If you file for Chapter 13 bankruptcy, your case will be assigned a Chapter 13 trustee. In many respects, the role of the Chapter 13 trustee is to serve as a Chapter 13 plan administrator -- charged with collecting and disbursing payments and otherwise carrying out the terms of your Chapter 13 plan. However, the Chapter 13 Trustee does have additional duties which go beyond administration. Read on to learn more about the role of the Chapter 13 trustee in your bankruptcy case.
(Learn more about how Chapter 13 works in our Chapter 13 Bankruptcy topic area.)
Chapter 7 Trustee v. Chapter 13 Trustee
The role of a Chapter 13 trustee in bankruptcy is very different than that of a Chapter 7 bankruptcy trustee. A Chapter 13 trustee will not take possession or control of your property, sell your assets, or operate or close down your business. (To learn what the trustee does in Chapter 7 bankruptcy, see The Role of the Chapter 7 Bankruptcy Trustee.)
How Chapter 13 Bankruptcy Works
In a Chapter 13 bankruptcy, you contribute all of your disposable income to repay your debt, in whole or part, over three to five years. This is called your Chapter 13 plan. You make monthly plan payments to your Chapter 13 trustee, who then disburses the money to your creditors. When you've made all payments under the plan, you receive a discharge. Because you are repaying creditors at least in part, you generally do not have to give up any property in Chapter 13 bankruptcy. (Learn more about the Chapter 13 repayment plan.)
The Standing Chapter 13 Trustee
The Office of the United States Trustee, a division of the Department of Justice which oversees bankruptcy, will appoint a standing Chapter 13 trustee to your case.
Standing trustees are generally appointed to handle all of the Chapter 13 cases filed in their defined area. Unlike Chapter 7 cases, where a trustee is randomly selected and appointed from a panel of trustees serving the area, in most Chapter 13 cases, you will know in advance who your trustee will be. This allows you to prepare by taking steps to become familiar with your trustee’s procedures before you file. Most Chapter 13 trustees maintain websites with information on their procedures and preferences. Many bankruptcy court websites identify the standing trustees in their district and provide links to the trustees' websites.
The Role of the Chapter 13 Trustee in Your Bankruptcy Case
The Chapter 13 trustee has responsibilities to the court and to the creditors in your case.
Review and verify information provided. The trustee must review your initial bankruptcy filing, including the petition, schedules and statements, for accuracy. The trustee may request financial documentation from you to support the information you have provided in your bankruptcy papers and will require you to provide your tax returns and payment advices to evidence your income. You must attend a hearing (called the 341 meeting of creditors) where you must verify, under oath, the information you have provided and answer any remaining questions that the trustee may have. The trustee will also check that you have complied with the credit counseling requirement.
Identify abusive filings. If your bankruptcy petition was filed in bad faith or you have filed mutiple bankruptcy cases in violation of the bankruptcy law or prior court orders, the trustee is required to bring this to the attention of the court by filng a motion to dismiss your case.
Participate in the bankruptcy case to recover assets. The trustee may be able to recover assets that you transferred to others before you filed for bankruptcy in certain situations. In addition, the trustee may object to your exemptions if they have been improperly claimed. The trustee may also work out an agreement with you to make sure you pay enough funds into your plan so that your creditors get as much as possible. The trustee will also review the attorneys' fees you paid, and file a motion with the court to recover any unreasonable fees.
Participate in plan confirmation. The trustee must object to the confirmation of your plan if it does not meet the requirements of bankruptcy law or does not appear feasible under your particular financial condition. to that end, the trustee will make sure:
- you are contributing all of your disposable income (called a disposable income analysis)
- that creditors will receive at least as much as they would have received if you would have filed a Chapter 7 (called a liquidation test), and
- that you are in a position to perform under the plan (called a feasibility review).
Review creditor claims. The trustee must review creditor claims and either object to improper claims or see that you do so.
Collect plan payments and disburse to creditors. In a Chapter 13, you make your plan payments to the trustee. The trustee must make sure the proper amounts are received and, once the plan is confirmed, disburse the funds to your creditors as set out in your plan. If you fall behind, the trustee will bring this to the attention of the court by filing a motion to dismiss your case. If your financial situation changes for the better, the trustee may request that you amend your plan to pay more money to creditors.
Provide status information. The trustee must make information available to creditors and interested parties in your case by responding to creditor requests or otherwise making status information available. The trustee must also report to the court and notify the court when you have successfully completed your plan, making you eligible to receive your discharge.
Monitor for fraud and criminal activity. Any suspected criminal activity must be reported by the trustee to the Department of Justice for referral to the United States Attorney and any other appropriate agency. The trustee is also required to take steps to detect and prevent fraud or abuse by debtors, creditors. or any other party in the case.
Things That the Chapter 13 Trustee Is Prohibited From Doing
The Chapter 13 Trustee may not:
- provide legal advice to any party
- solicit gratuities, payments, or gifts
- advertise or take any action which would encourage bankruptcy filings, or
- employ any relatives of the United States Trustee or Assistant United States Trustee in the region, or of a bankruptcy judge or clerk of the court in the district.