In Chapter 7 bankruptcy cases, a case trustee appointed by the court oversees liquidating the debtor’s non-exempt assets. If no assets or only exempt assets exist, the trustee files a “no asset” report, and no distribution occurs to creditors. Most individual Chapter 7 cases fall into this category. For asset cases, unsecured creditors have 90 days (or 180 days for government units) to file claims. The trustee’s primary role is to sell non-exempt assets to maximize returns for unsecured creditors. They may also use “avoiding powers” to recover property or money by setting aside preferential transfers or undoing security interests.
The distribution of estate property follows a specific order, with secured creditors and certain priority claims taking precedence over general unsecured creditors. The debtor’s primary interest is in retaining exempt property and obtaining a discharge for debts.
When someone files for Chapter 13 bankruptcy, a neutral trustee is appointed to oversee the case. This trustee evaluates the case and distributes payments from the debtor to creditors. In some areas, a specific trustee handles all Chapter 13 cases.
The information provided on this page is for informational purposes only and does not constitute legal advice or create an attorney-client relationship. Please contact a licensed bankruptcy attorney to determine your bankruptcy eligibility options.