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Sam Calvert


When you file a chapter 7 bankruptcy, the United States Trustee (which is a part of the Department of Justice that oversees bankruptcy cases) appoints a person whose title is “trustee”. The US Trustee will invariably select someone for “the private panel of trustees” — a list of people who are pre-qualified to serve. Technically your creditors could elect a different person at the first meeting of creditors, but I have never seen that happen. By the way, what I am saying here is about trustees in a chapter 7 case. In other chapters there are trustees, but they function very differently.

The job of a chapter 7 trustee is to interview you (currently by Zoom or phone) and to locate and sell assets to pay your creditors. The trustee will look at the paperwork you file with the court, and will ask questions at the trustee meeting. I would say that there are three basic types of questions:

a) you have little or no equity in your home, so you can use the federal exemptions. The trustee’s questions are going to be pretty basic.

b) you have a lot of equity in your home — over $27000 or so for an individual or $55,000 for a couple. In that case you are likely to use the state exemptions, and the trustee will probe to see if you have things that cannot be protected by the state exemptions, such as guns, boats, tax refunds, etc. This is because the trustee can take those items from you and sell them, although a trustee will ordinarily negotiate with us about selling them back to you.

c) you have a complicated farm or business; the trustee will spend a fair amount of time asking you about individual assets.

In any of these three types of questions, the trustee will also ask if you have given something valuable to a relative or paid an unsecured creditor. The reason is that if you have done so, the trustee is likely going to be able to go to the person who got the gift, or whom you paid, and try to get the money back from them.

For conducting this interview the trustee gets $60 (paid from the $338 filing fee paid to the court. There is a separate fund that sometimes pays trustees a little more.) However, the trustee also gets a commission on the money he earns from collecting assets and selling them. The commission rate is 25% of the first $5,000.00; 10% of the next $45,000; 5% of the next $950,000; and 3% of anything over $1,000,000.00. In addition, trustees frequently hire themselves to act as attorney at a rate of $350 an hour or so.

Frankly, in a huge majority of the cases the trustee gets $60 and nothing more; but if the trustee sees that you have non-exempt assets you can expect them to bore in on you. That’s why we meet and talk about your case; that’s why we put together detailed lists of what you own. If you are accurate in telling me what you own and what it is worth, we can usually predict very closely what a trustee will and won’t go after.

As always, each case is a little different. Feel free to call me at (320) 252-4473 to discuss your particular situation.

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