When a business goes bankrupt amid allegations of financial misconduct, there is usually plenty of blame to go around. The villains often include the former principals, who may have used the business to perpetrate a fraud. They may include parties who reaped some of the proceeds of the misconduct. And, many times, other third parties facilitated or participated in the debtor’s misconduct, and may have liability as a result.
Amid all those black hats, there is usually one white hat: the bankruptcy trustee. A trustee appointed over a failed business operates under the supervision of the Bankruptcy Court, and serves as a fiduciary to all creditors and parties in interest. The trustee has specific statutory duties to collect and reduce to money all property of the bankruptcy estate, to investigate the financial affairs of the debtor, and to expeditiously distribute all collected funds to all parties in interest.
