Who are the Bankruptcy Trustees?

Who are the Bankruptcy Trustees?

A Bankruptcy Trustee is most often thought of as the person that manages the bankruptcy estate.  When someone files for a bankruptcy a trustee is appointed to manage the bankruptcy estate.  You should think of the bankruptcy estate as a separate entity.  If Chris Coons files a bankruptcy then there is a bankruptcy estate for Chris Coons and the case title is usually In re Chris Coons.  

There are two basic kinds of bankruptcy trustees.  The first kind are federal employees of the the U.S. Trustee Program which is within the Department of Justice.  The second kind are private attorneys that are hired as trustees to help administer cases by the U.S. Trustee Program.

The U.S. Trustees Program oversees the basic functions of the bankruptcy system.  The head of the U.S. Trustee Program is appointed by the Attorney General of the United States.  The U.S. Trustee program manages all of the bankruptcy cases in the United States except for those filed in Alabama and North Carolina.  Those two states operate under a different system for management of their cases. 

The U.S. Trustee Program is divided up into 21 regions.  Kansas is part of Region 20 which also includes Oklahoma and New Mexico.  The current United States Trustee for region 20 is Ilene J. Lashinsky.  In Kansas there are several Assistant U.S. Trustees that operate out of an office in Wichita.  The U.S. Trustee Program started in 1978 as a pilot program and expanded in 1986 to the current system.  

The U.S. Trustee Program hires the private trustees that handle most of the day to day bankruptcy cases in the United States.  In Chapter 7 cases they are said to be panel trustees.  In Chapter 13 cases they are referred to as standing trustees.  The trustees in Kansas are based out of locations near the three federal courthouses in Kansas.  There are typically chapter 7 panel trustees and chapter 13 standing trustees in Kansas City, Topeka, and Wichita. 

The long serving chapter 7 panel trustee in Topeka retired not too long ago and has not been replaced.  Currently there are 5 chapter 7 panel trustees serving Kansas with three of them based out of Kansas City and the other two normally operating in Wichita.  Recently they have been taking turns handling the chapter 7 cases out of Topeka.  The assignment of your trustee when you file a bankruptcy is supposed to be random, but if you file in Kansas City you will get one of three and if you file in Wichita you will get one of two so it is limited to the trustees based out of those courthouses. 

The chapter 7 trustees do not draw a salary.  They are paid based on the filing fees that are paid when bankruptcy cases are filed and they can collect a chapter 7 trustee fee from the assets of the bankruptcy estate.  They can also hire themselves as the attorney for the bankruptcy estate and bill an hourly fee against the funds recovered for the bankruptcy estate.  
There are 3 standing chapter 13 trustees in Kansas.  There is one basically assigned to each of the federal courthouses in Kansas.  One in Kansas City, one in Topeka, and the last one in Wichita.  The chapter 13 trustees have a salary.  In a chapter 13 case the person filing the bankruptcy is making a payment to the chapter 13 trustee over a 3 to 5 year period of time.  A portion of that payment, known as the trustee’s fee, goes to cover the operating expenses of the trustee offices including their salaries.

The private trustees are not federal employees but have a contract with the U.S. Trustee’s office that periodically renews.  The attorneys that serve as trustees are very competent and experienced and have a substantial amount of practice time as bankruptcy attorneys.  The chapter 7 trustees often practice law and represent clients outside of their position as trustees.  The chapter 13 trustees do not handle work outside of their positions as trustees.

Each private trustee, whether a chapter 7 or chapter 13 trustee, has a set of guidelines used to operate their office.  These guidelines are fairly uniform and there are handbooks issued by the U.S. Trustees Program that outline how they should conduct hearings, manage cases, and marshal assets.  

Even though there are guidelines there is still a tremendous amount of leeway in how each trustee handles an individual case.  They must use their professional judgement to determine what course of action to take and in many cases they would come to different opinions on how to proceed in a given matter.  Each trustee has their own idea of how things should be run and it does not mean that some of them are correct and some are wrong.  Many of the decisions they make revolve around whether a course of action is cost effective or not and this varies based on the perceived value of assets or transactions in a case.   

If one trustee thinks a non-exempt piece of property would bring $2,000 at auction after expenses and fees they might want to seize and liquidate the item.  A different trustee might think that same item would only bring $1,000 at auction after expenses and fees and abandon the item and close the case without administering the asset.  These differences of opinion are completely normal and often not predictable.  

A bankruptcy attorney in Kansas should be familiar with how each trustee manages their cases.  Much of this information is found in the individual cases and you can learn how the trustees operate by attending the hearings they conduct and reviewing the cases they manage.  

If you have any questions about bankruptcy in Kansas please reach out to our office and we will be happy to give you a free consultation.  We can go over your options in bankruptcy and how things might be different for you if you file in Wichita, Topeka, or Kansas City.