What Does a Chapter 13 Bankruptcy Trustee Do?
Kansas City Bankruptcy Attorneys Define Trustee Duties
When an individual files a Chapter 13 petition, the court appoints a trustee to administer the case. The Chapter 13 bankruptcy trustee both evaluates the case and serves as a disbursing agent. That means that he/she collects payments from the debtor and makes distributions to creditors. Between 20 and 30 days after the debtor files the Chapter 13 petition, the Chapter 13 trustee holds a meeting of creditors.
In a Chapter 13 case, to participate in distributions from the debtor, creditors must file written proofs of claim within strict court-set deadlines. This is generally within 90 days after the first date set for the meeting of creditors. A governmental unit, however, has 180 days from the date the case is filed to file a proof of claim. The bankruptcy trustee must contact claimants/creditors regarding whether the estate will allow or reject the claim.
Bankruptcy trustees must ensure the repayment plan meets Bankruptcy Code requirements. They must then distribute plan payments to creditors. Additionally, they must monitor monthly income and expense reports as required by law.
When Do Chapter 13 Bankruptcy Payments Start?
Within 30 days after filing the bankruptcy case, the debtor must start making plan payments to the trustee. This is the case even if the court has not approved the plan.
If the court confirms the plan, the Chapter 13 bankruptcy trustee distributes funds from the plan “as soon as is practicable”. If the court declines to confirm the plan, then the debtor may file an amended plan. The debtor may also convert the case to a Chapter 7. If the court declines to confirm the plan or the amended plan and instead dismisses the case, the court may authorize the trustee to keep some funds for costs. However, the trustee must return all remaining funds to the debtor (other than funds already disbursed or due to creditors).
Occasionally, a change in circumstances may compromise the debtor’s ability to make plan payments. For example, a creditor may object or threaten to object to a plan. Or, the debtor may inadvertently have failed to list all creditors. In such instances, the plan may be amended either before or after confirmation.
Making the Chapter 13 Repayment Plan Work
The provisions of a confirmed plan bind the debtor and each creditor. Once the court confirms the plan, the debtor must make the plan succeed. The debtor must make regular payments to the trustee either directly or through payroll deduction. These will require adjustment to living on a fixed budget. While confirmation of the plan entitles the debtor to retain property as long as payments are made, the debtor may not incur new debt without consulting the trustee. This is because additional debt may compromise the debtor’s ability to complete the plan.
A debtor generally must make plan payments through payroll deductions, if the debtor has a job. This practice increases the likelihood that the debtor will make the payments on time and will complete the plan. In any event, if the debtor fails to make the payments due under the confirmed plan, then the court may dismiss the case or convert it to a liquidation case under Chapter 7 of the Bankruptcy Code. The court may also dismiss or convert the debtor’s case if the debtor fails to pay any post-filing domestic support obligations (i.e. child support, alimony), or fails to make required tax filings during the case.
Need Help Filing for Bankruptcy Chapter 13?
Our attorneys have assisted hundreds of Kansas and Missouri individuals, families and business owners in resolving their debts through Chapter 13 in addition to other debt relief methods. By putting its focus on bankruptcy, The Sader Law Firm can provide the guidance you need to meet the obligations you made under your plan. For more information about the benefits of bankruptcy, and to get an honest legal opinion, call the firm at (816) 281-6349.