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Bankruptcy Trustee Bond

What is a bankruptcy trustee bond?

A bankruptcy trustee bond is a type of fiduciary bond that's required for court-appointed trustees. This bond protects creditors in bankruptcy proceedings by guaranteeing that trustees will fulfill all of their duties. Those duties include obeying the orders of the United States Bankruptcy Courts and faithfully accounting for all of the estate's assets with which they are entrusted.

Bankruptcy trustee bond is a broad name for this bond type. Other names for this bond reflect the type of bankruptcy or the trustee's primary duties. For example, you may be ordered to get a Chapter 7 trustee bond, a depository bond, a receiver bond, or a disbursing agent bond—different names for the same kind of bond.

Why do I need a bankruptcy trustee bond?

If you've been appointed the trustee in a bankruptcy case, you're in charge of completing all of your responsibilities as defined in Section 704 of the U.S. Bankruptcy Code. Your duties vary depending on what type of bankruptcy has been declared.

  • Chapter 7: You will liquidate and distribute assets such as real estate, stocks, and commodities. You may also prosecute customer claims against third parties and administer bankrupt property.
  • Chapter 11: You are authorized to operate a business to reorganize it. Duties can include filing financial statements and tax returns, refinancing debt, inspecting the business premises and/or records, and other activities necessary to restore the economic well-being of the debtor.
  • Chapter 12 or Chapter 13: You'll adjust the debts by creating a payment schedule and dividing up monthly cash payments for distribution to creditors.

When you are appointed to be a bankruptcy trustee, you may need to purchase a surety bond to protect creditors from any errors or negligence on your part.

How does this bond work?

A bankruptcy trustee bond is a contract between three parties:

  • The principal: The bankruptcy trustee that's posting the bond
  • The obligee: The court requiring the bond
  • The surety: The company issuing the bond

It's important to keep in mind that a bond is not the same thing as insurance. A bankruptcy trustee bond does not protect you. It protects the creditors and court in the event that you steal, misappropriate funds or property, or otherwise fail to complete your duties. If this happens, the harmed party can file a claim against your bond. If you fail to satisfy the financial judgment issued by the court, then damages, fines and fees will be paid out of your bond. You are then responsible for repaying the company that issued your bond.

How much does a bankruptcy trustee bond cost?

The cost of a bankruptcy trustee bond varies based on the liability amount required by the court and the type of bankruptcy that's been filed.

Cost of Bankruptcy Trustee Bonds

Bond Type Bond Amount Cost*
(Annual Premium)
Bankruptcy Trustee Bond (Liquidations) $50,000 $150
Bankruptcy Trustee Bond (Liquidations) $200,000 $500
Bankruptcy Trustee Bond (Reorganizations) $50,000 $500
Bankruptcy Trustee Bond (Reorganizations) $200,000 $2,000

NNA Surety Bonds offers bankruptcy trustee bonds in all states. For bonds up to $50,000, a signed application with business and personal indemnity agreement will be needed. For bond amounts greater than $50,000, you'll need to complete a full application and provide a principal credit report with personal and business financials.

What are the requirements to get a bankruptcy trustee surety bond?

You can purchase your bankruptcy trustee bond from a surety company, such as NNA Surety Bonds. The company will require you to submit the following items:

  • Completed application, along with necessary financial documents.
  • A copy of the Court Appointment of Bankruptcy Trustee (the document naming you as the trustee).
  • A copy of the Specific Trustee Bond Form that states the bond amount.

Get bonded in your state

If you've been appointed the trustee in a bankruptcy case, you'll need to communicate with the court to determine the amount of your bond. Once you have the necessary documents, you can get a free policy quote.

For more information about bankruptcy trustee bonds, contact NNA Surety Bonds.

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