FAQ / Who oversees or administers the liquidation in a chapter 7 case? What procedures apply?

All bankruptcy cases are overseen by the bankruptcy court and, to a certain extent, the United States Trustee’s office (a subset of the U.S. Department of Justice). In a chapter 7 case, an appointed or elected chapter 7 trustee administers the liquidation process. The chapter 7 trustee is generally charged with investigating the financial affairs of the debtor, collecting and reducing to money the property of the estate as expeditiously as possible, examining and, where appropriate, objecting to proofs of claim, making distributions and closing the case. The chapter 7 trustee must ordinarily obtain the court’s permission to sell assets and must also make reports to the court.

Promptly after the order for relief is entered in a case, the United States Trustee appoints an interim chapter 7 trustee, usually from a panel of private trustees established for the purpose of administering chapter 7 cases. However, at an initial meeting of unsecured creditors, creditors holding undisputed, fixed and liquidated claims are permitted to elect another person to be the chapter 7 trustee in the case, provided that holders of at least 20% of all such claims request a vote and vote for a replacement. If election of a replacement trustee is not requested, the interim trustee initially appointed in the case becomes the chapter 7 trustee. Although it rarely occurs, at the initial meeting of unsecured creditors, creditors entitled to vote for a trustee are also entitled to elect a committee of between three and eleven unsecured creditors to consult with the trustee in connection with the administration of the case.