Bankruptcy Players

Even with only a handful of creditors involved, there are many different players in a bankruptcy proceeding; The Los Angeles Bankruptcy Firm understands the different role each party plays in a Chapter 7, Chapter 13, or Chapter 11 bankruptcy, including the role of the debtor, and knows how to work with all players involved to achieve a discharge of debt, reorganization, or other positive outcome for the client.  For advice or representation regarding bankruptcy or debt settlement, contact The Los Angeles Bankruptcy Firm for a free consultation.

Q.  What is the role of the debtor in a bankruptcy proceeding?

A.  The debtor initiates the bankruptcy by filing a petition for relief under the Bankruptcy Code, usually in Chapter 7 or Chapter 13.  A Chapter 7 debtor must also file a schedule of assets and liabilities, a schedule of current income and expenditures, a statement of financial affairs, and other records.  Individual debtors must also file a certificate of credit counseling and other documentation.

A Chapter 13 debtor is required to attend a creditors' meeting and answer questions, submit a payment plan to the court and make required payments to the trustee, and complete any required debt management courses.  In Chapter 11, the debtor will most often remain in management and control of the business, known in bankruptcy terms as the debtor-in-possession.

Q.  What is the role of the creditor in a bankruptcy proceeding?

A.  In a Chapter 13 proceeding, the creditors have an opportunity to confirm a plan or raise objections to it; they are "at the table" in the negotiation and development of the plan, which determines who gets paid, how much, and when.  The creditors also have the opportunity to question the debtor regarding assets and financial affairs at a Section 341 creditors' meeting.  Typically, the largest unsecured creditors in a Chapter 11 bankruptcy will comprise a creditors' committee that represents the interests of all the unsecured creditors. 

Q.  What is the role of the trustee in a bankruptcy proceeding?

A.  The trustee is appointed by the court in all Chapter 7 and Chapter 13 cases, and sometimes in Chapter 11, to manage the proceeding, primarily for the benefit of the creditors.  The trustee reviews the petition and brings actions as necessary to recover property of the bankruptcy estate which was taken by or conveyed to creditors or others in the months immediately preceding the filing of the bankruptcy petition.  A Chapter 7 trustee also liquidates the estate and distributes the proceeds to creditors in order of priority or preference.  A Chapter 13 trustee will oversee the implementation of the payment plan, including receiving the payments from the debtor and distributing them to the creditors in accordance with the plan.

Q.  What is the role of the judge in a bankruptcy proceeding?

A.  Much of the activity is handled by the trustee outside of court.  However, the judge appoints the trustee and maintains decision-making power over the case, including the final approval of a plan or discharge in bankruptcy.  Also, any contested matters, adversary hearings, or other types of bankruptcy litigation are heard in court and presided over by the judge.