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The duties of a Chapter 11 bankruptcy trustee

On Behalf of | Dec 4, 2022 | BANKRUPTCY LAW - Chapter 11

An Idaho business might suffer financial losses that put it heavily into debt. Such troubles may also befall individuals, and both persons and enterprises might seek protection from creditors under federal bankruptcy laws. The debtor must work with a trustee when filing for Chapter 11 bankruptcy.

The bankruptcy trustee

A bankruptcy trustee is an individual appointed to represent a debtor during bankruptcy proceedings. The trustee handles various administrative duties and likely possesses skills in financial matters and bankruptcy laws. Appointments come from the United States Trustee Program, a program inside the Justice Department, which makes the appointment.

A trustee is not an adjudicator. A federal court judge has the final say on all matters related to the proceedings. However, the trustee oversees the proceedings and keeps an eye on compliance. For example, the trustee would likely report instances of missed payments on a Chapter 11 plan.

Chapter 11

Under Chapter 11, a business struggling with debts works out a payment plan with creditors. Granted, the debtor might face requirements to liquidate certain assets to pay some of their obligations. However, Chapter 11 is not Chapter 7 liquidation bankruptcy. The Chapter 11 process involves making payments on an approved payment plan while remaining open for business. The revenue generated by business operations could pay creditors.

Large corporations and businesses often perform the trustee’s duties since the entity serves as the debtor in possession. Working with a trustee is more common with small businesses, as smaller businesses may file for Chapter 11 Subchapter V bankruptcy, a streamlined process that requires trustee oversight. The trustee might assist with developing a reorganization payment plan that is fair to all parties involved.