Bankruptcy Trustee Program - Bankruptcy

Trustee Interactions with Debtors' Attorney are Important

Trustees cannot provide legal advice to Debtors; however,
Collegial communication with your Debtor’s attorney is essential and valuable to the success of Chapter 13 Bankruptcy cases success

The United States Bankruptcy Trustee Program (USTP) is a component of the Department of Justice, whose mission is to promote the integrity and efficiency of the bankruptcy system. The USTP is headquartered in Washington, D.C., and has 89 offices within 21 regions across the country.

The United States Bankrutpcy Trustee Program (USTP) carries out a broad array of administrative, enforcement, and regulatory responsibilities and acts to prevent fraud, dishonesty, and overreaching in the bankruptcy system by ensuring all participants comply with the Bankruptcy Code and Rules.

Bankruptcy Trustees can serve two roles.

Trustee
Legal Counsel in a Specific Case.

Trustees may hire themselves as Legal Counsel. However, the Bankruptcy Trustee must gain approval from the Court. The roles of a Bankruptcy Trustee and Legal Counsel are separate and distinct.

Examples of the Role of Legal Counsel for the Trustee:

Enter into legal proceedings to collect money and/or property on behalf of the bankruptcy estate. However, the bankruptcy estate is handled by the Trustee.
Determine the value of ownership in a particular corporation or property.
Determine the extent and validity of a lien on a bankruptcy asset.

Debtors are notified when a Trustee applies to the Court to hire legal Counsel in their bankruptcy case.

Here is one Example:

Bankruptcy Trustee’s Role in Hiring Himself as Independent Counsel

Trustee applies to the Court to serve as Counsel for a bankruptcy case in which he was the Trustee.
No one objects to the application, and the court approves it.
Trustee/Lawyer files a Fee Application for services as Legal Counsel.
The Debtor objects to the Fee Application, stating the Trustee was double-dipping.
A debtor does not include in his written objection to the Court that the Trustee should not have been allowed to play two roles: Trustee and Attorney.

Bankruptcy Trustee Role – Court Ruling:

It is allowed under Section 327(d) that the Trustee can serve not only as a Trustee but also as an attorney for the Estate.
The Trustee/Lawyer demonstrated how his office separates these tasks.
The Trustee/Lawyer’s efforts clearly distinguished between the Trustee’s administrative duties and the legal services provided by Counsel.
The Court approved the fee application as submitted.
Nothing presented by the Debtor, neither at the hearing nor in the post-hearing brief, convinced the Court the Trustee’s appointment of Counsel for the Trustee was in the best interest of the Estate.

Lawyers must keep very accurate records to identify services performed, as demonstrated clearly in this case.

Choosing Your Bankruptcy Lawyer

An experienced bankruptcy lawyer keeps clients informed throughout the case.
When a Trustee files an application, the Debtor is notified in writing. However, it is your Lawyer’s responsibility to keep you informed.
In addition, a good bankruptcy lawyer should explain why the Bankruptcy Trustee filed an application. This way, the debtor understands the two distinct roles.

Throughout my bankruptcy cases, I continually keep in touch with my clients. Keeping them informed and helping them understand the process is paramount. My clients are communicated with often, and I am always available to take their calls.

When choosing your bankruptcy lawyer, be sure you understand how your Lawyer will work with you throughout your case.

Are you contemplating filing bankruptcy? I offer a free bankruptcy consultation.