Filing for bankruptcy? I bet you’re wondering what those bankruptcy trustees are really looking for. Well, I want to tell you – it’s not just about your assets and debts. Nope, these trustees are like financial detectives, and they’re on a mission to uncover the whole truth about your case.

So, what do bankruptcy trustees look for? They’re not just interested in what you own and owe. They want to know about any suspicious transfers, hidden income, and even your spending habits. Yep, they’ll comb through your bank statements and tax returns like they’re looking for clues to a mystery.

But don’t worry, I’m here to help you navigate this process and protect your case. Ready? Let’s dive in and explore what bankruptcy trustees are really after.

What Is a Bankruptcy Trustee?

A bankruptcy trustee oversees a bankruptcy filing and plays a major role in determining if a case goes forward. Trustees are appointed by the bankruptcy judge to look for assets that can be used to pay creditors and that includes an in-depth investigation of your finances, if you are the one filing for bankruptcy.

While trustees are neutral parties, a main duty is to make sure creditors get paid as much as possible for what they are owed. The bankruptcy trustee will look for property, income and assets, as well as whether you are hiding assets.

Duties of a Bankruptcy Trustee

The trustee’s job, after all, is to determine if you qualify for Chapter 13 bankruptcy or not. They make sure the forms you fill out mirror the required financial documents, preside over your meeting with creditors, and give the OK to your repayment plan.

How a Bankruptcy Trustee Gets Paid

Bankruptcy trustees get paid a flat fee of $60 for each Chapter 7 case they handle. For Chapter 13 cases, they receive 10% of the total amount paid out to creditors through the repayment plan.

What Does a Bankruptcy Trustee Investigate in Chapter 7?

In a Chapter 7 bankruptcy case, the trustee’s main job is to find any non-exempt assets that can be sold to pay creditors. This involves a thorough review of your bankruptcy petition and schedules, as well as an examination of your financial situation.

Reviewing the Bankruptcy Petition

The trustee will carefully review your bankruptcy petition and schedules to make sure all required information is disclosed. They’ll look for any inconsistencies or red flags that could indicate hidden assets or fraud.

Examining the Debtor at the Meeting of Creditors

At the meeting of creditors, the trustee will ask you questions under oath about your financial situation. This is an opportunity for them to clarify any issues and investigate further if needed.

Recovering Prebankruptcy Payments

The trustee will look for any payments made to creditors within 90 days before filing bankruptcy. These preferential payments can be recovered and redistributed among all creditors.

Checking Liens on Property

If you have any property with liens, the trustee will check to see if there is any equity available for unsecured creditors after the liens are paid off. Non-exempt equity can be used to pay creditors.

What Does a Bankruptcy Trustee Investigate in Chapter 13?

In a Chapter 13 bankruptcy, the trustee’s role is a bit different. Rather than selling assets, they oversee your repayment plan and make sure you’re making payments as agreed.

Confirming the Debtor’s Repayment Plan

The trustee will review your proposed repayment plan to make sure it meets all legal requirements. They’ll check that your disposable income is being used to pay unsecured creditors and that secured creditors are being paid according to the terms of their loans.

Monitoring the Debtor’s Financial Situation

Throughout your Chapter 13 case, the trustee will monitor your financial situation to ensure you’re still eligible for bankruptcy and able to make your plan payments. If your income increases, the trustee may request that your plan payment be increased as well.

Reviewing Previous Bankruptcy Filings

The trustee will also review any previous bankruptcy filings to make sure you’re eligible for Chapter 13 and not abusing the system. Too many filings in a short period can be a red flag.

Red Flags Bankruptcy Trustees Look For

Bankruptcy trustees are trained to spot signs of fraud or abuse in bankruptcy filings. Here are some common red flags they look for:

Suspicious Property Transfers

If you transfer property to friends or family members shortly before filing bankruptcy, the trustee may view this as an attempt to hide assets. These transfers can be undone and the property brought back into the bankruptcy estate.

Preferential Debt Payments

As mentioned earlier, payments to certain creditors within 90 days before filing can be recovered by the trustee. This ensures all creditors are treated fairly.

