The Chapter 13 trustee is an important player in your “adjustment of debts” case so it helps to know how to deal with him or her.
Chapter 13 Trustee vs. the Chapter 7 One
In a Chapter 7 “straight bankruptcy” case the bankruptcy trustee’s role is very different than in a Chapter 13 case.
Most Chapter 7 consumer cases involve a quick determination whether you can keep everything you own—whether it’s all “exempt.” It’s the Chapter 7 trustee’s job to determine this. This would usually happen within about a month after you and your bankruptcy lawyer would file your case. If everything is exempt—as it usually is—your case is usually done 2 or 3 months later. The trustee has some other important roles but in most cases nothing comes of them. Within about 4 months of filing your case is finished.
A Chapter 13 case is very different and so the role of the trustee is as well. Your Chapter 13 case is based on a three-to-five-year payment plan. So a lot of it involves putting together, getting court approval for, and then implementing that payment plan. The plan usually greatly reduces what you need to pay to most of your creditors. It often allows you to pay much more to secured creditors and special “priority” creditors to achieve certain goals. Then by the end of your Chapter 13 case usually some of your debts have been paid off or else get written off then.
The Chapter 13 trustee is involved in every step of this process, and has various roles along the way.
The Chapter 13 payment plan you and your bankruptcy lawyer propose can have a fair amount of flexibility. But that plan also has to follow the law in many ways. The trustee’s first role is to ensure that your plan complies with legal requirements. So the trustee raises concerns about any aspects that he or she finds inappropriate. He or she works with you and your lawyer to adjust the plan accordingly. For example, the trustee tries to ensure you pay into your plan as much as the law requires you to. In this role the trustee acts on behalf of all the creditors, especially the unsecured ones. Usually these kinds of trustee concerns are resolved through compromise, or by having the bankruptcy judge decide the matter.
Monitoring the Plan
Your Chapter 13 plan is approved by the judge, usually about two or three months after you file your case. It’s approved, or “confirmed,” either as originally proposed or after it goes through some adjustments. After “confirmation” the trustee and his or her staff continues to monitor your case closely to see if you are complying with the plan throughout the three-to-five-years that it will likely take to complete. They make sure you’re making the monthly payments. They review your yearly income tax returns to see if your income stays reasonably stable. The trustee’s office contacts you and your lawyer about concerns that may arise. They can file a motion to dismiss your case if you don’t comply with your payment plan.
Disburse Payments to Creditors
The trustee collects payments from you and distributes the money according to the terms of the court-approved plan. Related to this, the trustee’s staff reviews your creditors’ proofs of claim. These are documents filed by your creditors to show how much they claim you owe. The trustee may object to ones he or she believes are not appropriate. Then, when you have finished paying all that’s required under your plan, the trustee informs you and the bankruptcy court. Then the court discharges (writes off) the rest of your remaining debt (except for long-term debts like a home mortgage).
Both Chapter 7 and Chapter 13 trustees are not court employees but private individuals, carefully vetted and monitored. The Chapter 7 trustees are selected out of a “panel” of several trustees within each bankruptcy court. So your lawyer would usually not know which of the trustees from the panel would be assigned to your case. In contrast, there is usually only one “standing” Chapter 13 trustee assigned cases from each bankruptcy court or area. So your lawyer will usually know which Chapter 13 trustee will be assigned to your case.