The Chapter 13 Trustee in Bankruptcy

Chapter 13 bankruptcy involves the debtor participating in a repayment plan. Instead of making multiple monthly payments to all of their creditors, they instead make one monthly payment, which is then dispersed to their creditors. These repayment plans usually take 3 to 5 years to complete. During this process, a key figure is the Chapter 13 bankruptcy trustee, who collects the payments and disburses the money.    

What Is a Chapter 13 Bankruptcy Trustee?

The Chapter 13 bankruptcy trustee is a neutral third party assigned by the court. The trustee has two main responsibilities. The first is to ensure that the debtor is complying with bankruptcy laws and court rules. The second is to act as a liaison between debtors and creditors by collecting and distributing Chapter 13 payments. You can think of the Chapter 13 bankruptcy trustee as the person who oversees the bankruptcy. They make sure that all rules are followed and that the process goes smoothly. 

Chapter 13 Trustee Payments

As mentioned, Chapter 13 bankruptcy is a repayment plan that lasts 3 to 5 years. Your monthly payments will be determined by disposable income, debt types, and assets, and includes trustee fees. The idea is that your monthly payment is an amount which you can reasonably pay.  Some creditors must get 100% repayment other creditors can get less than 1%.  This payment will be made to your Chapter 13 bankruptcy trustee. The trustee will then disperse the payment to your various creditors. Your first payment is usually due 30 days after the filing of your Chapter 13 bankruptcy petition. The payment can be made online or by mail via money order or cashier’s check, but not by cash or personal checks. You are expected to make all payments to your trustee on time. Failure to do so may result in your case being dismissed without your debts being discharged. 

Does a Chapter 13 Trustee Monitor Income?

Your Chapter 13 trustee will review your income and make sure it matches the repayment plan. This is done in a few ways, including: 

• Initial Disclosures: When you first file for bankruptcy, your trustee will verify the income information you provided in your initial bankruptcy forms against documents like paycheck stubs, bank statements, and tax returns. 
• Annual Reviews: Trustees often review yearly tax returns to uncover any significant changes in income. This is not performed in all jurisdictions.   

• Requesting Documents: You may be asked to provide recent pay stubs or bank account information at any time to provide a clearer picture of your finances. 

Does the Trustee Monitor Your Bank Account in Chapter 13?

The trustee will not monitor your bank account during the Chapter 13 bankruptcy. They will however review bank statements around the time you file.  They are looking for: 

• Financial Accuracy: They verify that the bank account information you provided in your bankruptcy petition is complete and accurate. 

• Spending and Income: They will check to make sure that your actual expenses align with your declared budget and if your income has changed significantly since filing. 

• Suspicious Activity: They will investigate unusual or large cash withdrawals, excessive luxury spending, or transfers to friends or family that could indicate an attempt to hide assets. 

• Hidden Assets: Any undisclosed bank accounts or funds could be discovered during the trustee’s review, and failing to disclose them can result in your case being dismissed or criminal charges. 

It is incredibly important to be transparent with your lawyer, and subsequently, your trustee.  As you can see, if you are not, they will likely find out anyway and there may be consequences.

Can a Trustee Deny a Chapter 13?

The ability to deny a Chapter 13 bankruptcy lies solely with the bankruptcy court. However, just because your trustee can’t directly deny your bankruptcy, that does not mean they can’t get the ball rolling. They can and will file an objections to a proposed repayment plan should they feel it is not meeting the minimums set forth in the law.  Once the repayment plan is in progress, they can also file a motion to dismiss should you start missing payments, hide assets, or fail to comply with bankruptcy law. For this reason, you should always follow your repayment plan and treat your trustee with respect.

Can I Contact My Chapter 13 Trustee?

While it is possible to contact your Chapter 13 trustee, it is never recommended.  When going through bankruptcy, you should be represented by a bankruptcy attorney. Any communication you feel you need with the trustee should always go through your attorney. Your attorney understands the intricacies of bankruptcy law and is better equipped to speak with the trustee and understand their expectations. In fact, if you have an attorney, your trustee should refuse to communicate with you directly and require all communication to be done through your attorney.  And you may say or write something that would be used against you.  So be sure to remain in communication with your lawyer about any trustee issues.