Every chapter 7 bankruptcy case and every chapter 13 bankruptcy case is assigned to a trustee who will administer the bankruptcy case. They are called panel trustees and are not employees of the Court of or the U.S. Government. However, they are independent contractors appointed by the U.S. Department of Justice and are paid a small sum (approximately $60) per case assigned plus they receive a percentage of the value of the assets administered. There are approximately 20 of them in Arizona.

Primarily the “trustee” protects the interest of the creditors. They are acting in such a way to maximize the amount of money that can be paid to the creditors from the assets being administered. They also has the duty of reviewing the bankruptcy papers (petition, schedules and statements) and the relevant supporting documents such as bank statements, tax returns, pay stubs, etc. searching for assets, income and expenses. The law requires that they examine the debtor under oath primarily to determine that the debtor is eligible to file bankruptcy and to insure that the debtor has knowledge of the information filed and that the debtor is on record as attesting to the accuracy of that information.

In a chapter 7 case, often referred to as a “liquidation” type of bankruptcy, the trustee is focusing on those assets which might be liquidated (sold at auction usually) and then distributed to the creditors. They may question whether the claim of an “exemption” for an asset is appropriate and will also be interested to know whether the debtor has failed to disclose assets or has undervalued assets at the expense of the creditors.

In a chapter 13 case, the debtor is not required to liquidate non-exempt assets. However, the trustee is interested in maximizing the available funds for payment to creditors from the future income of the debtor. That available amount (net disposable income) is collected on a monthly basis from the debtor and is distributed to the creditors in accordance with the plan prepared by your attorney and approved by the trustee, the creditors and ultimately by the Court. The chapter 13 trustee is paid a percentage, not to exceed 10%, of the amount they collect and distribute. At this time (July 2010) there are two chapter 13 trustees in Phoenix which share those cases filed in Maricopa County and those areas to the North of Phoenix and one chapter 13 case in Tucson who is assigned cases in Pinal County and those areas to the South of Maricopa County.