The Role of The Case Trustee

Upon the filing of the chapter 7 petition, an impartial case trustee is appointed by the United States trustee (or by the court in Alabama and North Carolina) to administer the case and liquidate the debtor’s nonexempt assets. 11 U.S.C.  §§ 701, 704. If, as is often the case, all of the debtor’s assets are exempt or subject to valid liens, there will be no distribution to unsecured creditors.

Typically, most chapter 7 cases involving individual debtors are “no asset” cases. If the case appears to be an “asset” case at the outset, however, unsecured creditors5 who have claims against the debtor must file their claims with the clerk of court within 90 days after the first date set for the meeting of creditors. Bankruptcy Rule 3002(c). In the typical no asset chapter 7 case, there is no need for creditors to file proofs of claim. I

If the trustee later recovers assets for distribution to unsecured creditors, creditors will be given notice of that fact and additional time to file proofs of claim. Although secured creditors are not required to file proofs of claim in chapter 7 cases in order to preserve their security interests or liens, there may be circumstances when it is desirable to do so. A creditor in a chapter 7 case who has a lien on the debtor’s property should consult an attorney for advice.

The commencement of a bankruptcy case creates an “estate.” The estate technically becomes the temporary legal owner of all of the debtor’s property.  The estate consists of all legal or equitable interests of the debtor in property as of the commencement of the case, including property owned or held by another person if the debtor has an interest in the property. Generally speaking, the debtor’s creditors are paid from nonexempt property of the estate.