In every consumer bankruptcy case, a trustee is assigned to help facilitate the case. The trustee has a primary role in the administration of the case: the protection of assets and distributions to creditors. Because trustees play such a large part in a bankruptcy case, occasionally, other participants may object to the trustee's conduct. If there is suspected improper conduct by the trustee, and a formal complaint needs to be filed, there are a few things to consider beforehand.
The Trustee's Role
In a consumer bankruptcy case, it is necessary for an objective and qualified individual to evaluate the debtor's assets against the creditors' claims. Trustees take on that role. It is the trustee's responsibility to take control of any property that is available for distribution to creditors and not protected by any exemptions available under the Bankruptcy Code. If there is property in the estate, the trustee may liquidate it and then distribute the proceeds to creditors. If the bankruptcy involves a repayment plan, the trustee will review the plan to make sure it is fair and feasible, and monitor the plan's progress for the life of the bankruptcy case.
Read More: Duties of an Independent Trustee for Last Wills
The Trustee's Tasks
When a bankruptcy action is filed under Chapter 7, 12 or 13 of the U.S. Bankruptcy Code, the court will automatically assign the case to a judge and a trustee. Both the judge and trustee monitor the case from filing through discharge or dismissal. The trustee, however, will have a more active role in the administration of the case and its ultimate outcome. According to the U.S. Department of Justice, the trustee program serves as the "watchdog over the bankruptcy process." U.S. trustees are distributed throughout 21 regions. In those regions, the U.S. trustee appoints and supervises the private trustees who handle the work of administering the bankruptcy cases. Private bankruptcy trustees tend to be lawyers or accountants from the region. Private trustees are required to be highly skilled in administrative and financial matters, but are not federal employees.
Basis for Complaints Against the Trustee
There may come a time when a debtor feels it necessary to file a formal complaint against the trustee handling the administration of her bankruptcy case. While a disagreement on legal issues will not usually provide the basis for a valid complaint, there may be grounds for a complaint if there are violations of the Bankruptcy Code. In addition to code violations, a consumer may file a complaint for unethical behavior, discrimination or criminal activity. Examples of inappropriate behavior by a trustee could include having a personal financial interest in the case, misappropriation of plan funds, or involvement in a relationship with a party to the case.
How to File a Complaint
To lodge a complaint against a private trustee in a Chapter 7, 12 or 13 bankruptcy case, a consumer debtor may contact the U.S. Trustee Program field office in his region. Consumers can locate contact information for the appropriate regional office online on the U.S. Department of Justice website. In the case of criminal activity, it would be appropriate to contact the local U.S. Attorney's Office and alert the court overseeing the case. Because private trustees are usually attorneys or CPAs and hold professional licenses in their state of practice, it might also be necessary to contact the state bar association or board of accountancy to file a separate complaint.
Regions Not Covered by the U.S. Trustee Program
Bankruptcy cases in Alabama and North Carolina are not under the jurisdiction of the U.S. Trustee Program; instead, they are administered by the office of the bankruptcy administrator for that region. While bankruptcy administrators are separate from the U.S. Trustee Program, they perform virtually the same duties. Questions about filing complaints in Alabama or North Carolina should be directed to the bankruptcy administrator in the district where the case is pending. Before filing a complaint with any agency, a debtor who is represented by an attorney should consult with her for advice.
- U.S. Department of Justice: U.S. Trustee Program
- National Bankruptcy Forum: What Is a "Bankruptcy Trustee"? What Do They Do?
- U.S. Department of Justice: About the Program
- U.S. Department of Justice: Private Trustee Information
- U.S. Department of Justice: Frequently Asked Questions (FAQs) - Consumer Information
- U.S. Courts: Bankruptcy Administrators
Nichole Hoskins works as a criminal justice instructor, teaching courses in criminal law to college students in Virginia. Prior to academia, she served as a criminal attorney, later expanding her practice to civil and domestic matters. Though she maintains her licenses to practice, Hoskins now focuses on writing and researching criminal justice topics and trial consulting.