Learn more about Chapter 13 bankruptcy trustees, including what they do, how they are compensated, and how they manage your repayment plan.
When you file for Chapter 13 bankruptcy, the court will appoint a trustee to manage your case. You’ll learn about the Chapter 13 trustee’s responsibilities, how the trustee is compensated, and the role the trustee will play in your case in this article.
The Chapter 13 Bankruptcy Trustee’s Responsibilities
The trustee’s job in a Chapter 13 bankruptcy is to:
- Make sure your proposed Chapter 13 repayment plan complies with all legal requirements.
- Before you file, make sure you’ve filed your tax returns for the previous four years.
- take advantage of the plan’s payments
- Distribute plan payments to your creditors according to the law.
- keep track of the required monthly income and expense reports in a Chapter 13 case, and
- If you owe back child support, you must provide certain information to the payee and your state’s child support enforcement agency.
How are Chapter 13 Trustees compensated?
Trustees in Chapter 13 keep about 7%–10% of the payments they make to creditors. When deciding whether Chapter 13 is right for you, keep this fee in mind.
The Function of the Chapter 13 Trustee in Your Case
Many Chapter 13 trustees are involved in the cases they oversee. This is particularly true in small suburban or rural judicial districts, as well as in districts with a high number of Chapter 13 bankruptcy cases. A trustee might, for example:
- provide you with financial advice, such as assisting you in the creation of a realistic budget (the trustee cannot, however, give you legal advice)
- assist you in making any necessary changes to your plan
- if you miss a payment or two, give you a temporary reprieve or take other steps to help you get back on track, or
- Participate in any hearing about the value of a piece of property, and consider hiring an appraiser if necessary.
- Your financial relationship with the trustee has its limits, despite the trustee’s interest in your finances.
- You will have control over any money or property you obtain after filing, as long as you follow your repayment plan’s instructions and make all regular payments on your secured debts.
However, if your income or property rises during the course of your plan (for example, if you get a big promotion or win the lottery), the trustee can seek to amend your plan to pay your creditors a higher percentage of what you owe them rather than the lower percentage originally specified. If your income drops and you have to convert from Chapter 13 to Chapter 7, the trustee may become involved.