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Chapter 13 Trustee’s Role

In Chapter 13 bankruptcy, a trustee’s role is very important. Trustees are independent contractors appointed by the U.S. trustee system. The trustee looks after a bankruptcy case and administers it until closure. A Chapter 13 trustee reviews a petitioner’s repayment plan and makes recommendations to the bankruptcy court regarding confirmation. Trustees assist in enforcing bankruptcy laws, collect and liquidate assets, investigate financial information and keep detailed records. It is the duty of the trustee to collect the money paid by the petitioner and distribute to creditors.

A trustee acts as the representative of creditors and will ensure that the repayment plan is properly followed. The trustee will collect all monies from the debtor and make payments to the creditors. All priority debts including child support and alimony, employee wages, and tax obligations will be paid off in full. Then the trustee will make payments on secured debts such as mortgages and vehicle loans. Payments to unsecured creditors come third in the repayment plan.

A Chapter 13 trustee, in essence, represents the creditors. The trustee administers the bankruptcy case until it is closed. According to Section 321 of the bankruptcy Code, a trustee should be competent person residing in the judicial district in which the bankruptcy case is pending. There are also corporations acting as Chapter 13 bankruptcy trustees. These corporations must be authorized by its own charter and/or bylaws to act as a trustee. They should also have an office in the judicial district in which the case is pending

In 1978, the Bankruptcy Reform Act was passed creating the U.S. Trustee Program to appoint and supervise bankruptcy trustees and guarantee that they meet high standards and qualifications. A Chapter 13 trustee is appointed by the bankruptcy court. A debtor will meet the trustee in the creditors meeting. The trustee has the right to receive the entire debtor’s disposable income during the first thirty six months of Chapter 13 plan. Disposable income is the amount left over after paying all necessary monthly expenses. Trustees are licensed and any money handled by them is extremely safe. All their accounts are subject to auditing by private auditors and the US department of justice. The debtor can opt to pay the trustee directly or to be deducted from monthly paycheck.

Inside Chapter 13 Trustee’s Role