THE U.S. TRUSTEE'S ROLE IN CHAPTER 11 BANKRUPTCY CASES
Office of the United States Trustee, Region 2
United States Trustee Program is a component of the Department of Justice that
works to ensure the integrity of the bankruptcy system and intervenes in bankruptcy
cases to uphold the bankruptcy laws.
Program consists of an Executive Office for U.S. Trustees in Washington, D.C.,
as well as 21 regional U.S. Trustee Offices and 94 field offices that operate
in all federal judicial districts except those located in Alabama and North
the duties of the U.S. Trustee in a Chapter 11 bankruptcy case are set forth
in 28 U.S.C. § 586. They include the following:
Day Orders. Reviewing the debtor's requests for emergency orders
early in a bankruptcy case, and ensuring that the requested relief is tailored
to the circumstances. For example, debtors may seek immediate court approval
to retain professionals, obtain emergency financing, and pay certain suppliers.
These requests may affect the rights of creditors and alter their ability
to negotiate the terms of the debtor's reorganization later in the case.
Committees. Determining what official committees should be established
to serve in the case; appointing committee members; and engaging in oversight
of committee actions. Each committee upholds the interests of the creditor
group it represents, such as unsecured creditors, bond holders, or equity
security holders. A committee usually has seven to 15 members, representing
different subgroups of the creditor group. U.S. Trustee oversight includes
organizing the committee and supervising the professionals, such as attorneys
and accountants, who are employed by the committee..
Plans, Disclosure Statements. Reviewing reorganization plans and
disclosure statements filed by parties in the case to make sure they provide
adequate and accurate information.
Compliance. Ensuring that all required reports, schedules, and fees
are timely filed, and that the debtor manages money and assets consistent
with the Bankruptcy Code and with its fiduciary duty to creditors. Required
documents include the debtor's monthly operating reports, tax returns, schedules
of income and expenses, and proof of insurance. These documents allow parties
to monitor the debtor's progress toward reorganization.
Delay. Taking action to prevent undue delay by, for example, filing
a motion to dismiss the case, to convert the case to a Chapter 7 liquidation,
or to appoint a Chapter 11 trustee.
Employment. Reviewing and, if appropriate, objecting to applications
filed by professionals seeking employment in the case, payment of compensation,
and/or reimbursement of expenses. Professionals who serve in the case--and
receive payment from the bankruptcy estate--might include attorneys, accountants,
auctioneers, investment advisors, "turnaround specialists," and real estate
brokers. The U.S. Trustee might object to employment of a law firm on the
ground that the firm has a conflict of interest arising from its work for
other clients. The U.S. Trustee might also challenge the reasonableness of
professional fees billed in a case, such as charges for drafting a failed
reorganization plan after financial information clearly showed that the plan
would not be feasible.
Investigating criminal, fraudulent, or abusive conduct for possible civil
or criminal prosecution. The U.S. Trustee pursues civil (non-criminal) penalties,
and refers cases of apparent criminal fraud to the U.S. Attorney for investigation
and criminal prosecution.