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What is the Role of a Bankruptcy Trustee?

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What is the Role of a Bankruptcy Trustee?

Bankruptcy Trustee

Written and Verified by Ralph A. Ferro, Jr., Esq.

Bankruptcy Trustees can serve two roles.

  • Trustee
  • Legal counsel in a Specific Case.

Trustees are permitted to 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 two separate and distinct roles.

Examples of 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 estate of the bankruptcy 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 makes an application 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.
  • There are no objections to the application and the Court approved the application.
  • 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.
  • Trustee/Lawyer demonstrated how his office separates the specific tasks.
  • Efforts indicated by the Trustee/Lawyer did distinguish clearly between the Trustee’s administrative duties and legal serves by counsel.
  • Fee Application was approved 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 not in the best interest of the estate.

Lawyers are required keep very accurate records to clearly identify services performed, as demonstrated 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 informed in writing.   However, it is the role of your lawyer to keep you informed.   In addition, a good lawyer should explain why the Bankruptcy Trustee filed an application.   In this way, a debtor is clear on the two distinct roles.

Throughout my bankruptcy cases, I continually keep in touch with my clients.    Keeping my clients informed and understanding of the processes is paramount.

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

Contemplating bankruptcy?  I offer a free bankruptcy consult.

Call me today:   Ralph A. Ferro, Jr., Esq. – Board Certified in Consumer Bankruptcy Law.