When an individual files for Chapter 13 bankruptcy, a court-appointed trustee is assigned to oversee the case. Essentially, a Chapter 13 trustee acts as an administrator, facilitator and enforcer of a debtor’s bankruptcy plan.
For example, one of the trustee’s primary responsibilities is to review the debtor’s proposed repayment plan before it goes into effect. The plan must be fair, feasible and comply with bankruptcy laws before it will be approved. In a Chapter 13 scenario, the trustee evaluates whether the debtor has sufficient income to meet payment obligations while covering essential living expenses. If the plan appears unrealistic or does not allocate enough money to priority debts, the trustee may object and request modifications before it is confirmed by the court.
Moving forward
Once the debtor’s proposed repayment plan is approved, the debtor then makes monthly payments to the trustee, who distributes the funds to creditors based on the plan’s terms. Priority debts such as taxes and domestic support obligations (like child support) are typically paid first, followed by secured debts (such as mortgages and car loans) and then unsecured debts (such as credit card balances and medical bills). The trustee works to ensure that payments are made in accordance with the bankruptcy plan and that creditors receive their designated share.
Throughout the Chapter 13 process, the trustee monitors the debtor’s financial situation to ensure continued compliance with the repayment plan. If the debtor fails to make payments, the trustee may request that the court dismiss the case, which could leave the debtor vulnerable to collection efforts by creditors. If financial circumstances change, the debtor may request a modification to the repayment plan, but the trustee must review and approve any adjustments.
The trustee also conducts the 341 meeting of creditors, a mandatory hearing where the debtor answers questions about their finances under oath. Creditors may attend and ask questions about repayment, but in many cases, they do not participate. The trustee uses this meeting to verify the accuracy of financial disclosures and confirm that the debtor understands their obligations under the plan.
If the debtor successfully completes the repayment plan, the trustee submits a final report to the court, confirming that all required payments have been made. Once approved, the debtor receives a discharge of any remaining eligible debts, providing a fresh financial start.