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Duties Of United States Trustee
LAWDOG is intended to assist in the understanding of basic concepts. See Disclaimer. Always obtain legal advice from legal professionals.
United States Trustee
Private or "Case" Trustee
Qualification of Trustee or Examiner
Appointment of an "Examiner"
Compensation of Private or Case Trustee
Duties of Trustees May Vary By Chapter
A United States Trustee is generally appointed by the Attorney General for each designated region or district, as illustrated in Title 28 of the United States Code, Section 581 reproduced here for illustration purposes only. A United States Trustee may be required to establish, maintain and supervise a panel of private trustees eligible to serve as trustees in cases under Chapter 7 of the Bankruptcy Code, serve as and perform the duties of a trustee in a case as required under the Bankruptcy Code, and supervise the administration of cases and trustees in cases under the Bankruptcy Code.
Section 323 of the Bankruptcy Code provides that the case trustee is the representative of the estate. The trustee in a case under this title has the capacity to sue and be sued. Only a "disinterested" person may serve as trustee in a case, and only if such person is competent to perform the duties of trustee and, in a case under chapter 7, 12, or 13 of this title, resides or has an office in the judicial district within which the case is pending, or adjacent to such district. A person that has served as an examiner in the case may not serve as trustee in the case. The United States trustee for the judicial district may serve as "case" trustee in the case if necessary. See Section 321, Eligibility to serve as trustee, reproduced here for illustration purposes only.
Qualification of Trustee or Examiner
A person selected under Chapter 7 , 11, 12, or 13 to serve as case trustee, in a case under this title, must, before beginning official duties, file with the court a bond conditioned on the faithful performance of such duties. The United States trustee determines the amount and sufficiency of such bond, and is qualified to serve as a case trustee without bond requirements. A trustee is not liable personally or on such trustee's bond in favor of the United States for any penalty or forfeiture incurred by the debtor. A proceeding on a trustee's bond may not be commenced after two years after the date on which such trustee was discharged. See Section 322 reproduced here for illustration purposes only.
Section 1104 provides for the appointment of an "examiner". If the court has not ordered the appointment of a trustee in a Chapter 11 case, then at any time before the confirmation of a plan, on the properly noticed request of a party in interest, or the United States trustee, the court, after a hearing, may order the appointment of a disinterested person as an "examiner" to conduct such an investigation of the debtor as is appropriate, including an investigation of any allegations of fraud, dishonesty, incompetence, misconduct, mismanagement, or irregularity in the management of the affairs of the debtor of or by current or former management of the debtor. See Section 1104 is reproduced here for illustration purposes only.
Such appointment of an "examiner" must be in the interests of creditors, and other interests of the estate; or the debtor's fixed, liquidated, unsecured debts, other than debts for goods, services, or taxes, or owing to an insider, exceed $5,000,000. The debtor would usually remain as "debtor in possession" during such investigation by an examiner.
Section 324 provides for the removal of trustee or examiner by the court. After notice and a hearing, the court may remove a trustee, other than the United States trustee, or an examiner, for cause. See Section 324 reproduced here for illustration purposes only.
Compensation of Private or Case Trustee
Section 326 provides a percentage formula describing limitations on compensation of case trustees. In a case under Chapter 7 or 11, the court may allow reasonable compensation for the trustee's services, based upon a percentage of all moneys disbursed or turned over in the case by the trustee to parties in interest, excluding the debtor, but including holders of secured claims. In a case under Chapter 12 or 13, the court may allow reasonable compensation of a trustee appointed under section 1202(a) or 1302(a) not to exceed five percent upon all payments under the plan.
If more than one person serves as trustee in the case, the aggregate compensation of such persons for such service may not exceed the maximum compensation prescribed for a single trustee. The court may deny allowance of compensation for services or reimbursement of expenses of the trustee under certain circumstances. See Section 326 reproduced here for illustration purposes only.
Duties of Trustees May Vary By Chapter
A case trustee is required in a Chapter 7 case , because the property must be gathered and liquidated. However, in a Chapter 11 case, the debtor generally remains in possession of the assets, and a trustee is normally not required. In Chapter 12 and Chapter 13 repayment plans, the duties of the trustee may involve primarily the administration of payments, while the debtors retain assets. For a discussion of these issues, see the respective sections of LAWDOG Creditor Bankruptcy. For example, the duties of a Chapter 7 trustee are described here. Link does not return to this page.
