The bankruptcy system has developed to assist people and companies with unmanageable debts. The laws have been designed to protect creditors as well as debtors, and provide a method by which people can gradually recover their financial stability.

Bankrtupcy Process

In bankruptcy, a debtor files a petition in which all liabilities and assets are declared to the court. Creditors may challenge a bankruptcy filing, or file a claim on assets of the debtors, if they disagree with the information provided on the petition.

Trustee

A bankruptcy trustee holds a very important task in the bankruptcy process. The trustee oversees the liquidation of assets of the debtors, and the distribution of the sales of these assets to creditors. The trustee is the employee of the court who actually manages the financial transactions involved in the bankruptcy.

In Chapter 13

A chapter 13 bankruptcy allows the debtor to repay some of his debts by a repayment schedule. The trustee in a 13 case sets up this schedule, sets the amount of time over which it will be paid and the amounts to be paid by the debtor to each of his creditors.

Trustee Responsibilities

In a chapter 13, the trustee communicates directly with the debtor, collects a monthly payment from the debtor and distributes the money to the creditors. If the debtor falls behind on his payments, the trustee is responsible for warning the debtor of the consequences and assisting the debtor in making her payments on time.

Discharge or Dismissal

The trustee helps the court make the ultimate decision on whether to discharge the case, or bring it to a conclusion with all outstanding debts canceled, or dismiss the case, in which the court cancels the bankruptcy proceeding, closes the case and effectively returns the debtor and creditors to their former standing.

Source:

Learn Bankruptcy Facts and How they Affect You

BankruptcyLawFirms.com

United States Bankrupcy Courts