Bankruptcy Trustee

Category: legal

A person appointed by the Department of Justice or the creditors to manage the debtor’s bankruptcy estate.

The trustee is the "neutral administrator." In Chapter 7, they seize and sell assets. In Chapter 11, a trustee is rarely appointed unless current management is caught committing fraud or gross incompetence, at which point the trustee takes complete control away from the executives.

Common Examples

• The bankruptcy trustee aggressively pursued preferential transfer claims to claw back cash for the general unsecured creditor pool.
• Upon discovering massive accounting fraud, the court removed the CEO and installed a Chapter 11 bankruptcy trustee to run the operation.