When you read about Bankruptcy on websites or blogs like this one, you often see references to the United States Trustee (or U.S. Trustee). People will often confuse to U.S. Trustee with the Chapter 7 Trustee or Chapter 13 Trustee, or wonder what the U.S. Trustee’s role is in their Bankruptcy case. Who exactly is the U.S. Trustee and what does he do? The U.S. Trustee Program is a division of the United States Department of Justice and it is responsible for overseeing the administration of Bankruptcy cases and Bankruptcy Trustees. There are twenty-one regions in the United States, and each region has a United States Trustee and a staff of attorneys, accountants and administrative staff. Interestingly, Alabama and North Carolina do not have U.S. Trustees; instead they have a Bankruptcy Administrator. The U.S. Trustee website states the following:
To further the public interest in the just, speedy and economical resolution of cases filed under the Bankruptcy Code, the Program monitors the conduct of bankruptcy parties and private estate trustees, oversees related administrative functions, and acts to ensure compliance with applicable laws and procedures. It also identifies and helps investigate bankruptcy fraud and abuse in coordination with United States Attorneys, the Federal Bureau of Investigation, and other law enforcement agencies.
Interestingly, Alabama and North Carolina do not have U.S. Trustees; instead they have a Bankruptcy Administrator.
Here are a few of the more common duties of the Offices of the U.S. Trustee:
- They oversee private Trustees in Chapter 7, 12 and 13 cases. They appoint Chapter 7 panel Trustees, occasionally audit them, and can remove them. They also provide periodic training for Trustees.
- They review Means Test documents to make sure Chapter 7 debtors actually qualify for Chapter 7.
- They occasionally randomly review and audit individual Bankruptcy cases, although it appears this has never been a priority due to time and resources.
- The act as case Trustees in Chapter 11 cases in which a Chapter 11 Trustee has not been appointed. In general, the attorneys for the U.S. Trustee are active in every Chapter 11 case.
- They investigate allegations that a debtor has filed false schedules or otherwise been dishonest in the case. In some cases, they will file a complaint to deny a discharge. If the conduct is egregious, they may even refer the case to the U.S. Attorney’s office for criminal investigation.
- They investigate complaints about petition preparers and often request that the Judge sanction petition preparers who have violated the law, or bar them from any further services. The most common reasons are that the preparer has improperly given legal advice, overcharged the client or not properly disclosed their role in the case.
- They review all fee applications for lawyers, accountants and other professionals in Chapter 11 cases and those hired by the Chapter 7 Trustee in Chapter 7 cases. Infrequently, they may review the fees charged by lawyers for the debtor in Chapter 7 cases, although generally this is viewed as a matter that is between the lawyer and client. By way of a very exaggerated example, if a Chapter 7 debtor in a fairly simple case had an unexempt bank account with $25,000 in it, the U.S. Trustee would likely object if the debtor’s lawyer charged a $25,000 fee just because the debtor would lose it anyway.
- They occasionally pursue sanctions against debtor’s lawyers who do not properly represent their clients in Bankruptcy cases. They do not second-guess a lawyer’s advice, but will get involved if a lawyer completely drops the ball; for example, they fail to appear in Court, allow support staff to improperly give legal advice, or improperly charge clients. See this post on how to avoid this.
- Although attorneys for the United States Trustee carry considerable weight in a Bankruptcy case, they are not the Judge or the final authority on many issues. Often, they are just another party in a case and it is perfectly fine to disagree with their position.
These are just a few of the many duties of the United States Trustees and for further reading you can refer to their website. It is unusual for individual debtors in Chapter 7 or 13 cases to even see or hear from the U.S. Trustee. Even most lawyers rarely see much of the work they d0. As a federal government agency, they often have limited resources and, of course, sometimes have to deal with political issues of the day.