What is the Appointment or Election of a Case Trustee?
Chapter 11 bankruptcy cases for businesses are often among the most complex types of bankruptcy cases. If you have a small business and limited amounts of debt, it is important to talk with a bankruptcy lawyer to determine whether your business could be eligible for file for the simpler and more streamlined Subchapter V bankruptcy (also a type of reorganization bankruptcy) to sidestep some of the complex aspects of a traditional Chapter 11 case. Yet many businesses are only eligible for a traditional Chapter 11 case, and it is important to understand how the bankruptcy process works.
Certain parts of a Chapter 11 case will depend on the debtor and the specific facts of the bankruptcy case. One of those aspects involves the appointment or election of a case trustee. Although this does not happen commonly, it is a situation that can apply to some Chapter 11 bankruptcy cases. Our West Palm Beach bankruptcy lawyers can explain in more detail.
What is a Case Trustee?
What is a case trustee? According to the US Courts, a case trustee “is responsible for management of the property of the estate, operation of the debtor’s business, and, if appropriate, the filing of a plan of reorganization.” A case trustee is not typically appointed or elected in a Chapter 11 case because the debtor serves as the debtor in possession and is responsible for these actions.
In some cases where a case trustee is appointed, the court can later terminate the appointment of the case trustee and restore those powers to the debtor in possession (i.e, the debtor and bankruptcy filer).
When is a Case Trustee Appointed or Elected?
Generally speaking, a case trustee will only be appointed by the court when a creditor or US trustee has concerns about fraud, incompetence, criminal activity, gross mismanagement, or any other behavior by the debtor in possession that would put a party in interest at risk. In some cases, where the US trustee has “reasonable grounds to believe that any of the parties in control of the debtor participated in actual fraud, dishonesty or criminal conduct in the management of the debtor or the debtor’s financial reporting,” the US trustee must ask the court to appoint a case trustee.
A particular case trustee can be elected at the request of a party in interest after the court has already ordered that a case trustee be appointed.
It is important to be clear that the discussion above applies to traditional Chapter 11 cases. If your business is filing for Subchapter V bankruptcy, a trustee will always be appointed.
Contact a West Palm Beach Bankruptcy Attorney Today
Whether you are considering a Chapter 11 bankruptcy filing, have general questions about your business’s eligibility for a type of reorganization bankruptcy, or you have a specific inquiry about your bankruptcy filing, an experienced West Palm Beach bankruptcy lawyer at Kelley, Kaplan & Eller, PLLC can help. Contact us today to find out more about the bankruptcy services we provide to businesses in South Florida and how we can assist you with your bankruptcy case.
Source:
uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-11-bankruptcy-basics
