Chapter 11 what is the trustee’s role?

Recently on our bankruptcy forum a user asked, “I own a small business and I am wanting to restructure my debt and continue my operations. I am wondering if I am allowed to do this, and if so, what role will the trustee have in my Chapter 11 bankruptcy?”

When can you file Chapter 11 bankruptcy?

Chapter 11 bankruptcy is not the only bankruptcy option for small business owners. In fact, it is often avoided because it can be time-consuming and complicated. Chapter 11 bankruptcy, however, may be the only option for small business owners (who are not sole proprietors) who wish to restructure their operations and continue to do business.

Although you will need to discuss your case with a bankruptcy lawyer, with the details you have provided it sounds like Chapter 11 may be your only bankruptcy option.

Now, let’s take look at the responsibilities the trustee will have in your Chapter 11 bankruptcy case.

What will my Chapter 11 trustee do in my bankruptcy case?

All details concerning the role of the Chapter 11 trustee are detailed in Bankruptcy law, specifically 28 U.S.C. § 586. According to the bankruptcy code, the trustee will be responsible for all of the following:

  • First Day Orders

If a debtor request any emergency orders the Chapter 11 bankruptcy trustee will ensure that these requests are accurate. Emergency orders may be requested if the bankruptcy filer needs to hire certain professionals or request certain types of emergency financing.

  • Establish official committees and appoint members to serve.

The second task of the Chapter 11 bankruptcy trustee is to determine what types of committees will be needed for the debtor’s case. According to bankruptcy laws, the trustee has the responsibility to first organize the right committees and then to appoint the appropriate members. After their appointment, the trustee will supervise them and make sure they are representing the interests of the creditor group they represent.      

  • Reviewing the reorganization plan and disclosure statements

The trustee must also review both the reorganizational plan and the disclosure statements to ensure the information is correct and accurate.

  • Verify compliance with the bankruptcy code

One of them important tasks of the Chapter 11 trustee is to ensure that all of the forms are filed correctly and in a timely manner. For example, the trustee will review all of the debtor’s reports, schedules, and fees to determine if the debtor is managing the money and assets according to the Bankruptcy Code.

Finally, the trustee will also be responsible for ensuring that the case is not delayed, and if the case needs to be converted to another case it is done properly and in a timely manner.

What if there is fraud?

Chapter 11 trustees will also investigate fraud or any other conduct they conclude is abusive. If you or any other party involved in the bankruptcy commits fraud the trustee has the legal authority to pursue a civil case or refer any criminal fraud information to the U.S. Attorney for investigation.

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Beth L. is a content writer for Better Bankruptcy. Good content and information is one of many methods we utilize to bring you the answers you need.