A trustee is appointed by the Executive Office of the United States Trustee under the United States Department of Justice. This office is responsible for the administration of the bankruptcy system in the U.S. All filed cases are randomly assigned to a panel of trustees in each jurisdiction.
According to the Federal Rules of Bankruptcy Procedure there could be voluntary and involuntary chapter 7 liquidation cases. These cases need election of interim as well as permanent trustees. It can be noticed that most of chapter 7 cases filed in the bankruptcy courts are voluntary consumer cases. In voluntary consumer bankruptcy cases, an interim trustee will be appointed immediately upon filing of the petition. Interim trustees are usually lawyers from within the community. They are appointed by the U.S. Trustee’s office to serve the role of sitting for the 341 meeting and initial review of bankruptcy cases. This interim trustee will preside over the 341 meeting, conduct preliminary investigation and verify the debtor’s financial position. S/he will also question the debtor to state his/her financial condition under oath. The creditors will also be given an opportunity to attend this meeting. Upon the findings, the trustee will make recommendations to the bankruptcy court. If the creditors do not elect a permanent trustee, the interim trustee will be converted to a permanent trustee for administration of the case until its closure.
A Chapter 7 bankruptcy trustee should be educationally well qualified. S/he should possess a bachelor’s or postgraduate degree in a business-related field. Certified public accountants and lawyers are often considered appropriate candidates for presiding as trustees. Candidates from other equally qualified professions can also apply to work as certified bankruptcy trustees. There are also corporations licensed to act as Chapter 7 bankruptcy trustees. The person should have sufficient case administration experience. S/he must submit to a five-year background and fingerprint check. A Chapter 7 bankruptcy trustee also must have a proper tax returns filing history. The IRS also checks for any civil penalties for fraud or failure to pay taxes on penalties. A bankruptcy trustee should have clean criminal history record.
It is also a rule that a person applying to be enrolled as a bankruptcy trustee should not have any relatives (first cousins or closer–including spouses) employed by the Executive Office for U.S. Trustees of the Department of Justice; or in the Office of the U.S. Trustee in the home district. A person acting as a trustee should be a person of good moral character and integrity; and should not demonstrate prejudice to a particular person, class or creed. S/he should also act with courtesy and be accessible to stakeholders.