mishandled your money. Those are common reasons that people file for bankruptcy.
And, even if the trustee finds a particular transaction suspicious, explaining what caused your financial problems might help the trustee understand your motivation for filing.
Here are a few common reasons that people find themselves filing for bankruptcy:
Often, a bankruptcy attorney will predict what the trustee might find questionable, prepare you for the same, or even handle the problem by discussing it with the trustee soon after filing the case.