The court appoints an impartial third party referred to as the trustee. It is the trustee's job to examine your case, determine if you are eligible for relief according to the chapter under which you filed and determine if there are any assets available to pay creditors, including any assets you may have that are not otherwise exempt. For example, your equity in homestead is exempt property up to a certain value. If there is any value beyond that figure, that excess equity is considered an asset. A trustee who locates assets has the right to seize and sell them to use the proceeds to repay a portion of your debt. It is rare for you to not be able to exempt your assets and if you do have assets beyond your exemptions, the trustee usually will allow you to pay a sum to keep the assets.
The trustee's role differs depending on the chapter of bankruptcy for which you file. For consumers, there are two types of bankruptcy chapters: Chapter 7 and Chapter 13. Chapter 7 trustee duties include:
- Questioning you briefly to be sure you filed the forms correctly
- Searching for assets in excess of your exemption limits to resell for creditor repayment
- Examining the financial status of the debtor to determine eligibility for Chapter 7
- Reporting that there are no assets and recommending that the case be discharged
The discharge wipes out debts. This is what you are seeking when you file for bankruptcy, and it is what gives you a fresh financial start. When the trustee is satisfied that there are no assets and the filing was proper, this is reported to the court with a recommendation that the case be completed. There is also a discharge in a Chapter 13 case, but it comes much later. While a Chapter 7 case is typically over in about three to six months, a Chapter 13 lasts for three to five years. Therefore, the duties of the trustee in a Chapter 13 are much more involved, because the trustee must review the repayment plan and is generally the person to whom you remit your monthly payment. The trustee then pays your creditors according to the terms of your plan.
Minnesota bankruptcy lawyers can explain the nuances of filing for bankruptcy and answer all of your questions.