What is the role of a U.S. trustee in a Chapter 11 bankruptcy?

During bankruptcy, a trustee is assigned to assist with the process. In Chapter 11, the U.S. trustee's role is important in monitoring the case as it progresses and in supervising how the case is administrated. Additionally, the trustee is responsible for oversight of the debtor in possession as the business continues to operate.

Because a Chapter 11 business bankruptcy often results in a company continuing to operate while repaying creditors over time, the operation of the business is important for the success of the reorganization effort. The debtor in possession is required to submit reports to the U.S. trustee to provide information about the operations. Additionally, the debtor is required to pay fees which are submitted to the trustee. The trustee is responsible for coordinating with creditors and scheduling meetings of creditors so that the debtor's actions can be questioned while under oath.

A trustee establishes guidelines for the debtor's reporting on income and expenses. The debtor will also need to report to a trustee about issues such as bank accounts and payment of taxes. The debtor is expected to pay a fee to the trustee on a quarterly basis until the point at which the bankruptcy case is either dismissed or converted to another chapter, which can also be the result in cases of noncompliance at the option of the trustee.

Prior to filing for Chapter 11, a business owner might want to discuss alternative options with an attorney so that all possibilities can be explored. In some cases, a reorganization may last a short time before a company can regain solid financial standing. In other cases, a company may be better served by liquidating and ceasing operations.

Source: United States Courts, " Reorganization Under the Bankruptcy Code", October 29, 2014

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