When you file a bankruptcy under Chapter 13, a Chapter 13 trustee will be assigned to your case. Most people refer to this person simply as their “trustee” or “Chapter 13 trustee” but the exact title given to this person by the United States Trustee’s office is the “Chapter 13 Standing Trustee for the District of Minnesota.” There are two Chapter 13 trustees that serve in Minnesota. Each trustee is assigned a specific jurisdiction.
Duties of a Chapter 13 Trustee
A Chapter 13 trustee is under a legal obligation to perform the statutory duties as set forth under Section 1302 of the United States Bankruptcy Code. These duties include reviewing filings in the debtor’s case, receiving and accounting for all monies paid to the bankruptcy estate and disbursing funds to creditors. The primary duties of a Chapter 13 trustee include but are not limited to:
- Be accountable for all property received. In a Chapter 13 case, this would be the payments received by the debtors and any other monies received by the trustee for the benefit of the bankruptcy estate.
- Investigate the debtor’s financial affairs.
- Examine proofs of claims filed by creditors and object to any improperly filed claims.
- Oppose the discharge of the debtor if applicable.
- Appear in court and be heard regarding the confirmation of the plan and any motion to modify the plan.
- Appear in court and be heard regarding any other applicable motions or applications filed by the debtor or other parties that effects the administration of the case.
- Assist the debtor in performing his or her duties under the plan.
- Ensure the debtor makes timely payments.
- Provide notice to the holder of a claim for domestic support obligations and notify the appropriate State child support enforcement agency.
- If the debtor is self-employed or is otherwise engaged in a business, investigate the business in addition to the debtor’s personal finances.
- Prepare and file reports as required by the court, bankruptcy rules or bankruptcy laws including a final report and accounting when the case is complete.
- Disburse funds to creditors according to the plan and approved claims.
Who Pays for the Services of the Chapter 13 Trustee?
Your Chapter 13 trustee plays a very important role in your bankruptcy case. The Chapter 13 trustee receives your bankruptcy plan payments each month and then disburses those funds to your creditors according to the terms of your confirmed bankruptcy plan. The trustee receives hundreds of different plan payments that must be disburse to thousands of different creditors. It is a huge undertaking, and in order to do this, the trustee must hire and fund an entire staff to assist the trustee with the administration of the Chapter 13 cases appointed to the trustee.
In order to pay the trustee and to fund the trustee’s office, the trustee receives a fee that is based on a percentage of your bankruptcy plan payment. The fee is added to your bankruptcy plan payment you pay to the trustee each month. The percentage is set by the Attorney General and cannot be changed by the trustee. The maximum percentage that a trustee can charge at this time is ten percent.
Additional Services Provided by a Chapter 13 Trustee
Your Chapter 13 trustee is not permitted to give you legal advice; however, your trustee can and does provide you with financial advice and other services that help you complete your bankruptcy plan successfully. Some people view the trustee as an adversary who simply wants to make it difficult to complete the bankruptcy plan. In fact, the Chapter 13 trustee will try to do whatever is within the trustee’s power to assist you in completing your plan. This includes taking steps to help you get back on track if you miss a payment and objecting to improperly filed claims so that you are not paying claims that were not filed correctly.
Trustees communicate with debtors and their attorneys when problems arise in a case to try to find a solution that will help the debtor continue with the bankruptcy plan. They also give financial advice if the debtor desires to sell an asset such as their home or if a debtor wants to purchase an asset by borrowing money. (NOTE: debtors cannot apply for new debt without the trustee’s approval.)
As you can see, a Chapter 13 trustee holds a very important role in your bankruptcy case. Not only are they responsible for making sure you make payments to your bankruptcy plan, but they are also there to help you and be your ally against your creditors. To learn more about Chapter 13 and Chapter 7 bankruptcy, sign up for our monthly eNewsletter.