What remedies are available if I believe my bankruptcy trustee did not handle a debt properly?

Full Question:

I obtained a student's loan for my son = $11,795 in 1996. filled for chapter 7 Bankruptcy in 1999. Chapter 7 trustee did nothing to stop collection, as a result the loan of 11795 becomes very large due to interest penalties and collection costs added = $29493 in 2009. Trustee before submitting his final closing accounts in 2009 pay = $20,513, leaving a balance of $9483/. this $9483 is now deducted from my Social Security Retirement benefits at the rate of $160/. per month. What is my legal recourse here? what is the law, did the trustee broke any laws? Why would the Trustee pay a partial amount ? What can I do to recover these amounts? Trustee already paid $20513 towards a loan of only $ 11795/ . How can I recover this amount?
07/24/2011   |   Category: Bankruptcy   |   State: New Jersey   |   #25228

Answer:

It may be possible to bring a claim against the trustee if you believe he/she mis-handled your petition and you believe he/she acted outside the law. However, first it may be beneficial and cost effective to contact the supervisor of the bankruptcy trustees. This would be the Ofice of U.S, Trustee, a branch of the Department of Justice. The address of the U.S. Trustee will be on the website of the Bankruptcy Court (see below). The field supervisor will ask you to file a written complaint.

According to the federal statutes, the trustee has the following duties as set out in Section 704 of the United States Bankruptcy Code:

1.To collect and reduce to money the property of the estate and close the estate as expeditiously as compatible with the best interests of the parties in interest;
2.To be accountable for all property received;
3.To ensure that the debtor performs his or her intention as to retaining or surrendering property of the estate that secures consumer debt;
4.To investigate the financial affairs of the debtor;
5.If a purpose would be served, to examine proofs of claims and object to any that are improper;
6.If advisable, to oppose the discharge of the debtor;
7.Unless the court orders otherwise, to furnish information concerning the estate and the estate's administration as requested by a party in interest;
8.If the debtor's business is authorized to continue operating, to file with the court appropriate reports and summaries, including a statement of receipts and disbursements; and
9.To file a final account of the administration of the estate with the United States Trustee and the court.

The authority granted to trustee by law involves:

The trustee in a Chapter 7 liquidation case is authorized to employ accountants, attorneys, appraisers, auctioneers and other professionals to assist in carrying out his or her duties. Additionally, the trustee may use, sell or lease property of the bankruptcy estate, subject to a notice requirement. However, there is no notice required for a trustee to enter into transactions in the ordinary course of business if he or she is authorized to operate the debtor's business. The trustee is also authorized to obtain unsecured or secured credit in connection with the operation of a business and assume or reject executory contracts or unexpired leases of the debtor.

A trustee is vested with significant powers to aid in carrying out his or her fiduciary obligations to the bankruptcy estate. Among them is the ability to move to dismiss a bankruptcy case for cause, including unreasonable delay by the debtor that is prejudicial to creditors; non-payment of any fees or charges required under certain provisions of the Bankruptcy Code; and failure of the debtor to file certain information required under the Bankruptcy Code. The trustee may prosecute an objection to a discharge granted to an individual debtor. He or she may also object to proofs of claim filed by creditors in a bankruptcy case. The disallowance of a proof of claim or a reduction in its allowed amount has a significant impact on what creditors ultimately receive when the trustee distributes the funds on hand in a bankruptcy estate.

The most significant of the trustee's powers are generally referred to as avoidance powers, and they are often the subject of litigation in the Bankruptcy Court. Known as the "strong arm clause," Section 544(a) of the Bankruptcy Code gives the trustee the rights and powers of a judicial lien creditor or a purchaser of real estate, whether or not there is an actual judicial lien creditor or purchaser who may be able to exercise the same rights. Section 544(b) allows the trustee to bring actions that an unsecured creditor could bring (including state law fraudulent conveyance actions), while Section 545 permits the trustee to avoid the fixing of certain statutory liens. Section 547-Preferences authorizes a trustee to avoid certain transfers of property, including payments made by the debtor to creditors, within 90 days prior to the commencement of a bankruptcy case (subject to certain conditions). Section 548 authorizes a trustee to avoid fraudulent transfers or obligations made with actual intent to hinder, delay or defraud a past or future creditor. Transfers of property made by a debtor for less than a reasonably equivalent consideration are also vulnerable if the debtor was or thereby became insolvent, was engaged in business with an unreasonably small amount of capital or intentionally incurred debts that would be beyond the debtor's ability to repay. Finally, Section 549 authorizes the trustee to avoid transfers of property of the bankruptcy estate that occur after a bankruptcy case has commenced.