Bankruptcy Trustee: Meaning, Overview, Example

What Is a Bankruptcy Trustee?

A bankruptcy trustee is a person appointed by the United States Trustee, an officer of the Department of Justice, to represent a debtor's estate in a bankruptcy proceeding. Bankruptcy trustees evaluate and make recommendations about various debtor demands in accordance with the U.S. Bankruptcy Code.

However, a bankruptcy judge has the ultimate authority on the distribution of assets. A bankruptcy trustee works with the bankruptcy court to take any action. The trustee cannot act without approval by the court.

Key Takeaways

  • A bankruptcy trustee is an administrator who is assigned to your case by the United States Trustee if you file for bankruptcy.
  • There are three main types of bankruptcy: Chapter 7, Chapter 11, and Chapter 13; the trustee's responsibilities depend on which type has been filed.
  • In Chapter 7, the trustee oversees the liquidation of assets and the paying back of creditors.
  • In Chapter 11, a trustee can help a business reorganize obligations, debts, and assets.
  • In Chapter 13, a trustee works with an individual who seeks to repay their debt over time on a payment plan.

Understanding the Role of a Bankruptcy Trustee

A trustee's role differs according to the type of bankruptcy proceeding that they are overseeing.

In a Chapter 7 bankruptcy proceeding, the primary action is a liquidation of assets. The trustee will manage the sale of the assets and then oversee the distribution of the proceeds to creditors.

In a Chapter 11 proceeding, the trustee, if appointed, may work with the debtor, usually a business, that hopes to emerge from bankruptcy and continue operating.

Another type of bankruptcy is Chapter 13. In such cases, the trustee works with individuals who seek to keep some of their assets in return for repaying certain debts.

Chapter 7

Chapter 7 of Title 11 of the U.S. bankruptcy code controls the process of asset liquidation. The appointed trustee will collect and take control of a debtor's non-exempt assets, liquidate them, and distribute the proceeds to creditors.

Debtors may not remove assets that belong to the bankruptcy estate without notice from the trustee or permission from the court. After the exhaustion of proceeds from the liquidation, the trustee and court may discharge the remaining debt.

There are eligibility requirements for filing a Chapter 7 bankruptcy. A debtor must not have had a Chapter 7 bankruptcy discharged in the preceding 180 days, and the applicant must pass a means test. The Chapter 7 process is also known as a straight or liquidation bankruptcy.

Chapter 11

Chapter 11 of the U.S. bankruptcy code is a form of bankruptcy that involves a reorganization of a debtor's business affairs, debts, and assets. Businesses generally are the entities that file for this type of bankruptcy. Chapter 11 gives a debtor a fresh start, subject to the fulfillment of their obligations under the reorganization plan.

Chapter 11 typically doesn't involve a bankruptcy trustee. However, if one is appointed by the court, they take and maintain control over the debtor's affairs and bankruptcy estate property during the reorganization being carried out by the debtor. In addition, the trustee may decide to create a creditor’s committee to work with the debtor to form the reorganization plan.

As Chapter 11 is the most complex of all bankruptcy cases and generally the most expensive, a company would consider a reorganization only after careful analysis and exploration of all other alternatives.

Chapter 13

Chapter 13 bankruptcy enables individuals with a regular income to restructure their obligations and repay their debt over time. The debtor does not seek forgiveness of their outstanding debts. Rather, the debtor offers up a repayment plan that employs fixed installment payments.

The bankruptcy trustee's role here is to collect the payments, distribute the funds to creditors, and request that payment amounts be increased, if need be. The trustee may arrange and run an initial meeting between the debtor and the creditors.

Chapter 13 bankruptcy formerly was called a wage earner's plan because relief under it was only available to individuals who earned a regular wage. Subsequent statute changes expanded it to include any individual, including the self-employed and those operating an unincorporated business.


The total number of bankruptcy filings in 2022, which is a decrease from the 2021 level of 413,616, according to the American Bankruptcy Institute.

Example of a Chapter 11 Bankruptcy Trustee

In June 2022, beauty industry pioneer Revlon, which got its start selling nail polish in 1932 and which had operated for close to 100 years, filed for Chapter 11 bankruptcy.

The company had amassed over $3.5 billion in debt. Sales and revenue had been dropping for several years due to a growing lack of relevancy for consumers, competition from direct-to-consumer outfits, and inflation. It also suffered from the supply chain complications associated with the pandemic and a Citigroup error that mistakenly wired close to $1 billion in company funds to creditors. Consequently, its cash flow challenges made it impossible for it to continue operating.

On April 3, 2023, Revlon received court approval for its reorganization plan, over the objections of the United States Trustee that the plan did not provide creditors with an informed choice regarding releasing non-debtor third party claims.

The company announced that it had restructured its debt and increased its liquidity by more than $285 million. It would emerge from Chapter 11 to resume operations by the end of the month as a private company, not the previous publicly-traded company.

Bankruptcy filings by individuals and businesses jolted upward in January 2023, as a result of the halt of pandemic-related federal aid, rising interest rates, high inflation, and high levels of consumer debt. If the U.S. enters a recession, it's expected that the number of filings will continue to grow.

Does a Bankruptcy Trustee Work on Behalf of the Bankrupt Person?

No. The bankruptcy trustee works on behalf of the bankruptcy court. However, it's in your favor to work with the trustee because their role is to try to ensure that the process moves to a successful conclusion.

What Does Bankruptcy Trustee Mean?

Bankruptcy trustee refers to the person appointed by the U.S. Trustee to administer a debtor's estate. Their role depends on the type of bankruptcy declared. They cannot act without the court's approval.

Can A Bankruptcy Trustee See My Bank Account?

Yes. As the trustee is involved in the financial affairs of the debtor and the bankruptcy estate, they will have access to your financial records, including your bank account.

The Bottom Line

A bankruptcy trustee is an individual appointed by the U.S. Trustee to administer a bankruptcy case. Their specific responsibilities will depend on the type of bankruptcy case to which they're assigned. In general, and according to the U.S. Trustee Program, a bankruptcy trustee is the watchdog that oversees the integrity of the entire bankruptcy process.

Article Sources
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  1. U.S. Department of Justice. "U.S. Trustee Program."

  2. Cornell University, Legal Information Institute. "Bankruptcy Trustee."

  3. United States Courts. "Chapter 7 - Bankruptcy Basics."

  4. U.S. Department of Justice. "Overview of Bankruptcy Chapters."

  5. United States Courts. "Chapter 11 - Bankruptcy Basics."

  6. United States Courts. "Chapter 13 - Bankruptcy Basics."

  7. U.S. House of Representatives, United States Code. "11 USC 727: Discharge."

  8. U.S. Department of Justice. "Means Test."

  9. American Bankruptcy Institute. "Annual Business and Non­-business Filings by Year (1980­‐2022)."

  10. Revlon|Elizabeth Arden. "Our Founders."

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