One of the basic objectives of bankruptcy is to provide a new start for debtors. If you're planning to file for bankruptcy, then you must understand the whole process. The role of a bankruptcy trustee is one important subject that raises many questions in bankruptcy proceedings.
For every bankruptcy case, a trustee is appointed. Although the duties and powers of the trustees are identical in many matters, they may differ depending on the type of bankruptcy.
In a Chapter 7 petition, the primary duty of the trustee is to decide whether the debtor possesses any nonexempt assets. These are assets or properties that are not covered by the bankruptcy laws. If no nonexempt assets exist and all of the debtor's assets are subject to valid liens, the trustee must file a "no asset" report with the court, which prevents unsecured creditors from receiving any capital. However, if it is an "asset" case, the unsecured creditors must file their petitions with the court within three months of the first creditor's meeting.
The key responsibility of a trustee in a Chapter 7 filing is to gather all nonexempt assets of the debtor and sell them. A trustee may sell the debtor's property only if it is free of liens and the value of the property is more than any security interest or lien attached to it, including any exemptions that the property may hold.
Moreover, in cases where the debtor is a business and files for Chapter 7 bankruptcy, the court may give the case trustee permission to run the business for a certain period of time if it finds the business has the potential to increase the insolvency of the assets and benefit the creditors.