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What is the trustee’s role in Chapter 13 bankruptcy?

On Behalf of | Jan 14, 2025 | Bankruptcy

Chapter 13 bankruptcy can be a good option when you are facing overwhelming debt but own a home that you want to keep. Unlike Chapter 7 bankruptcy, which discharges qualifying debts, Chapter 13 bankruptcy allows you to pay off your debt through a three-to-five-year payment plan.

Your mortgage payments can be included in a Chapter 13 payment plan, along with your other debts. By keeping up with the payment plan, you can eventually clear your overdue mortgage payments and keep your home.

Setting up your payment plan

When you file Chapter 13 bankruptcy, a trustee is appointed to oversee your Chapter 13 payment plan. The trustee has many responsibilities.

Some of the duties a trustee performs include verifying that you qualify for Chapter 13 bankruptcy, reviewing your bankruptcy paperwork and analyzing your proposed payment plan for compliance with bankruptcy laws.

You will work with the trustee to thoroughly examine your financial situation. They will review your income, expenses, assets, debts and tax returns. You will likely be asked to provide them with these numbers and documentation such as pay stubs or bank statements.

The meeting of creditors

The trustee also conducts the meeting of creditors. This is a meeting held approximately a month after filing for bankruptcy.

The purpose of the meeting is to review your payment plan, which should be fair to creditors but allow you to comfortably make the monthly payments. Any issues with the plan are discussed at the creditors’ meeting.

Your payment plan must be approved by a bankruptcy court at a confirmation hearing. The trustee attends this meeting with you and presents your plan to a bankruptcy judge. The judge will approve your plan or may deny it if there is an issue and provide you with time to correct it.

Overseeing your payments

You do not make payments directly to your creditors under Chapter 13 bankruptcy. The payments are made to the trustee who distributes them to creditors.

The trustee keeps track of payments and provides regular reports on the status of your payment plan to the bankruptcy court.

The trustee is the person you will communicate with during the Chapter 13 process. If you have questions about the plan or your circumstances change and you need to modify the plan, you should go to the trustee.

It is important to go to your trustee if you miss a payment or worry about falling behind on payments. The trustee has a legal duty to report any missed payments to the bankruptcy court.

From there, they will communicate your request to the bankruptcy court, who will decide what to do next.

You should be able to count on your trustee to guide and help you through the Chapter 13 process and payment plan. Successfully completing your Chapter 13 payments allows you to start again with a clean financial slate and work your way back to financial stability.