Chapter 7 Riverside Trustee Todd Frealy is the “Interim Chapter 7 Trustee” assigned to a case by the Department of Justice, United States Trustee’s office. He serves, as other Chapter 7 Trustees, do on behalf of the US Trustee. While the name “trustee” is similar, the roles of the US Trustee and the Chapter 7 Trustee are different. The US Trustee’s role is to make sure the debtors are in the correct chapter of bankruptcy and to ensure that the debtors are eligible for bankruptcy and have not committed fraud in filing bankruptcy. The Chapter 7 Trustees examine the debtors and inform the US Trustee of any qualification or eligibility issues, but then the Interim Trustees also administer assets for the benefit of the bankruptcy estate, if there are any.
I tell my clients that the US Trustee is like the “bankruptcy police” who make sure the debtor is allowed to file bankruptcy and has not done anything fraudulently to abuse the privilege of filing bankruptcy. The Chapter 7 Trustee administers the individual cases to see if there are assets to be sold to be distributed to the creditors.
While every debtor is examined by a Chapter 7 Trustee, not every debtor is asked questions by the US Trustee. An example of questions that the US Trustee may are questions asked at a recent hearing:
The US Trustee’s representative came to the meeting of creditors and asked a debtor “When was the last time you used the credit cards?. Did you have intention of paying back the credit cards. Do you still receive statements? “No” Did you give them a new address? Do you have a car? “Yes” Mercedes auto. I did not see it listed? Why is it not listed in the petition? ( US Trustee rep and the Chapter 7 Trustee as the debtor to Amend Schedule B to list the car.)
Before you filed, did you read and review the schedules? Yes. Why was not listed?
“I told the paralegal….”
Do you pay rent? “No”
I saw a $450 rent payment in schedules, are you making that payment? Then the
US Trustee asked for the credit card statements for the accounts listed in the petition prior to today, we ask again for those statements”.
If the US Trustee’s representative starts asking your client questions, he wants to make sure your client should be in a Chapter 7 instead of Chapter 13 or there may be fraud involved in the bankruptcy.