The Trustee in Chapter 13

Posted by Kevin on November 16, 2012 under Bankruptcy Blog | Be the First to Comment

In Chapter 13 the trustee is a gate-keeper, overseer, and payment distributor. Quite different than in Chapter 7.

To understand what a Chapter 13 trustee does, we need to get on the same page about what Chapter 13  is. It’s an “adjustment of debts” based on a three-to-five-year payment plan. Moreover, upon successful completion of your Chapter 13 Plan, you get a discharge, and you get to keep your stuff- whether it is exempt or not.

The Chapter 13 Trustee as Gate-Keeper. The trustee’s first role as gate-keeper is to review your plan and object to any aspects of it that he or she believes does not follow the law. Usually any trustee objections are resolved by your attorney through persuasion or compromise, or by having the bankruptcy judge make a ruling on it.

The Trustee as Overseer

After the plan is approved, or “confirmed,” by the judge, the trustee and his or her staff continues to monitor your case throughout its three-to-five-year life.  They track your payments, usually review your income tax returns each year to see if your income stays reasonably stable, and file motions to dismiss your case if you don’t comply with these and other requirements.

The Trustee as Payment Distributor

The trustee collects payments from you and distributes the money as specified by the terms of the court-approved plan. As part of that, the trustee’s staff reviews your creditors’ proofs of claim—documents filed by your creditors to show how much you owe—and may object to ones that do not seem appropriate. And when you have finished paying all you need to pay, the trustee informs you and the bankruptcy court, so that the court can discharge the rest of your remaining debt (except for long-term debts such as perhaps a home mortgage or student loan).

Practical Differences between Chapter  7 and 13 Trustees

• The Chapter 7 trustee liquidates assets, or, more often, determines if you have any assets which can be liquidated, fixating on your assets at the point in time when you filed your case. In contrast, the Chapter 13 trustee receives and pays out money over a period of years, based on a bunch of factors but mostly on your ongoing income and expenses.
• Both types of trustees are private individuals, carefully vetted and monitored. The Chapter 7 trustees are chosen out of a “panel” of several trustees within each bankruptcy court, so your attorney will not know (or be able to influence) which one of the trustees will be assigned to your case. In contrast, there is usually only one “standing” Chapter 13 trustee assigned cases from each court or each geographic area within the court’s jurisdiction. So your attorney will almost for sure know which Chapter 13 trustee will be assigned to your case.