In a Chapter 13 bankruptcy, a trustee is the person who administers the case. Upon filing of the bankruptcy petition, a trustee is appointed to look after the debtor’s case. The trustee verifies the financial situation of the debtor and makes recommendations for preparing a repayment plan.
Section 321 of the bankruptcy Code states that a Chapter 13 trustee should be a competent person residing in the judicial district in which the bankruptcy case is pending. Some corporations also act as Chapter 13 bankruptcy trustees. These corporations must be authorized by their 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.
The primary duty of the trustee is to collect the money paid by the petitioner and distribute to creditors. Within 45 days after the creditor’s meeting, the Court will summon the debtor and inform whether the repayment plan is accepted or needs to be modified. In this confirmation hearing, the Court will verify whether the plan meets the standards set forth in the Bankruptcy Code. All the creditors will be notified about the confirmation hearing giving them a chance to object to the debtor’s payment plan. It is in this meeting that the trustee is appointed.
All payments will be made to a trustee appointed by the U.S. trustee services. The trustee will be the representative of creditors and will ensure that the repayment plan is properly followed. The trustee will collect money from the debtor and make payments to the creditors. All priority debts including child support and alimony, employee wages, and tax obligations should be paid off in full. Then the trustee will pay all the secured debts such as mortgages and vehicle loans. Finally, unsecured creditors will be paid in full or part.
A Chapter 13 trustee reviews a petitioner’s repayment plan and makes recommendations to the bankruptcy court regarding confirmation. S/he will prioritize payments to secured creditors, tax obligations, court obligations, and attorney before paying the unsecured creditors. Trustees assist in enforcing bankruptcy laws, collect and liquidate assets, investigate financial information and keep detailed records. They are independent contractors appointed by the U.S. trustee system.