Trustee In Bankruptcy Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Trustee In Bankruptcy, written in plain English, along with examples of how it is used.
What is Trustee In Bankruptcy?
(n) Trustee in bankruptcy is defined as the person appointed by a bankruptcy court to assess, hold, manage the property and affairs of the bankrupted person and to report to the Court. Courts generally appoint full time professionals qualified for the purpose to run the trust property.
History and Meaning of Trustee in Bankruptcy
A trustee in bankruptcy is a person appointed by the court for managing the assets and business affairs of a bankrupt person. The trustee's primary duty is to collect, sell, and distribute the proceeds to creditors. Bankruptcy trustees are typically licensed attorneys and financial professionals who specialize in bankruptcy law. They operate under the authority of the U.S. Trustee Program, a division of the Department of Justice.
The role of trustee in bankruptcy originated from the ancient practice of appointing trustees to manage the assets of a deceased or incapacitated person. In modern bankruptcy law, the trustee is responsible for safeguarding the interests of creditors, protecting the bankruptcy estate, and ensuring that the debtor complies with bankruptcy regulations. The trustee is a neutral party who does not take sides with the debtor or the creditors.
Examples of Trustee in Bankruptcy
- John’s business filed for bankruptcy, and the court appointed a trustee to manage its assets and oversee its liquidation.
- The trustee in bankruptcy determined that the debtor had concealed assets and initiated legal action to recover them for the benefit of the creditors.
- The trustee in bankruptcy filed a motion to dismiss the bankruptcy case because the debtor failed to disclose a significant liability to the court.
- When the debtor failed to comply with the trustee’s request for information about his financial affairs, the trustee sought a court order to compel him to cooperate.
- The trustee in bankruptcy sold the debtor's property at an auction and used the proceeds to pay off the creditors' claims.
Legal Terms Similar to Trustee in Bankruptcy
- Bankruptcy Code: the federal law that governs bankruptcy cases in the United States.
- Chapter 7 Bankruptcy: a type of bankruptcy proceeding that allows individuals or businesses to liquidate their assets and discharge their debts.
- Creditor: a person or entity that is owed money by a debtor.
- Debtor: a person or entity that owes money to another party.
- Liquidation: the process of selling a debtor's assets to raise funds to pay creditors.