What Does The Chapter 13 Bankruptcy Trustee Do?

Find out what the Chapter 13 bankruptcy trustee does, how they get paid, how they administer your repayment plan, and more.

When you file for Chapter 13 bankruptcy, a bankruptcy trustee will be assigned to your case. The Chapter 13 trustee is responsible for administering your case.

Read on to learn the duties of the Chapter 13 trustee, how the trustee gets paid, the active role the trustee may play in your case, and more. (To learn about Chapter 13 bankruptcy, see our  Chapter 13 Bankruptcy area.)

The Duties of the Chapter 13 Bankruptcy Trustee

In a 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
  • receive the payments you make under the plan and distribute them to your creditors in the manner required by law
  • monitor the monthly income and expense reports required in a Chapter  13 case
  • monitor your duty to file tax returns with the appropriate federal and state taxing authorities for the four years previous to your filing date and annually while your Chapter 13 case is pending
  • monitor your duty to file an annual financial statement charting your income and expenses, and
  • if you owe back child support, provide the payee and your state’s child support enforcement agency with certain information.

How Chapter 13 Trustees Get Paid

Chapter 13 trustees pay themselves by keeping 7%–10% of the payments they disburse to creditors.

The Chapter 13 Trustee’s Active Role in Your Case

Many Chapter 13 trustees play a fairly active role in the cases they administer. This is especially true in small suburban or rural judicial districts, or in districts with a lot of Chapter 13 bankruptcy cases. For example, a trustee may:

  • give you financial advice, such as helping you create a realistic budget (the trustee cannot, however, give you legal advice)
  • actively participate in helping 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 great interest in your finances, your financial relationship with the trustee is not as stifling as it may sound. In most situations, you keep complete control over 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.

Excerpted from  The New Bankruptcy: Will It Work for You?, by Attorney Stephen Elias (Nolo).

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