What is the role of the Trustee in a Chapter 13 filing?

For individuals who have enough disposable income, or money left over after their monthly debts are paid, filing chapter 13 can help them get financially back on track. Chapter 13 requires individuals--commonly referred to as debtors--to make monthly payments to the U.S. Bankruptcy Courts through a repayment plan. The repayment plan generally lasts three to five years depending on debtors’ specific finances.

In a chapter 13 bankruptcy, a bankruptcy trustee is involved in every step of the process. For instance, the trustee reviews bankruptcy petitions during a 341 meeting commonly called the meeting of the creditors. Also, during that meeting, the trustee recommends that debtors’ chapter 13 petitions are confirmed or dismissed.

Although debtors are paying unsecured and secured creditors, they do not pay them directly. Instead, a bankruptcy trustee plays the role of middleman. In other words, through the repayment, debtors make monthly payments to a bankruptcy trustee. The trustee’s role is to distribute the monies received among the creditors. For instance, the bankruptcy trustee pays priority creditors such as mortgage lenders and car dealers first. Unsecured creditors such as credit card companies and hospitals are paid later.

In addition, the trustee keeps track of debtors’ payments. For instance, when debtors miss payments, the trustee can petition the U.S. Bankruptcy Courts to dismiss the case.

The role of a bankruptcy trustee is complicated. Thus, debtors should talk with bankruptcy lawyers about a trustee and how they affect bankruptcy cases.