Unlimited power? The overreach of Chapter 7 trustees.

by | Aug 30, 2017 | Bankruptcy

In a Chapter 7 bankruptcy, trustees play an important role in administering the assets for the benefit of creditors. They enjoy certain powers to recover assets on the bankruptcy estate’s behalf.

Duties include early examination of debtors to identify assets available for administration or property that can be recovered by lawsuits. Typically, trustees do not request login information for online accounts, in spite of their growing prominence.

Until now.

According to an attorney involved with knowledge of the cases, two Chapter 7 trustees based in Maryland are demanding that debtors provide login information for their PayPal, Amazon Prime and eBay accounts.

Their reason is no reason. They are not saying what is motivating these blanket requests.

Forms sent to debtors request screen names and passwords for the three prominent online services. The paperwork instructions specifically demand that debtors keep the accounts active and not change passwords for at least 10 days.

What the form lacks is who specifically has access to the accounts. It also does not clarify what the trustees will do with the information once they gain access.

Bankruptcy attorneys find what they consider a glorified fishing expedition both invasive and intimidating. It treats debtors as if they were criminals. The tactics could even discourage future consumers from pursuing the option of a Chapter 7 debt discharge.

They are not alone in their opposition. The Justice Department’s U.S. Trustee Program also does not support the tactics. Their recently published best practices specifically state that trustees should request what they need without asking for everything.