How Do Trustees Verify Bankruptcy Information?

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Every case under Chapter 7 and 13 is assigned a case trustee. In Chapter 11, the United States Trustee acts to supervise the case.

The trustees begin their investigations by looking in detail at the Schedules and Statements filed in your case. The schedules and statements should be answered completely and in detail, without providing irrelevant information. Your experienced attorney can help you to do this properly. If you and your attorney have done a careful job of preparing these there should not be any problems or surprises but if the schedules and statements have been done carelessly you WILL have many questions, surprises, and problems with your case.

Several weeks after the case has been filed, you will receive a questionnaire and other documents from your case trustee. If your case is a Chapter 11 case, the United States Trustee will send you a questionnaire and schedule and IDE (Initial debtor’s examination) which will be held prior to your Section 341 hearing.

Every case trustee’s questionnaire has its own set of details. Many are very broad and ask questions that may not even seem to be relevant but they are fishing for information that may not otherwise be obvious. The trustees often research available public records like the County Recorder’s office and the Motor Vehicle Division. They are checking to see if you listed all of your land, your houses and your vehicles.

The Trustee will demand many documents from you, including tax returns for multiple years before and after filing your case, a pay stub history and any and other evidences of income, and records of your spending, such as bank account records a year or more.

Chapter 7 Trustee’s receive a flat fee for every case they process. In addition, trustee’s income is based on what he or she may find that is “non-exempt” property which can be sold at a Trustee’s sale. These may include boats, coins, or other valuable items. The Trustees may also earn income from preferential transactions. The trustee then gets a percentage of the proceeds he or she finds and distributes the remainder of the proceeds to your creditors in accordance with the Bankruptcy Code.

Chapter 13 Trustee’s are paid a percentage fee from plan payments which are paid on a monthly basis to the Trustee’s office for the duration of the plan, usually 3 to 5 years. The plan may also pay administrative expenses and creditors according to their priority set forth in the Bankruptcy Code.

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