DO YOU NEED BANKRUPTCY? BANKRUPTCY CHAPTER SEVEN CALL 235-1970
In all Chapter 7 cases, the U.S. trustee appoints a trustee to administer the estate created by the filing of the debtor’s bankruptcy. 11 USC 701. The trustee is typically a member of a private panel of individuals appointed by the Office of the U.S. Trustee, although certain circumstances, such as a conflict of interest affecting all of the private panel trustees, may necessitate the appointment of an individual who is not a member of the standing panel. See 11 USC 702 (allowing for election of trustee).
In his or her capacity as trustee, the trustee is required to investigate, collect, and liquidate the debtor’s nonexempt property and distribute the proceeds to creditors according to the priorities established in the Bankruptcy Code. 11 USC 704(a). The trustee is charged with performing other duties as well, including, where appropriate, opposing an individual debtor’s right to receive a discharge. 11 USC 705. In a large number of Chapter 7 cases, trustees retain counsel to assist them in administering the estate. If you are requested to represent a trustee in a Chapter 7 case, you should first make certain that the bankruptcy court administering the case enters an order appointing you as counsel. 11 USC 327(a). Typically, court approval of the trustee’s employment of professionals is obtained on an ex parte basis; however, the process requires the concurrence of the U.S. trustee.
In the Eastern District of Michigan, LBR 2014-1 (ED Mich) governs the procedure for applications for the retention of professionals, including the attorney for a Chapter 7 trustee. In general, the application must be accompanied by a statement from the attorney that he or she is a disinterested person and holds no interest adverse to the estate. Bankruptcy Rule 2014; LBR 2014-1(a) (ED Mich); see also 11 USC 327(a). This statement must also disclose all connections of the attorney with the “debtor, creditors or any other party in interest, and their respective attorneys and accountants” as required by Bankruptcy Rule 2014. LBR 2014-1 (ED Mich); see also LBR 2014 (WD Mich). This application must be filed with the bankruptcy court, and a copy of the application, along with a proposed order of retention, must be served on the U.S. trustee. LBR 2014-1(b) (ED Mich). If the U.S. trustee concurs in the application, he or she will sign the proposed order. If the U.S. trustee fails to sign the order within seven days, the applicant must serve on the U.S. trustee a notice of a hearing for the entry of the retention order. Once the retention order is entered, it is deemed effective as of the date the application was filed, “unless the Court orders otherwise.” Id.