Bankruptcy Horror Stories #6: Know the Chapter 7 Trustee Assigned to Your Client’s Case
Chapter 7 Bankruptcies: Filing my own Chapter 7 cases, watching 1000s of other cases at court, and reviewing results from hearings, it is imperative in 25% of cases that the attorney knows or at least regularly interacts with the Chapter 7 Trustee appointed to the client’s case.
Even though bankruptcy is under Federal Law, each Trustee differs in personality, case administration style, and the issues they examine in a filing. I have witnessed countless cases where the Trustee continued the matter multiple times to get more information or administered a case to seize a debtor’s assets. Many times, I scream at my computer screen because the case would have gone smoothly if the attorney knew the Trustee’s personality, understood what the particular Trustee focused on, reviewed the questions the Trustee would ask and how to answer them before the hearing, and provided documents or called the Trustee before the hearing. Just spending 15 minutes with the client going over questions and answers would save so many cases from being continued or administered. I personally review what each specific Trustee will ask, any curveballs they might throw and how to answer a question that is not a typical yes or no answer.
I make it a pattern and practice to only take cases in certain Districts, so that when a case is assigned, I know the Trustee and the Trustee knows who I am. I will decline a case if it is in a district I am not comfortable filing a case in. Past relationships are very important: Trustees inherently give you more leverage in a case and treat you, your client, and your office with greater respect. Trustees will spend on average about half the time with a debtor if they know the attorney and have worked with them before. Remember, Trustees are human, so the familiarity and personal relationship make a difference when dealing with your case.
It is important to always respond immediately to the Trustee or the Trustee’s administrator. By doing this, the Trustee knows that you are well informed of your case and respects your professionalism. This is especially true for the administrator, who is the gatekeeper of the Trustee’s office and can make your life much easier or more difficult.
Finally, knowing the Trustee’s personality and how they conduct a hearing is very important. The more difficult Trustees will go through a hearing like you have the “easiest case” in the world and then at the end of a hearing, when your client gets comfortable, goes on the attack and starts asking questions that most people cannot answer because they are so out of left field or seem so unimportant—the Trustee’s goal is to get the debtor confused and start talking because they are nervous and disclose something that may raise additional issues for the debtor. This is how certain trustees conduct their hearings and try to basically “extort” money from your clients. Knowing the Trustee requires the attorney to really review the filing to look for a landmine. There are also Trustees that like to go on the attack by trying to intimidate an unsuspecting attorney, who does not know the Trustee. One Trustee likes to intimidate by stating that his office believes the debtor’s car has value and you have 72 hours to buy back the equity to the Trustee or he will sell it. I have seen attorneys almost pass out and promise to give the Trustee an answer the next day. Since I have dealt with this Trustee, I tell him I have the right to get a valuation at CarMax, as he has no idea of the condition of the vehicle. This results in a continuance and time to get the appraisal.
Bottom line: know your Chapter 7 Trustee. This does not mean to have a beer with the Trustee, but know their personality, issues they look at in a case and how they conduct their hearings. If you need to reach out to the Trustee, always do so to show that you take an interest in the case. If you have never filed a case in a certain district, stay away, as it is not worth the hassle for you and your client.