This is a question we get asked every day, the answer is it depends.
There are circumstances where using a private trustee is useful. For example, you may have an asset like a house you want to try and keep once you have filed for bankruptcy and a private trustee will give you greater flexibility on agreeable terms more than AFSA the public trustee.
A few words of warning. Firstly, remember a private trustee must remain independent, a trustee must be free from any conflict of interest, and must at all times act in an impartial manner. Any prior dealings with the debtor (the person to be made bankrupt) must first be disclosed to creditors. Depending on the type of any prior dealings or relationship with the debtor, the Trustee in Bankruptcy may not be eligible to be appointed as the Trustee. If the issue of any conflict of interest or perceived conflict of interest arises during the course of the bankruptcy administration, then the Trustee may need to resign from office. A Trustee in Bankruptcy must declare that they have not had any previous dealings or relationships with the debtor (person to be made bankrupt) and the debtor is not a related party.
Secondly, if you are being advised that your trustee doesn’t want any payment in advance, and it all seems too good to be true then it probably is! Think about it, bankruptcy trustees are not charities they don’t work for free! If they don’t get some kind of fee up-front then they will be getting it some other way. Generally, it’s in a way you won’t like.
A final word about private bankruptcy trustees, it’s critical that they follow the regulatory guidelines otherwise they risk losing their license and future ability to be a registered trustee. However, at the end of the day, they get paid by you one way or the other. Whether it’s by selling assets or receiving income contributions from you while you are bankrupt. Our advice is simple, remember that when you appoint a private trustee, they are there to serve the creditor’s interest and their own interest above yours, you are way down the list. This doesn’t make them evil and duplicitous; they are doing their job. So, proceed with caution to clarify their fees and how they get paid upfront.
For the three years you are bankrupt there are obligations and paperwork required of you. This is not a time to stick your head in the sand, if you don’t give the trustee what is needed for that period of time you run the risk of having your bankruptcy term extended to 5 or 8 years. Often people get frustrated and emotional with their trustee while they are bankrupt and don’t comply with what is needed. Putting the bankrupt and the trustee in a very difficult position. So stay on top of your paperwork while you are bankrupt and you will be ok.