Find out what the Chapter 13 bankruptcy trustees do, how they get paid, how they administer your repayment plan, and more.
When you file for Chapter 13, the court will assign a bankruptcy trustee to administer your case. In this article, you'll learn about the duties of the Chapter 13 trustee, how the trustee gets paid, and the role the trustee will play in your case.
The Duties of the Chapter 13 Bankruptcy Trustee
In Chapter 13 bankruptcy, the trustee's role is to:
- examine your proposed Chapter 13 repayment plan and make sure it complies with all legal requirements
- ensure that you filed your tax returns for the four years before filing
- receive the payments under the plan
- distribute plan payments to your creditors in the manner required by law
- monitor the monthly income and expense reports required in a Chapter 13 case, and
- if you owe back child support, provide the payee and your state's child support enforcement agency with certain information.
Learn more about the steps involved in Chapter 13.
How Chapter 13 Trustees Get Paid
Chapter 13 trustees keep 7%–10% of the payments they disburse to creditors. You'll want to factor in this fee when deciding whether Chapter 13 is right for you.
The Chapter 13 Trustee's Role in Your Case
Many Chapter 13 trustees play an active role in the cases they administer. This is especially true in small suburban or rural judicial districts, or in districts with numerous Chapter 13 bankruptcy cases. For example, a trustee might:
- give you financial advice, such as helping you create a realistic budget (the trustee cannot, however, give you legal advice)
- help you modify your plan, if necessary
- give you a temporary reprieve or take other steps to help you get back on track if you miss a payment or two, or
- participate at any hearing on the value of an item of property, possibly even hiring an appraiser.
Despite the trustee's interest in your finances, your financial relationship with the trustee has its limits.
You will be in control over the money and property you acquire after filing—as long as you make the payments called for under your repayment plan and you make all regular payments on your secured debts.
However, if your income or property increases during the life of your plan (for instance, you receive a substantial promotion or you win the lottery), the trustee can seek to amend your plan to pay your creditors a greater percentage of what you owe them rather than the lesser percentage originally called for in your plan. The trustee might also be involved if your income decreases and you find you have to convert from Chapter 13 to Chapter 7.
For more information about both Chapters 7 and 13, read the self-help book The New Bankruptcy: Will It Work for You? by Attorney Cara O'Neill (Nolo).
