The Role of a Chapter 13 Trustee

The U.S. Bankruptcy Code assigns a trustee to a case where an individual files Chapter 7 or Chapter 13 bankruptcy. The role of a trustee administering a Chapter 13 bankruptcy is more involved than the role of a Chapter 7 trustee due to the complexity and continuing nature of the bankruptcy.

Chapter 13 Trustee v. Chapter 7 Trustee

In general, a Chapter 7 trustee’s charge is:

•         being accountable for all property received;
•         investigating the financial condition of the debtor;
•         examining and objecting to proofs of claim (a proof of claim is a creditor’s written statement to the court, debtor and trustee to assert a right to receive a distribution);
•         providing information to parties in interest; and
•         filing a final account of the case.

A Chapter 13 trustee has those duties, but that is only a small part of the job profile. The bulk of work revolves around the debtor’s plan and schedules. The trustee reviews the Chapter 13 plan and schedules for conformance to the statutory requirements for confirmation. In addition to the above, a Chapter 13 trustee has these duties:

•         appearing at confirmation hearings;
•         disbursing payments to creditors once a plan is confirmed; and
•         advising and assisting the debtor on the non-legal aspects of performance of the plan.

Because of the continuing nature of a Chapter 13 bankruptcy, the Code authorizes the United States Office of Trustees, a division of the Department of Justice, to appoint one or more “standing” trustees to administer all chapter 13 cases within a district. A standing trustee means that acting as a Chapter 13 trustee comprises all or most of the trustee’s business. In contrast, Chapter 7 bankruptcy trustees usually consist of a panel of trustees who administer cases on a part-time basis. It is common for a district to have one or two standing Chapter 13 trustees while there are twenty or more Chapter 7 trustees.

Capping Maximum Percentage of Plan Payment

Per the U.S. Bankruptcy Code, a Chapter 13 trustee’s compensation is capped at 10% of the bankruptcy plan. Beside for trustee compensation, the 10% cap includes costs incurred in the case and the costs of running the trustee’s office.

Limitation on Standing Trustee Salary

The amount of the money used to pay the yearly salary of the Chapter 13 trustee (exclusive of costs) is limited to the amount set for a federal government employee being paid at Executive V level plus the cost of benefits. Currently the Executive V level compensation is approximately $145,000.

Budget Approval

Periodically, the standing Chapter 13 trustee files proposed operating budgets with the Office of the United States Trustee. If approved, the budget fixes the maximum costs and compensation recoverable by a Chapter 13 trustee.

If you are drowning in debt and are earning a wage, Chapter 13 bankruptcy may be right for you. While the bankruptcy process can be daunting and complex, the Law Office of Melanie Tavare will help you navigate the bankruptcy process. Melanie has the knowledge, experience, and personal touch needed to handle these complicated matters. Call her today!