Concealed Assets

If the trustee suspects you’re hiding assets, they may request additional documentation or even conduct a Rule 2004 examination to question you under oath. Hiding assets is a serious offense that can result in your case being dismissed or even criminal charges.

False Claims on Bankruptcy Forms

Deliberately making false statements or omitting information on your bankruptcy forms is considered perjury. The trustee will carefully review your forms for any inconsistencies or signs of fraud.

What Happens if a Bankruptcy Trustee Suspects Fraud?

If a bankruptcy trustee suspects fraud in your case, they have several tools at their disposal to investigate further and address the issue.

Conducting a Rule 2004 Examination

Under Bankruptcy Rule 2004, the trustee can request a special examination to question you or other parties under oath. This can help them gather more information about your financial situation and any suspected fraud.

Filing an Objection to Discharge

If the trustee believes you have committed fraud or are abusing the bankruptcy system, they can file an objection to your discharge. This means you would still owe your debts after bankruptcy.

Initiating an Adversary Proceeding

In some cases, the trustee may file an adversary proceeding to recover money or property for the benefit of creditors. This is a separate lawsuit within the bankruptcy case.

Referring Bankruptcy Crimes for Prosecution

If the trustee uncovers evidence of serious fraud or crime, they may refer the matter to the U.S. Attorney’s Office for criminal prosecution. Bankruptcy fraud is a federal offense that can result in fines and imprisonment.

Documents Bankruptcy Trustees Review

To conduct their investigation, bankruptcy trustees will review a variety of financial documents. These may include:

Tax Returns and Pay Stubs

The trustee will review your tax returns and pay stubs to verify your income and make sure it matches what you reported on your bankruptcy forms.

Bank Statements and Account Records

Bank statements and other account records can help the trustee identify any unusual transactions or transfers that could indicate fraud.

Bankruptcy Schedules and Statement of Financial Affairs

The trustee will carefully review your bankruptcy schedules and statement of financial affairs for completeness and accuracy. These documents provide a detailed picture of your financial situation.

How a Bankruptcy Attorney Can Help Your Case

Working with an experienced bankruptcy attorney can make a big difference in how your case is handled by the trustee. Here are some ways an attorney can help:

Ensuring Accurate and Complete Bankruptcy Filings

Your attorney will make sure your bankruptcy forms are filled out accurately and completely, reducing the risk of red flags or trustee objections.

Protecting Your Exempt Assets

An attorney can help you maximize your bankruptcy exemptions to protect as much of your property as possible from being sold by the trustee.

Bankruptcy can be a complex and intimidating process. Your attorney will guide you through each step and make sure you understand what’s happening in your case.

Communicating with the Bankruptcy Trustee

If issues arise with the trustee, your attorney can communicate on your behalf and work to resolve any problems. Having an advocate on your side can make the process much less stressful.

Key Takeaway: 

Bankruptcy trustees dig deep into your finances to ensure creditors get paid, looking for any hidden assets or suspicious activity. They play a key role in both Chapter 7 and Chapter 13 cases, from reviewing documents to overseeing repayment plans. Avoiding red flags like unexplained asset transfers can save you from serious trouble.


So, what have we learned about what bankruptcy trustees look for? They’re not just bean counters – they’re financial sleuths on a mission to uncover the truth about your case.

From reviewing your petition and schedules to examining your tax returns and bank statements, these trustees leave no stone unturned. They’ll look for red flags like suspicious property transfers, undisclosed assets, and inconsistencies in your paperwork.

But here’s the good news – with the right preparation and guidance, you can navigate this process and protect your case. Working with an experienced bankruptcy attorney can help ensure your filings are accurate, your assets are properly protected, and you’re ready to face any questions the trustee might have.

Remember, the trustee’s goal is to ensure a fair outcome for everyone involved – including you and your creditors. By understanding what they’re looking for and being proactive in your case, you can emerge from bankruptcy with a fresh start and a brighter financial future.

If you’re facing a financial hardship, schedule a consultation with The Law Office of William Waldner. We’re here to answer your questions and determine if bankruptcy can give you the fresh start you need.