The Bankruptcy Trustee

Bankruptcy Trustee

The Bankruptcy Trustee is a key player in both Chapter 7 and Chapter 13 bankruptcies. In Chapter 11 bankruptcies, the debtor manages their own affairs and is referred to as the “debtor-in-possession” unless it is a case filed under the Small Business Reorganization Act of 2019. Who is the trustee and what is their objective?

Appointment and Characteristics of the Bankruptcy Trustee

When a chapter 7 or chapter 13 case is filed, the United States Trustee, a division of the Department of Justice, assigns an impartial case trustee to administer the case and liquidate any nonexempt assets. 11 U.S.C. §§ 701, 704. The United States Trustee can appoint as many chapter 7 trustees as it deems necessary to ensure the prompt, competent, and complete administration of cases, as well as by the need for fair distribution of case assignments. A trustee must undergo a five-year background check, which includes a tax check with the IRS and a credit report check.

Under 28 C.F.R. § 58.3, in order to become a bankruptcy trustee, the bankruptcy trustees must:

  1. Possess integrity and good moral character.
  2. Be physically and mentally able to satisfactorily perform a trustee’s duties.
  3. Be courteous and accessible to all parties with reasonable inquiries or comments about a case for which such individual is serving as private trustee.
  4. Be free of prejudices against any individual, entity, or group of individuals or entities which would interfere with unbiased performance of a trustee’s duties.
  5. Not be related by affinity or consanguinity within the degree of first cousin to any employee of the Executive Office for United States Trustees of the Department of Justice, or to any employee of the office of the U.S. Trustee for the district in which he or she is applying.
    1. Be a member in good standing of the bar of the highest court of a state or of the District of Columbia; or
    2. Be a certified public accountant; or
    3. Hold a bachelor’s degree from a full four-year course of study (or the equivalent) of an accredited college or university (accredited as described in part II, section III of Handbook X118 promulgated by the U.S. Office of Personnel Management) with a major in a business-related field of study or at least 20 semester-hours of business-related courses; or hold a master’s or doctoral degree in a business-related field of study from a college or university of the type described above; or
    4. Be a senior law student or candidate for a master’s degree in business administration recommended by the relevant law school or business school dean and working under the direct supervision of:
      1. A member of a law school faculty; or
      2. A member of the panel of private trustees; or
      3. A member of a program established by the local bar association to provide clinical experience to students; or
      4. Have equivalent experience as deemed acceptable by the U.S. Trustee.
  6. Be willing to provide reports as required by the U.S. Trustee.
  7. Have submitted an application under oath, in the form prescribed by the Director, to the U.S. Trustee for the District in which appointment is sought: Provided, that this provision may be waived by the U.S. Trustee on approval of the Director.

Provided that the trustees meet these qualifications, they can continue to serve in their role.

Duties and Role of the Bankruptcy Trustees

Every bankruptcy trustee has certain responsibilities, as enumerated in 11 U.S.C. 704. These are to:

  1. collect and reduce to money the property of the estate for which such trustee serves, and close such estate as expeditiously as is compatible with the best interests of parties in interest;
  2. be accountable for all property received;
  3. ensure that the debtor shall perform his intention as specified in section 521(a)(2)(B) of this title;
  4. investigate the financial affairs of the debtor;
  5. if a purpose would be served, examine proofs of claims and object to the allowance of any claim that is improper;
  6. if advisable, oppose the discharge of the debtor;
  7. unless the court orders otherwise, furnish such information concerning the estate and the estate’s administration as is requested by a party in interest;
  8. if the business of the debtor is authorized to be operated, file with the court, with the United States trustee, and with any governmental unit charged with responsibility for collection or determination of any tax arising out of such operation, periodic reports and summaries of the operation of such business, including a statement of receipts and disbursements, and such other information as the United States trustee or the court requires;
  9. make a final report and file a final account of the administration of the estate with the court and with the United States trustee;
  10. if with respect to the debtor there is a claim for a domestic support obligation, provide the applicable notice specified in subsection (c);
  11. if, at the time of the commencement of the case, the debtor (or any entity designated by the debtor) served as the administrator (as defined in section 3 of the Employee Retirement Income Security Act of 1974) of an employee benefit plan, continue to perform the obligations required of the administrator; and
  12. use all reasonable and best efforts to transfer patients from a health care business that is in the process of being closed to an appropriate health care business that—
    1. is in the vicinity of the health care business that is closing;
    2. provides the patient with services that are substantially similar to those provided by the health care business that is in the process of being closed; and
    3. maintains a reasonable quality of care.

In a chapter 7 bankruptcy, the trustee reviews the bankruptcy petition and schedules filed by the debtor, reviews financial documentation provided by the debtor and determines if there are any assets to distribute to creditors. In there are no assets, the trustee will issue a “Report of No Distribution.” If there are assets to distribute, the trustee takes additional actions to recover those assets.

In a chapter 13 bankruptcy, the trustee ensures that all of the requirements for confirmation are met, and collects and distributes payments to creditors under the confirmed chapter 13 plan.

The Chapter 7 Bankruptcy Trustees in Maryland

The chapter 7 trustees in Maryland are:

  1. Monique D. Almy
  2. Marc H. Baer
  3. Merrill Cohen
  4. Charles R. Goldstein
  5. Steven H. Greenfeld
  6. Zvi Guttman
  7. Sean C. Logan
  8. Laura J. Margulies
  9. Janet M. Nesse
  10. Cheryl E. Rose
  11. Gary A. Rosen
  12. Roger Schlossberg
  13. Michael G. Wolff

Steiner Law Group has experience working with the chapter 7 Maryland trustees to ensure that all the requirements that the trustees mandate are met.

The Chapter 13 Bankruptcy Trustees in Maryland

In contrast to the number of chapter 7 bankruptcy trustees, there are currently only 3 chapter 13 bankruptcy trustees in Maryland. These are:

  1. Timothy P. Branigan;
  2. Rebecca Herr; and
  3. Robert S. Thomas II.

Steiner Law Group is experienced working with the Maryland chapter 13 bankruptcy trustees to ensure that all of their requirements for confirmation are met.

Chapter 11

In contrast to chapter 7 and chapter 13, in chapter 11 the debtor typically manages their own affairs, and no panel trustee is appointed. In certain circumstances, however, a chapter 11 trustee can be appointed, particularly in cases filed under the new Small Business Reorganization Act of 2019.

If you have questions about bankruptcy, please call Steiner Law Group at (410) 670-7060.

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About Eric Steiner, Esquire

Mr. Steiner graduated from the University of Michigan Law School in 2006. Since then, he has focused his practice on bankruptcy, real estate, commercial and consumer collections, including representing the third largest lender in the greater Baltimore area.