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A Chapter 13 trustee is a court-appointed official who oversees the progress and completion of a Chapter 13 bankruptcy in the United States. The duties of a Chapter 13 trustee include approving a debtor's repayment plan; meeting with the debtor, his attorney, and his creditors to address any questions or concerns; and disbursing payments to the debtor's creditors throughout the course of the plan. A Chapter 13 bankruptcy trustee is not an employee of the federal government, but instead earns a fee based on the amount of money repaid or distributed to creditors in a bankruptcy plan.
Debtors in the United States generally have two options for filing bankruptcy. The first is a Chapter 7 liquidation plan, and the second is a Chapter 13 repayment plan. Candidates for Chapter 7 bankruptcy typically do not have the income necessary to repay their debts in a reasonable amount of time, so after their assets are liquidated and paid to creditors, their debts are discharged fairly quickly after they file their case. In a Chapter 13 bankruptcy, debts are not discharged all at once, but only after the debtor attempts to pay them through a court-approved repayment plan. The repayment plan takes anywhere from three to five years to complete, and at the end of the repayment period, any dischargeable, unsecured debt is eliminated by the court.
The United States trustee appoints the bankruptcy trustees for specific court jurisdictions. The trustee must pass a comprehensive background check and meet other qualifications, including a professional or educational background in finance. A bankruptcy trustee does not receive a salary, but is compensated either by a flat fee for handling a Chapter 7 bankruptcy for a debtor with no assets or a percentage of the funds collected and distributed to creditors, including asset liquidation funds from a Chapter 7 bankruptcy or creditor repayments in a Chapter 13 bankruptcy. The trustee maintains an office staff who assist with the processing of bankruptcy claims. A chapter 13 trustee, for example, will rely on her staff to process payments, send statements to debtors, and to notify debtors if their payments are late.
While the Chapter 13 trustee has significant responsibility for the way a bankruptcy case proceeds, he is not a judge and does not rule on contested issues, such as whether a bankruptcy discharge should be issued at the end of the repayment period. The Chapter 13 trustee does review the bankruptcy case and ensure that it is in compliance with bankruptcy law. The Chapter 13 trustee may also permit a debtor to modify a plan in case of unexpected financial hardship during the repayment period.