If you are filing for Chapter 7 bankruptcy, you may encounter a variety of professionals at work throughout the process, and one of these is a “trustee.”A bankruptcy trustee is tasked with administering the bankruptcy “estate” (the estate temporarily owns the debtor’s property) and maximizing the amount of money that goes to the creditors. The trustee does this in a few different ways: first, the debtor’s property is identified, including that which is non-exempt and eligible to be sold. Trustees are also able to “unwind” some transactions made by the debtor shortly before filing for bankruptcy, such as making a property sale at a price low enough to create suspicion. This is known as the trustee’s “avoiding power,” as it allows for the nullification of transactions in which the debtor attempted to take advantage of the bankruptcy process. After eligible property has been liquidated, the sales proceeds are then distributed to the creditors.There are six classes of creditors’ claims in specific order:
- Priority claims – These include taxes, child support, fees against the estate, administrative fees, and wages and commissions from the debtor’s employees 90 days prior to filing
- Unsecured “allowed” claims – Includes creditors which have provided a proof of claim
- Tardy unsecured “allowed” claims – Any creditor from class 2 whose proof of claim was filed after the set deadline
- Fines/penalties – Forfeiture claims, penalties, fines, and punitive damages from before the date of filing
- Interest charges – Includes interest on claims paid from the date of filing
- Debtor – The debtor receives any remaining money after assets are sold and all five classes are paid in full
If you are considering filing for Chapter 7 bankruptcy, contact an experienced bankruptcy attorney for a free consultation.
