The filing of an involuntary petition is an extreme action that may affect the alleged debtor's credit standing, cause public embarrassment, and impact its ability to carry on business affairs or transfer assets. If the petition is dismissed, other than with the consent of the parties, the court may assess costs, attorney fees, compensation, and punitive damages against the petitioning creditors. Therefore, even prior to the entry of the order for relief, the court may order the United States Trustee to appoint a trustee in an involuntary chapter 11 case. In re Advanced Elecs. Generally, a motion for the appointment of a trustee prior to the entry of an order for relief should be made by the creditors rather than the United States Trustee.
Conversion terminates the service of a trustee serving before the conversion.
This effort may be of limited practical use as parties in interest could immediately move in the new case for appointment of a trustee. At least one court has held that the filing of a voluntary chapter 11 does not automatically cause removal of the trustee. In re Sun Spec Indus. However, if the case is dismissed prior to the entry of an order for relief, the United States Trustee should not seek to review fees. Generally, in determining whether to sustain such a motion, the court must weigh the interests of the estate and the creditors.